From the glory of domestic products to the alleged financial fraud of 2.2 billion, why is the myth of Luckin Coffee shattered?

How did Luckin Coffee become the “light of domestic products”? To sum it up in one sentence, use money to build a business model and take advantage of Internet traffic. And "Success is also Xiao He, failure is also Xiao He", Ruixing also failed in this.

Where does the money come from?

This must mention its founder Qian Zhiya and the Shenzhou team behind it, especially Lu Zhengyao, chairman of China UCAR Group. ?These social resources have attracted the attention of many investment institutions for the Luckin Coffee project. These institutions have all participated in Luckin Coffee’s angel round financing, with an investment scale of about 1 billion yuan. This money did give Ruixing Coffee a huge innate advantage, but it also ultimately laid part of the root cause of Ruixing Coffee’s excessive development scale.

Why is there no money? The traffic is gone

In a price war, new users are free, buy two get one free, buy five get five free, Ruixing Coffee made full use of the social fission strategy to open up the market, but it also consumed all the initial investment. funds. It can be said that they cannot make back their costs. However, this method also has successful cases, such as WeChat’s red envelope-grabbing marketing method.

The rapid expansion of business territory

This is reflected in the fact that their ambitions were too ambitious at the beginning, and they directly targeted Starbucks from the beginning. In fact, it is not particularly accurate to say this, because it is also a marketing method, and it does achieve the purpose of quickly establishing one's own brand image. In other words, Luckin Coffee entered the public eye when it sued Starbucks (China) for monopolizing the domestic coffee market.

However, it really shouldn’t compete with Starbucks for market share. Starbucks, which entered the Chinese market on January 11, 1999, took 17 years to expand the number of stores to 2,000. Luckin Coffee, which had just started its business a year ago, successfully surpassed Starbucks in the total number of stores at the end of 2019. It’s scary to think about it.

Successfully "quickly" listed

On May 17 of the same year, Luckin Coffee landed on Nasdaq, becoming the largest IPO financing on Nasdaq in 2019 of Asian companies with a market capitalization of US$4.2 billion. Soon, Luckin Coffee’s business model became a successful business template that everyone wanted to copy. For a while, the limelight was overwhelming.

What was supposed to come came a bit quickly

But what happened afterwards was not so pleasant.

On February 1, 2020, Muddy Waters issued a short-selling report, pointing out that Ruixing exaggerated the sales volume of store merchandise, exaggerating the daily sales volume of each store in the third and fourth quarters of 2019 by at least 69 and 88.

That is to say, Ruixing did not make that much money, and the accounts were all false. However, Luckin strongly denied this. I did not skip the order. There is something wrong with your argument and you have not found the evidence.

After that, on April 2, Luckin Coffee took the initiative to confess the false transaction. In the next few weeks, the following news will automatically pop up on my mobile phone. Luckin’s stock price has melted, it has melted again, and it has melted again. That's right, after five circuit breakers, its stock price shrank by 80%. It's a bit like buying a big steamed bun in the morning, and at night, huh? Why did it become a pancake?

The element of luck

In fact, if Luckin Coffee resists for a while, it should be able to make normal profits. After all, Meituan and Didi have done this kind of thing by burning money to change customers. , also succeeded. But there are unforeseen circumstances~

Summary

Actually, Luckin Coffee is not easy. How can it turn losses into profits as soon as possible without expanding the market? However, it was too impatient and took too big a step. In other words, the market was not ready to accept the user-led Internet coffee business model.