"small stalls seem to have huge potential" catering giants explore the "small store model" in china
2024-09-03
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source: cankaoxiaoxi.com
reference news reported on september 2on september 1, the hong kong-based south china morning post published a report titled “kfc, mcdonald’s and haidilao launch ‘small store model’”. the report is translated as follows:
tommy zhang, a medical researcher in shenzhen, usually walks out of the subway at around 10 a.m. every morning. when he passes the overpass, he always sees a breakfast stand with a long line of customers waiting to buy a 15-yuan breakfast. the snack stand with a distinctive red logo is from kfc.
posts on chinese social platform xiaohongshu show that such stalls operated by other popular restaurant chains have also sprung up across china. mcdonald's, for example, has opened food stalls and food trucks in subway stations, streets and parks in cities such as beijing, guangzhou and changsha.
the proliferation of food stalls highlights the battle for consumers among fast-food operators, including yum china, mcdonald's and hotpot chain haidilao.
"in many cases, small stores are a 'backfill' strategy for a business district where consumer demand is not strong enough to support a larger store, but a kiosk or small stand can generate hundreds of thousands of dollars in sales that would otherwise go to a competitor," said sean dunlop, senior equity analyst at morningstar.
he added: “smaller stores are much cheaper to build, so even with lower sales per store, they can be quite profitable from an operating margin and cash return perspective.”
although these stores account for only a small portion of the chain's revenue, the model is cost-effective in the fiercely competitive chinese market, where consumers are seeking value for money amid slowing consumer spending.
yum china said in its second-quarter earnings report that "innovation in new store formats" will continue to drive the group's long-term growth. it has increased its penetration into lower-tier city markets by introducing more "mini stores." entering lower-tier markets may be the secret to dealing with shrinking consumption in big cities. food stalls appear to have great potential.
in 2020, china's county-level permanent population was about 748 million, accounting for about 53% of the national population. a report by management consulting firm mckinsey in april predicted that by 2030, more than 66% of china's personal consumption growth will come from the sinking market.
