According to the report, in 2025, the sales volume of China’s wholesale retail industry will break through 200 billion RMB, with more than 45,000 stores, and the compound annual growth rate of market penetration will be maintained at over 11%. Among them, as one of the important participants, the Hao Xiang Lai (which could translate to ‘Would Like to Come’) brand snacks already have 10,000 signed franchise stores, and each month they are expanding at a rate of more than 800 stores. The booming development of this category has also attracted high attention from practitioners in the mother and baby retail industry. So, what new growth points can the wholesale snack industry bring to the mother and baby market?
Recently, at the 2024 CBME Maternity & Baby Industry Summit, Xu Dongfei, the person in charge of Hao Xiang Lai brand snacks in the three northeastern provinces and the general manager of Liaoning Lollipop Children’s Department Store Chain, discussed with us how to “Find New Growth in the Mother and Baby Market from Casual Snacks.” Below is Xu Dongfei’s sharing, organized by CBME Insight:
Why has the wholesale snack track developed so fast?
The reason why the wholesale snack track has developed so fast is related to the advantages of this business model: direct manufacturer access reduces costs; wholesale snacks create channel values through being abundant, fast, of good quality, and economical.
“Abundance” is reflected in the 13 categories and 1,800 SKUs. Moreover, Hao Xiang Lai also has specific requirements for displays: good color matching, stepped arrangements, fullness, and plumpness are all standardized.
“Speed” comes from the fast speed of opening stores and also in decoration. It takes 21 days from renting to opening, with 17 days for decoration and 4 days to prepare for the opening; product updates are also fast, with 50 new SKUs introduced each month; quick capital turnover, with three orders per week, and next-day delivery.
“Good Quality” means that all the leisure snacks seen in big and small supermarkets can be found here at very low prices.
“Economical” – I’ll share the focus on how prices are reduced to the point that they excite customers.
With 10,000 stores and 50 billion in sales, the volume per SKU is very high. Such a large “pie” attracts every manufacturer to want a piece. Plus, there are no advertising fees, promotion fees, barcode fees, store entry fees, just price negotiations ensuring supply, quality, and pricing. Many products are negotiated by the manufacturers’ financial directors and investors directly with our brand’s purchasing manager, discussing cost-plus pricing based on the annual order volume.
Another “economical” factor comes from the supply chain, with goods going directly from manufacturers to warehouses, then straight to stores, eliminating middlemen, as each transfer normally adds cost. Many local small supermarkets or existing supermarket systems can’t match these prices because their supply chain system isn’t set up for this kind of selling method.
How does the operational action support franchisees in opening stores quickly?
For franchisees, Hao Xiang Lai has created good franchise policies and operational support. 0 franchise fee, 0 service fee, 0 management fee, 0 delivery fee.
For store signs exceeding 30 square meters, there is a subsidy of 500 RMB per square meter, and a 120,000 RMB decoration subsidy for business areas over 150 square meters. We have two stores that distribute over 650 kilometers, all with zero freight cost. Our stores’ signs are large because the subsidies are generous; some store signs can receive up to 90,000 or even over 100,000 RMB in subsidies. Moreover, our operation center and service are very detailed. From the moment a franchisee expresses interest, our development team is in touch, promoting the location. Once a site is approved, we sign a franchise contract, then the establishment team begins handling business registration, taxation, fire protection, urban management, sign approval, etc.
Additionally, our training team assists franchisees with practical and theoretical training.
Following closely, the decoration team standardizes renovations. A storefront is renovated in 17 days and opened in 21 days, including a team responsible for guiding employees in stocking the store for the first time and accompanying them during the three-day opening process. On the fourth day, they ensure the store returns to its pre-opening standard. Then our operation team takes over. The operation team has supervisors; one supervisor manages ten stores, and they solve all the challenges store managers face. After supervisors, there are city managers, each overseeing five supervisors, and above the city managers, there are operations directors responsible for overall coordination.
We have an important department called the Auditing Department, split into online and offline auditing. Online auditing randomly captures any activity in the store not meeting operational standards through the internal cameras, whereas offline auditing consists of two-person teams visiting the store at least once a month, or if non-compliant, twice a month. One person specifically checks expiration dates, from the store to the warehouse, looking for any near-expiry or expired goods, ensuring price consistency and accuracy. The other auditor checks against a list of about 150 items to ensure compliance. Finally, combining online and offline results, a score is given. Scores like 85, 90, and 95 are considered excellent, and the brand awards 1,000, 1,500, and 2,000 RMB respectively. If the score is below 80, the supervisor is held accountable; if several stores score below 80, the supervisor is changed. If multiple supervisors need to be changed, then the city manager needs reshuffling. This closed system management is complete and effective, naturally increasing the store score.
In fact, the whole operating logic of wholesale snacks means the mother and baby team has inherent advantages: first, they have capital; second, a solid management team; third, operational capabilities, and snack operations are much simpler than mother and baby; fourth, resources—knowing which local property is suitable for a store, familiar with landlords, and understanding reasonable property prices. The most important thing is that the baby product industry owners have plenty of time and energy.
So, is there any compatibility between mother and baby stores and snack stores? In my opinion, all customers of mother and baby stores are also customers of snack stores, and they are high-quality customers of snack stores. But I don’t quite agree with opening both stores together. We should learn from some of the successful marketing strategies of snack stores, their standardized operations, especially the centralized purchasing that snack stores utilize.
