Brand Shoes Go To Small Cities To Make Money

Summary: because the rental cost is too heavy, the rate of return on investment in Shanghai, Beijing and other first tier cities has become increasingly meager. However, in the two or three tier cities of inland big cities and coastal areas, investing in a brand exclusive store may become a cost controllable, visible market and considerable revenue. As a brand image strategy, consumer company will naturally take the lead in attacking the first tier cities in China. But with China's economic growth, the economic boom will extend from big cities and coastal areas to other regions. The wealth hidden in China's inland cities, second tier cities and small and medium-sized towns will become an important factor for the next round of business growth of many companies. According to statistics, the market potential of small towns in China is very attractive. The population of its potential rich group (135 million) is roughly equivalent to the total population of a second tier city (137 million), and the average household income is quite similar. Compared with large cities, the rental cost and personnel cost of small and medium-sized cities are relatively low, so once the cost of logistics and distribution is reduced, the profitability of stores will be much better than that of big cities. If the success of big city flagship stores determines the overall status and profitability of the market, then the market of small and medium-sized cities is the density of network and the ability of logistics distribution to determine profitability. In fact, as a regional franchisee of a brand, its logistics and distribution expenses are mostly undertaken by the headquarters. Therefore, investors choose to join a brand outside the first tier cities, and this brand occupies a certain market position in the local market. Then it may become a cost controllable, visible and profitable investment behavior. Kangnai shoe industry is one of the choices. So, take Kangnai as an example, how can it become its franchisee? What is its investment prospect? Fan Jimin, deputy general manager of marketing group of Kangnai Group Co., Ltd., told the reporters that according to incomplete statistics in 2007, the number of Kangnai's total stores in the country was around 2700, of which 15% were direct businesses while the other 85% were two or three. The plan is to achieve more than 4000 stores in 2010. In addition, it has opened 120 stores in the fashion capital of more than 10 countries in New York, Paris, Berlin, Rome and Amsterdam. In the domestic market, Kangnai has divided the market into three levels according to the economic level of different parts of the country. Among them, the first tier market is Shanghai and other municipalities directly under the central government, as well as cities with relatively developed coastal economies, such as Ningbo, Qingdao and Dalian. The two tier markets are prefecture level cities and coastal county-level cities. Small cities such as the county and the West and North are listed as the three tier market. "At this stage, the shops in the primary market are mainly direct battalions. Because the cost of operating in a primary market is too high, the average investor will not be able to afford it. On the contrary, in the two or three tier market, the income of residents is increasing obviously, and the demand for quality of life is getting higher and higher. Because of the smooth consultation, there is a considerable demand for certain brands of clothing. Fan Jimin said. According to introducing, in the market, Kangnai's positioning is high-end footwear, the main target customers are between 25 and 45 years old, stable and well paid groups. "In the two or three tier market, the occupation of this group of people is mostly concentrated in government agencies, banks, power supply systems, mobile communications and other units." The franchisor requires experience for the selection of the franchisees. In Fan Jimin's opinion, experience and ideas are more important factors than funds. According to Fan Jimin, joining a Kangnai store does not require payment. However, it is necessary to pay a certain amount of deposit. According to the geographical location, the amount of security deposit ranges from 10 thousand yuan to 20 thousand yuan. Kangnai first preferred investors with brand operation experience. Fan Jimin said: "because there are many differences between the brand products and the non brand products in the process of operation, they require more and more, from image requirements, shopping guide service requirements to commodity requirements, publicity requirements and so on. Only with the idea of brand management can we ensure the quality in the process of operation and keep consistent with the overall brand image. "Secondly, investors who know how to cultivate the market and cultivate customers are more likely to gain a firm foothold in the market and develop in a healthy way. In addition, the cultural quality of the franchisee is also an important consideration. Only a good cultural investor can form a good and effective communication with the headquarters, and accept new ideas more easily, and reach a consensus on the problem. The location of the key commercial street is suitable for the opening of the two or three level market, and location is still one of the most critical links. "Investors must have a good understanding of the local market. Of course, some of the franchisees take into account the cost factors. The cities he joined are not the most familiar cities in his life. However, we will send special personnel to inspect the site and understand the economic conditions of the city, such as the layout of the business, the income of the residents, the shopping ability and shopping habits, as well as the local brand competition. Fan Jimin said, "for example, commercial layout needs to be subdivided into commercial streets in cities. Some commercial streets are very busy and have a large flow of people. But after observation and analysis, it is found that its business is mainly household appliances or mobile phones and catering, so it is not suitable for Kangnai. Generally, the commercial streets with relatively concentrated clothing are ideal locations. Specifically, it is the main commercial area, commercial street, brand clothing street and pedestrian street. On the choice of specific shops, Kangnai's proposal is: "small cities open big stores". The so-called "big shop", that is, in the two or three tier cities double open shop, the area of 60 square meters to 80 square meters. According to Fan Jimin's estimate, the cost is about 30 thousand yuan. "This charge includes the decoration of the basic parts such as doors, containers, windows, cash registers, etc. if you want to keep improving on the floor and the top, this cost is not enough. According to the introduction, in the selection and decoration of the store, there will be special assistance at headquarters, including specific location, shop image and specific decoration. After the first renovation, the headquarters requires that each shop be redecorated every two years to ensure the image of the store and the freshness of the customers. The cost of the renovation is shared by the headquarters and the franchisees, with a ratio of 50%. In the early stage, it invested 3.4 million yuan to join a Kangnai store. The initial investment mainly included margin, shop decoration, pre purchase, first rent and staff wages. The margin is 10 thousand yuan to 20 thousand yuan, and the shop decoration is 30 thousand yuan. According to Fan Jimin, taking the 60 square meter to 80 square meters shop in the two or three level market as an example, the first batch of goods is 200 styles, and the purchase volume of each style is 6 to 10 pairs, about 1500 pairs of shoes. The price of a single shoe varies from season to season, with an estimated investment from $150 to $200 per pair, from 225 thousand yuan to 300 thousand yuan on initial purchases. In terms of staff wage preparation, a single store with fifty thousand or sixty thousand of the urban population exposed to the urban population needs 8 employees, divided into two shifts, from 9 a.m. to 3 p.m., and 3 p.m. to evening. Fan Jimin told reporters that in general, the wage level in the two tier market is 800 yuan per person per month, while the wage level in the three tier market is between 600 yuan and 800 yuan. Generally, 3 months' salary is required in the early stage of investment. Before the opening of the new store, the headquarters will conduct a week of training for the sales staff. The training mainly includes two aspects, one is Kangnai's corporate culture, such as brand history, brand positioning and honor, etc. In addition, the head office has training courses for store managers or franchisees every year to retrain new ideas and new requirements. In the stable period, the annual profit of 100 thousand yuan is the most sensitive profit to the franchisees. Fan Jimin introduced the retailer's pricing system to reporters in detail. "The products are distributed to the general agent and the direct branch company at the factory price of the head office. The general agent and the direct branch company are shipped to the franchisee on the basis of the ex factory price plus the 25%~30% price, while the franchisee is *1.6* + 10% after this foundation, and the 10% is the price adjustment room set for the regional differences. However, in the same area, the principle of parity with the same land must be implemented. " That is, the gross profit margin of franchisee sales is 37.5%. After winning the gross margin, unlike many affiliations, franchisees do not need to pay a portion of their fees to headquarters for consultancy management fees and earn gross profits themselves. The reporter calculated the monthly profit and loss in the two level market for Kangnai franchised stores. In the monthly cost, the rent is still a large expenditure, which is about 10000 yuan per month. 8 employees are employed in two shifts, and wages and other benefits are paid at around 6400 yuan per month. It is decorated every two years, and the cost of decoration is amortized in 24 months, which is 1300 yuan per month. It is disclosed that in general, the income tax of such shops is paid in the form of fixed tax, with a monthly value of 800 yuan. Coupled with the monthly expenditure of 2500 yuan, the operating cost will be more than 21000 yuan per month. According to the gross profit of the 37.5% purchase, to achieve breakeven, we only need a monthly turnover of 56000 yuan. On a daily basis of 30 days, sales of only $1867 a day can be guaranteed. For a brand shoe store, this figure is not very harsh. Fan Jimin told reporters that with the existing franchisee operating conditions, the first year is mainly the market incubation period, mostly in the break even or small profit situation, to second years or third years of stable period, the average annual profit is 100 thousand yuan. "Generally speaking, the monthly profits of the prefecture level stores in the stable period are 20000 yuan. Of course, any investment will have risks. If the franchisee's brand management concepts are not consistent with headquarters, expect a rich overnight, or limited financial capacity, insufficient funds for subsequent replenishing sources, or lack of business skills will result in eventual failure. After a variety of support in the process of operation, investors have accepted many supporting policies after headquarters. In the distribution of the main franchisee, is very concerned about the issue of a return. According to Fan Jimin, Kangnai's overall return rate is controlled at around 10%~20%. "This ratio is controlled by the branch and the general agent. Because of their understanding of the market for many years, the rate of return in practice is basically below this value." In terms of sales, franchisees are unable to make promotional plans for products such as discounts. "If this kind of situation is not handled well, it will have a certain impact on the brand image. Therefore, every time, the local branch or the general agent will formulate a unified sales promotion plan according to the market situation. Fan Jimin said. For advertising and other promotional activities, there are three main cases of Fan Ji min's explanation. If the company considers that there is a very important and important market, the head office will bear all the publicity expenses in full, carry out brand building and expand its influence in the local area; when the new store opens, the branch or the general agent will support the advertising cost; the other is the franchisee when they think it is necessary, they should extend their own pockets. In addition, in the logistics and transportation links, when franchisees need to replenish goods and replenish goods, they can only get free after contacting the company or agent. It should be reminded that Kangnai's franchise contract can be renewed on a one year deadline and after a full period of operation, and there is no need to pay other fees. "Setting such a deadline is a pressure and motivation for the franchisees. Those who are not qualified in the performance appraisal or poor in service image will be trained and supervised by the retail owner and image supervisor. If they are still not ideal, they will be eliminated when the contract expires. On the contrary, those who have a long term cooperation and sales and other normal franchisees will be rewarded by the headquarters. They will not only have the opportunity to study and investigate, but also have the support of a certain amount of credit. That is to say, franchisees can extract 50 thousand yuan of goods first and then pay the money to headquarters. This is a very favourable condition for franchisees who need cash flow to expand their operations.