Article | Dingjiao One (dingjiaoone), Intern Author | Wang Hanxing, Editor | Wei Jia
At 10am on the second day of the Lunar New Year, Chen Ting, the owner of a boutique coffee shop in Pujiang, was wearing a gray and white checkered shirt. Before she could put on her work clothes, the first group of customers had already walked into the shop.
During the Spring Festival holiday, the business in the store is particularly good. The popularity exceeded our expectations, "Chen Ting told" Dingjiao One ".
Per capita consumption exceeds 50 yuan, a cup of coffee costs around 30 yuan, a serving of French fries costs 35 yuan… Such prices, which are basically on par with first tier cities, are not cheap in Pujiang County, Jinhua, Zhejiang Province, a small county with a permanent population of only 460000.
For Chen Ting, the 10 day holiday during the Chinese New Year is the most important window for earning money throughout the year. Although the business has exceeded expectations in these days, it is not enough to dispel the survival anxiety of this boutique coffee shop in the county. Because after the Spring Festival, business will quickly cool down, and it will be a long "break even off-season" until next year's Spring Festival.
At an independent boutique coffee shop in a small fourth tier city in Jilin, Zhang Chao is calculating the sales revenue for the past few days of the Chinese New Year with the staff. On weekdays, they can sell up to 50 cups of niche boutique coffee per day, but during holidays, their sales have surged to over 200 cups per day. In the off-season, this may be half a month's sales.
Zhang Chao told "Dingjiao One", "Only these seven or eight days of 365 days a year are profitable. What you earn is not profit, but the cost of extending your life for more than 350 days in the future
When Starbucks China first proposed to open its stores in the county town in 2022, people were still questioning who would buy coffee worth over 30 yuan per cup in the county town. However, a large number of independent boutique coffee shops had already infiltrated the daily lives of young people in the county town (note: Starbucks is not strictly a boutique coffee, but the price is similar to boutique coffee).
These boutique coffee shops have successfully sold coffee worth over 30 yuan per cup to young people in small towns, thanks to their popularity, local specialty drinks, social and spatial attributes. Opening an independent boutique coffee shop in the county town of go home also became the entrepreneurial choice of many migrant workers in first tier cities at that time.
But as coffee sinks and gradually becomes a consensus in the industry, starting from 2023, more brand chain specialty coffee, as well as chain commercial coffee represented by Luckin Coffee, Kudi, and Starbucks, will flood into lower tier cities and county towns, and the living environment of independent specialty coffee will undergo drastic changes.
For most people, selling a cup of coffee for 30 yuan to young people in small towns is no longer a good business.
Take advantage of the 9-day holiday to earn enough profit for the next year
In 2021, Chen Ting opened her first boutique coffee shop in Pujiang, with a cup of coffee priced at 20 to 35 yuan, which was definitely considered high consumption in Pujiang at that time.
At first, her family did not support her entrepreneurship because there were hardly any coffee shops in Pujiang at that time, and there were relatively few young people in the area. The potential consumer base for premium coffee was very limited.
But Chen Ting believes that this is actually a good opportunity.
After graduating from university and briefly residing in Hangzhou, she witnessed the thriving development of the coffee industry. In 2021, the competition in the coffee market in first – and second tier cities has become fierce, and Luckin Coffee has launched its popular product "Shengye Latte" and opened up franchising for rapid expansion; Starbucks' performance in the Chinese market has declined due to intensified competition; Lucky Coffee under the umbrella of Meixue Ice City has emerged from the lower tier market.
Beyond what Chen Ting saw on the surface, the size of China's coffee market has exceeded 380 billion yuan this year. According to IT Orange data from that year, the total financing amount of domestic coffee brands in 2021 was 5.921 billion yuan, which is more than twice the sum of the financing scale of the previous two years.
So Chen Ting decisively opened her first boutique coffee shop in Pujiang Cultural and Creative Park. "The cultural and creative park is not a very ideal location, as there is almost no natural flow there, but the business has unexpectedly been good after opening
At the beginning, the main customer group was office workers born in the 1980s and 1990s, who would come to coffee shops to check in, gradually attracting a group of loyal customers. In a small county town like Pujiang, a boutique coffee shop with internet celebrity attributes quickly spread, and then younger middle and high school students began to come together to check in at the shop.
In Chen Ting's words, the first few years of entrepreneurship were very promising. But by 2023, the environment began to change, with coffee chain brands such as Luckin Coffee and Kudi opening a series of stores in the commercial district of Pujiang. Following this, Starbucks also arrived in this small town, opening three stores in Pujiang in just a few years.
Customers are starting to be diverted.
Last October, due to the local government's urban planning, Chen Ting had no choice but to move her coffee shop to the commercial district near Jinshi Lake. The renovation of the new shop cost over 1 million yuan. If it were five years ago, this investment of over one million yuan might have been able to quickly recoup costs, but today, Chen Ting admits that there is a lot of pressure.
Although business remained booming during the Chinese New Year period, with people sitting inside and outside the store, she knew in her heart that this wave of popularity, which only lasted for a few days, would quickly dissipate after the holiday, and this boutique coffee shop would also enter a long off-season for breakeven. In order to maximize seat utilization during the Spring Festival, Chen Ting also posted a notice stating "During the Spring Festival, one customer, one seat, one consumption, according to the head count".
Zhang Chao's experience is similar to Chen Ting's. In 2023, his boutique coffee shop opened, with only two employees including himself. The price of a cup of coffee ranges from 25 yuan to 35 yuan. In the first few months of opening, the monthly profit can easily reach over 10000 yuan.
But last year, except for the Chinese New Year period, the average monthly profit was only a few hundred yuan, and most months were struggling on the profit and loss line.
Zhang Chao made a simple calculation for "Dingjiao One". This boutique coffee shop has two floors, with each floor covering an area of about 40 square meters, and the monthly rent is about 3000 yuan; Excluding one's own salary, the monthly cost for one employee in the store is 4300 yuan; Electricity is the main component of water and electricity bills, with significant seasonal variations and an average of 800 yuan per month.
Including material loss, the daily cost is about 300 yuan, and a cup of coffee has a gross profit margin of less than 60%. Selling 20 cups a day is almost breakeven, without considering equipment and decoration losses, "he said.
This boutique coffee shop invested 120000 yuan in equipment and decoration in the early stage. On weekdays, during the off-season and holidays, we can occasionally sell 50 cups a day. Most of the time, it's just a dozen or twenty cups, and sometimes even only single digit sales in a day. Paired with some snacks and desserts with higher gross profit margins, we can barely sustain it.
If I don't earn enough 'life extension money' during the Chinese New Year, I'm planning to sell the store after the New Year, "Zhang Chao told" Dingjiao One.
It's not that the county coffee that costs 30 yuan per cup is "not fragrant" anymore, it's just that there are too many substitutes for it.
Li Tongtong and her friends just left Chen Ting's coffee shop. The two of them drank coffee, had a "beautiful meal", and chatted for over an hour, spending a total of more than 130 yuan. For her, this consumption is not cheap, but during holidays and festivals, finding a good place with friends to chat and take photos, a boutique coffee shop in the county town is still a good choice.
But on weekdays, she prefers to order a cup of ancient tea coffee, which can refresh her for a whole day for less than 10 yuan.
On a street in a county town, 10 coffee shops are stuffed in
Today's coffee market in the county town is already crowded with top brands of "9.9 yuan", cross-border milk tea shops, fast food restaurants, and world-class coffee giants. Everyone's living space is being compressed.
The manager of a Luckin Coffee shop located in the county town told "Dingjiao One" that not only are boutique coffee shops in the county facing the dilemma of "making money during the Spring Festival and breaking even during normal times", but even some national chain brands find it difficult to make money during the off-season of consumption in the county town.
Compared to independent boutique coffee, the upfront cost of joining a Luckin Coffee in the county town is much higher. According to him, Luckin does not charge franchise fees, but will charge decoration, equipment fees, and a deposit in the early stage, with a total cost of approximately 400000 yuan.
However, the unit price of chain coffee brands is more in line with the consumption habits of county towns than boutique coffee shops, and there is still a certain guarantee of customer flow on weekdays. Taking his store as an example, "During the off-season on weekdays, there are still 200 cups per day, but during the Spring Festival, the starting point is 1000 cups per day (with takeout accounting for the majority)
Based on Luckin Coffee's average order price of 13-14 yuan and a single cup gross profit margin of around 55%, although the payback period is longer than that of independent boutique coffee shops, the "breakeven threshold" is relatively lower.
A brand coffee franchisee believes that boutique coffee chain brands represented by Manner Coffee and M Stand began testing the county market many years ago, but have always been stuck in the stage of small-scale store opening and trial and error. From their actions, it can be seen that the survival status of boutique coffee in county cities is not optimistic.
Several boutique coffee practitioners in county towns told "Dingjiao One" that according to their observations and actual experiences, the key turning point from easily earning over 10000 yuan per month to barely "surviving" through the Spring Festival will occur in 2023.
According to data previously released by Meituan, the growth rate of online coffee merchants nationwide in 2021 was 27.81%, with a growth rate of 42.42% in first tier cities and 27.80% in each county. By 2023, this growth rate data has clearly inverted, with the market in first tier cities approaching saturation and the growth rate dropping to 28.17%, while the growth rate of the county coffee market has surged to 66.68%.
Similarly, 2023 will also be a "turbulent year" for the Chinese coffee market.
This year, Luckin Coffee's sales in China surpassed Starbucks China for the first time, securing the industry's top spot. Luckin Coffee has repeatedly expressed its plan to accelerate expansion into lower tier markets through a joint venture model.
On the other hand, in the year after losing the top spot in the Chinese market, Starbucks founder Schultz returned to China after a five-year hiatus. During his speech at Peking University, he proposed that in the future, Starbucks' stores in China will exceed 10000 and cover 3000 county towns.
Two coffee giants are accelerating their competition for the county-level market in China.
At the same time, Kudi Coffee launched a "Hundred Cities, Thousand Stores" promotion this year, spreading the flames of the "9.9" coffee war to the lower tier markets.
According to GeoQ Data data, as of December 2023, the total number of branded coffee stores in county towns across the country was 5454, of which 68% (3700) were opened within the year 2023.
Today, in the core business district of a county with a permanent population of around 500000, it is not uncommon to see Luckin Coffee, Kudi Coffee, Lucky Coffee, and Starbucks appearing simultaneously on a commercial street of three to four hundred meters.
There are five chain coffee brand stores near the People's Square in the central business district of Pujiang County, including two Luckin Coffee, one Starbucks, one Novartis, and one Kudi. In addition, there are two or three independent boutique coffee shops.
Chen Ting deliberately avoided the fiercely competitive central area of the county, but recently she discovered that on the other side of the shopping mall a few meters away from her boutique coffee shop, a new antique tea has just been renovated and is expected to open after the New Year.
The Long Breakthrough War of County Boutique Coffee
The challenges faced by boutique coffee shops located in county towns far exceed those in first and second tier cities.
A senior coffee practitioner summarized three reasons to 'Fixed Focus One'. The first is the most obvious price factor, as a cup of premium coffee priced at 30 to 40 yuan does not match the average consumption level in the county. Single time clock in consumption is the mainstream, making it difficult to form high-frequency repeat purchases.
The second reason is that consumers have different priorities in their decision-making. Coffee consumers in first – and second tier cities tend to prioritize essential needs, and they value the product itself more than the brand, such as whether the taste is suitable, whether the product is stable, and inconvenience for the buyer.
However, coffee consumers in county towns have not yet fully developed the habit of drinking coffee, and their consumption tends to be more social and leisure oriented. Therefore, the importance of brand is higher when making consumption decisions.
That's also why whenever Starbucks enters a lower tier city or county, it always triggers a consumer check-in craze. This is more because Starbucks' high-end brand image is already well-known, "he said. Independent boutique coffee shops in county towns are naturally in a disadvantaged position in terms of brand effect.
Finally, there is the dilemma of site selection. In big cities, boutique cafes can be located in remote or less crowded areas to avoid direct competition, such as parks and residential buildings, relying on nearby residents and online traffic to survive.
In county towns, there are usually only one or two commercial centers, and it is difficult to attract customers by opening stores too far away. If they are located in the core business district, they must directly compete with a group of chain coffee brands.
But not all boutique cafes in county towns need to rely on the Spring Festival to 'extend their lives'.
Another boutique coffee shop 1.4 kilometers away from Chen Ting's store has not been affected by the chain brand. This is a coffee shop that has been open for 10 years, and the price of a cup of coffee is also over 30 yuan. On New Year's Eve, the store's turnover increased fivefold compared to usual.
For the owner of this store, the additional income during the Spring Festival holiday is more of a icing on the cake than a timely help. The store is mainly staffed by old customers in their forties and fifties, some of whom even come to the store every day to order a cup of coffee.
These customers not only frequently visit the store themselves, but their children have also gradually become regulars. Three or four years ago, when Luckin Coffee and Starbucks started opening stores in Pujiang, the owners felt nervous and worried about their business being diverted. However, over the years, these chain coffee brands had little impact on their business.
In the "acquaintance society" of county towns, "acquaintance business" is the most ideal business model. But for most entrepreneurs, they don't have 10 years to slowly cultivate customer loyalty, instead they try other ways to 'break through'.
Chen Ting opened a boutique coffee branch in Yiwu and collaborated with local communities to only make a few basic coffees. She also made some Chinese meals and earned a stable income by delivering meals to the elderly in the community.
Zhang Chao is operating the accounts of Tiktok and Xiaohongshu at the same time, creating personal IP to improve his influence in the local area, and moving some products of his shop, such as coffee beans, cultural and creative products, and coffee accessories to online sales to earn some extra money besides boutique coffee.
However, at first glance, they didn't care about various "side jobs", but quickly washed away the mountain of coffee cups piled up in front of them, and then rushed to make the next cup of coffee, because only by winning the battle of the Spring Festival holiday can there be a future.
*At the request of the interviewee, Chen Ting, Zhang Chao, and Li Tongtong in the article are all pseudonyms