Chapter 1 Industry Overview
The professional chain industry refers to companies operating in a chain operation mode, and its main business covers retail, catering, hotel, medical care, education and other fields. These companies provide professional and high-quality products and services through large-scale and standardized business models and supply chain management. The specialty chain industry is booming across the globe and has emerged as a significant market player in various segments.
Figure professional chain industry chain structure
Source: Asset Information Network Qianji Investment Bank IFIND
The characteristics of professional chain
- Franchising: The headquarter with technical and management experience guides and teaches the technical experience of chain store operations, and collects a certain percentage of royalties and guidance fees. This contractual relationship is a franchise chain. Franchise chain headquarters must have a set of complete and effective operational technical advantages, so as to transfer guidance, so that chain stores can operate quickly, and at the same time gain benefits from it, so that the chain network can grow stronger day by day. Therefore, how to inherit business technology is the key to franchising.
- Direct sales: refers to the chain stores directly operated by the head office, that is, the business form in which the headquarters of the company directly manages, invests and manages each retail point. There is no doubt that they must fully accept the command of the headquarters. The main task of the direct chain is "channel management", which means to obtain profits from consumers through the expansion of business channels. Therefore, the direct chain is actually a "management industry".
- Voluntary: stores that voluntarily join the chain system. Since this kind of store already exists, it is not a franchise store that was founded by the chain head office at the beginning of opening or does not meet the "franchise conditions", and it needs to rely on the mature chain system of the headquarters to open independently. Therefore, voluntary chains can be different from franchise stores in name. In the voluntary franchise system, the commodity ownership belongs to the owner of the voluntary chain, while the system operation technology and the exclusive information of the store brand are held by the headquarters. Therefore, although the operation of the voluntary chain system is maintained on the strength of unity produced by each chain store's identification with the "community of destiny", it also takes into account the premise of the cooperative development of the "community of life". On the other hand, the voluntary chain stores maintain independent operations, so In fact, voluntary chains can actually be called "the industry of ideas". The meaning is to focus on the communication between the two, and to achieve the same concept as the primary goal of cooperation.
Figure professional chain industry performance
Source: Asset Information Network Qianji Investment Bank IFIND
Chapter 2 Business Model and Technology Development
2.1 Professional chain industry chain
Figure professional chain industry chain panorama
Source: Asset Information Network Qianji Investment Bank Wind
The professional chain industry is a typical midstream industry. The upstream hosts the suppliers of raw materials required for the operation of different types of professional chain enterprises. For example, suppliers in the chain catering industry provide ingredients, seasonings, etc. The downstream is driven by customers, and the transmission effect of the entire industrial chain is bottom-up, that is, downstream demand affects the operation of professional chain enterprises, which in turn affects the demand for upstream raw materials.
(1) Unilateral chain trading platform: Chain enterprises directly produce products and then provide products (or services) to consumers through their own channel network or terminals (that is, self-produced and self-sold). For example, Gree, Midea, etc., manufacturers are transforming.
(2) Bilateral chain trading platform: the upstream supply chain provides products and services, and chain enterprises provide brand and management and trading venues to consumers. For example: Gome and Suning, distributors (chain platforms).
(3) Multilateral chain transactions: Multilateral platforms are biased towards resource integration, that is, the cooperation of two or more chain enterprises with distinct but interdependent customer groups. The relevant customer groups are together, and the platform becomes more and more valuable. Multi-sided platforms need to generate value by facilitating interactions between the parties' customer groups. For example: In the Internet age, the favorite project of many start-up companies is to create a platform, and then use the platform to allow multilateral customers to achieve transactions to obtain benefits.
Figure professional chain platform positioning
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
2.2 Business model
The professional chain operation business model adopts the 9C model, which is composed of the enterprise input module and the enterprise income module on the chain enterprise trading platform. The input module refers to cost input, core resources, partners, and reproducible keys, and the business income module refers to chain income, trading venues, customer needs, goods or services.
Figure 9C positioning of professional chain industry business model
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
input module
Cost input includes three major plate products of enterprise product cost, fixed cost and variable cost. Costs include raw material costs, procurement costs, logistics costs, warehousing costs, etc.; fixed costs refer to internal costs that do not change due to changes in business volume, which mainly include depreciation of factories, machinery and equipment, rent, water, electricity, miscellaneous fees, etc.; The variable cost varies with the output of the company, such as wages, marketing expenses, after-sales service, etc.
Figure cost input structure model
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
Figure 1. Single store cost structure model of professional chain enterprises
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
Core resources include four major sectors: physical assets, intellectual assets, human assets, and financial assets.
Figure professional chain enterprise core resource content
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
Partners are the factors that can optimize the business model and exert scale effect, reduce risks and uncertainties. The motives for cooperation are divided into the following three types: optimizing business models and operating scale effects; reducing risks and uncertainties; and obtaining specific resources and businesses. In just a few years, Heilan House has experienced explosive growth in stores, which is inseparable from the agreement model it has with its partners. The two most troublesome problems for clothing companies-inventory and funds are decomposed to the upstream and downstream, and only the brand is provided. Management, supply chain management and terminal sales management form a community of interests among suppliers, franchisees and companies.
Reproducible key businesses are mainly divided into: product provision, that is, enterprises with research and development, design, production, etc. as their main business, which have high reproducibility; Reproducibility. Such as catering, beauty, hotels, consulting companies, etc.; platforms and networks, that is, enterprises with platforms as their core resources. Platforms can include networks, software products, trading platforms, brands, etc., and are highly replicable.
Revenue Module
Chain income is divided into explicit income and implicit income, and its structure can be divided into: actual income, integrated income, derivative income, which can be continuously optimized according to the profit model of the enterprise. For example, the link of actual income can optimize the product structure. Create explosive products, improve the service level of employees, and reasonably operate cost-effective products to maximize profits. Secondly, aiming at the integrated income, we can strengthen the branding operation, increase the brand premium, operate the franchise model, and continuously increase the market share, etc. Finally, the derivative income, after expanding the market share, forms a scale effect and realizes other income such as capital income and real estate income outside the main business.
The trading place can be a physical place or a virtual trading place. The online Internet platform can be your existing enterprise platform, or a mature platform, such as Tmall and JD.com. Offline physical venues have different standards for the divided cities and business districts of the cities. At present, the most ideal is to combine online and offline to create a system network of new retail and new chains.
Customer demand, that is, consumer demand, is the only reason for the existence of enterprises and business models. It constitutes the core of business models, and consumers are also the starting point of brand positioning.
Figure customer needs analysis
Source: Asset Information Network Qianji Investment Bank "Analyzing the 9C Model of Chain Enterprise Business Model"
Customers are divided into four dimensions, simplicity, excitement, price, and solution. Simplicity represents the value of self-discipline; stimulation represents the pursuit of emotional satisfaction and enjoyment; price represents the identification of price factors and constrains consumption; solution represents the pursuit of rational value in terms of quality and function. To meet different needs of customers in different latitudes.
Commodities and services are to provide customers with tangible value and intangible solutions. Whether it is a product or a service, the most important thing for an enterprise is to provide value to customers. Only with good customer value can there be a good customer market. Solutions can be simply categorized as: buyers who tend to satisfy individuality, that is, buyers of personalized products; buyers who tend to be rich, that is, buyers of diversified and diverse commodities; buyers who tend to meet basic needs, that is, buyers who aim to meet basic living needs; Tend to convenience, that is, buyers who take the convenience of purchasing goods as the main criterion.
2.3 Technology Development
It has been several years since my country's professional chain industry has really entered the scale of development. From the perspective of the current development situation, the overall momentum is good, and the technological development has shown six modernizations.
- Operational scale. Some relatively large-scale chain enterprises have been formed in the country, such as Wangfujing Department Store, Bailian Stock, etc. These chain enterprises are developing rapidly, with obvious scale benefits, continuous expansion of market share, and increasingly prominent market position.
- Scarcity of talents. After several years of practice, many chain enterprises have formed a relatively complete operating system, and have accumulated a lot of experience suitable for Chinese characteristics in terms of store development, distribution center operation, effective control of the procurement system, and implementation of a unified sales system. Created some chain management talents. However, these talents are only a drop in the bucket for the entire chain operation's demand for chain management talents. The shortage of talents has hindered the development of chain operations to a certain extent, and has become a talent bottleneck for chain development.
- The industry is diverse. The connotation and operation rules of the chain operation method and the resulting scale benefits have been increasingly recognized by Chinese businesses. As a recognition of this method, the chain operation method has begun to be expanded and applied from supermarket chains to other fields and formats. Among them, such as professional and specialty store chains, department store chains, catering, fast food restaurant chains, service industry chains, home appliance sales chains, building materials chains, drug store chains, etc., which also indicates that the circulation industry is setting off a revolution in business methods - chain stores operate.
- Business enrichment. The development of chain operation will continue to develop from the retail field to the wholesale field, production field and service industry. For example, the monopoly chain stores opened by manufacturing enterprises have developed from clothing, packaging and footwear to automobiles, household appliances and other industries. The cooperative chain of sales network organized by wholesale business has developed by leaps and bounds. The chain operation of the service industry has been widely carried out, from tourism, catering, washing and dyeing, photo printing, and rapidly developing to service, express delivery, transportation, leasing, legal, intermediary services, socialized housework and other fields. Sales chain organizations of agricultural and sideline products have also been developed to a certain extent. In the retail industry, chain operations have rapidly developed from supermarkets to convenience stores, department stores, large general supermarkets, warehouse supermarkets, shopping centers, discount stores, cheap stores and home centers.
- Regional differentiation. From the point of view of the development of chain operation, there is a geographical imbalance. The coastal area develops faster than the inland area, with a high success rate and strong maturity. This also shows that chain enterprises in the coastal areas have great market development space in terms of geographical expansion. It can be seen that large-scale chain enterprises will also emerge from the chain enterprises that have developed along the coast.
- Expansion across regions. In some coastal cities where the chain operation mode was introduced early and a certain scale of chain enterprises has been formed, since 1998, the domestic market has been developed on a large scale and chain organizations have been developed. Mainly in the form of setting up chain branches and distribution centers in various places, we will concentrate on developing chain stores in one area, so as to realize the gradient transfer of these chain enterprises to surrounding areas and the inland in terms of business format, and to obtain additional benefits in new markets. The implementation of cross-regional development of chain enterprises is a good start for the in-depth development of my country's chain operations.
2.4 Policy Supervision
On December 1, 2005, the "Regulations on the Administration of Direct Selling" was officially promulgated and implemented, entering a new stage. The voluntary chain sales without stores have completed the historical mission; the marketing of interpersonal networks has entered a standardized operation with laws and regulations, and related industries are collectively referred to as For the direct selling industry, illegal interpersonal networks are collectively referred to as pyramid schemes (including pyramid schemes in disguise) according to the "Regulations on the Prohibition of Pyramid Selling" promulgated and implemented in the same year.
Chapter 3 Industry Valuation, Pricing Mechanism and Global Leading Enterprises
3.1 Comprehensive financial analysis and valuation methods of the industry
Figure Comprehensive Financial Analysis
Source: Asset Information Network Qianji Investment Bank IFIND
Figure Industry Valuation and Historical Comparison
Source: Asset Information Network Qianji Investment Bank IFIND
Valuation methods for the iron and steel industry can choose price-earnings ratio valuation method, PEG valuation method, price-to-book ratio valuation method, price-to-cash ratio, P/S market-to-sales ratio valuation method, EV enterprise value method, EV/Sales market-to-sales ratio valuation method, etc. value method, RNAV revaluation net asset valuation method, EV/EBITDA valuation method, DDM valuation method, DCF discounted cash flow valuation method, dividend discount model, equity free cash flow discount model, unlevered free cash Discounted flow model, net asset value method, economic value added discount model, adjusted present value method, NAV net asset value valuation method, book value method, liquidation value method, cost replacement method, real option, LTV/CAC ( Customer lifetime value/customer acquisition cost), P/GMV, P/C (customer), Metcalfe valuation model, PEV, etc.
Figure comparison of valuations of major listed companies
Source: Asset Information Network Qianji Investment Bank IFIND
3.2 Industry Development and Driving Factors
economic factors
The data shows that China's GDP is showing an upward trend. In 2021, China's GDP will exceed 114 trillion yuan, a year-on-year increase of 8.1%. Among them, the added value of the primary industry was 8.31 trillion yuan, an increase of 7.1% year-on-year; the added value of the secondary industry was 45.09 trillion yuan, an increase of 8.2% year-on-year; the added value of the tertiary industry was 60.97 trillion yuan, an increase of 8.2% year-on-year.
Figure 2013-2021 China's GDP
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
social factors
Statistics show that China's economy is growing steadily, and the annual per capita disposable income is gradually rising, reaching 35,128 yuan per capita in 2021. The expenditure of Chinese residents on food, clothing and other daily life is constantly increasing, and people's consumption level is also constantly upgrading. The increase in per capita disposable income can increase the willingness of consumers to spend, thereby increasing corporate profits and promoting the development of professional chain enterprises.
Figure 1978-2021 Per capita disposable income of Chinese residents
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
With the in-depth development of new industrialization, informatization and agricultural modernization and the implementation of the policy of urbanization of agricultural transfer population, China's urban population has gradually increased and the urbanization process has accelerated. Data show that China's urban population will be 914.25 million in 2021.
Figure 1949-2021 China's urban population size
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
Takeaway market expands
From 2011 to 2021, the scale of China's online food delivery market continued to grow rapidly. In 2021, the scale of China's online food delivery market was 785.58 billion yuan, and it is expected to reach 941.13 billion yuan in 2022. With the rise of the "lazy economy" and "beauty economy", the younger generation of consumers pay more attention to convenient services, and their willingness to order food delivery has increased. Thanks to young people's preference for online consumption, the development of the food delivery industry has accelerated, pushing catering companies into the fast lane of development.
Figure 2011-2022 China's online food delivery market size and growth rate
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
The expansion of online retail
With the rapid development of online shopping and the outbreak of the "stay-at-home economy", commodity consumption has shifted significantly to online, and online sales of physical goods have grown rapidly. Various types of online consumption represented by online retailing have developed rapidly, which has promoted consumption upgrades. Data show that China's online retail sales will reach 13,088.3 billion yuan in 2021, an increase of 29.7% over 2020.
Figure 2014-2021 China's online retail sales scale and the ratio of total social consumer retail sales
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
The scale of the e-commerce market is expanding
The disappearance of traffic dividends and the increase in the cost of traditional e-commerce drainage have promoted the development of social e-commerce. The content of the e-commerce platform has enriched the marketing model of retail products. Against the backdrop of ecological and structural changes in the retail industry, the operating model of "social e-commerce + new retail" has become a new direction for the development of retail chain operations. Data shows that the transaction scale of China's social e-commerce market in 2021 will be 2,378.57 billion yuan, and it is expected to exceed 4,800 billion yuan in 2025.
Figure 2015-2025 Transaction scale of China's social e-commerce market
Source: Asset Information Network, Qianji Investment Bank, National Bureau of Statistics, iiMedia Data Center
3.3 Industry risk analysis and risk management
Table common industry risk factors
Source: Asset Information Network Qianji Investment Bank
policy risk
According to the actual work experience, the risks of professional chain operation are mainly policy risks. In the process of becoming bigger and stronger, many enterprises have opened many branch companies in various places. However, due to policy changes, the investment in various places cannot be supervised in an orderly manner during the process. The interruption of investment due to special circumstances will cause certain risks. The way to avoid it is to have a certain degree of foresight and a certain degree of anti-risk ability in emergency management, especially in the financing process.
brand risk
In the process of brand management, when the brand has an advantage, it can be effectively operated, but once a brand crisis occurs, the chain operations in various places will directly fall into a bad situation. Especially in the event of some public relations events, consumers will all have resistance to the brand. The way to avoid risks is to change the brand in the process of chain operation when it is clear that the brand is in crisis. In addition, whether the brand has been fully registered, whether it is registered in closely related categories, such as whether the restaurant chain brand has been registered in the communication category, etc. also exist in the category of brand risk.
manage risk
Management risks include store licenses and personnel licenses. Store licenses and personnel licenses need to be recorded in detail through the system, which can remind the parties and operating personnel in advance before the expiration, so as to avoid the basic risk caused by the expiration of the license.
contract risk
Contract risk Special attention should be paid to whether the franchise filing is completed. If the franchise contract is signed before the franchise filing is completed, it may bring a series of unnecessary troubles in the future. These need to be prepared in the early stage. The defection of franchisees happens every year in the industry. In fact, it is impossible to completely avoid it, but it can be avoided through specific model design.
For example, many brands are willing to recruit regional franchisees and let this franchisee serve the entire region, but they need to have strong operational management and control capabilities. When these basic operational control capabilities are not available, it is very easy for franchisees to flop their cards at once. According to the characteristics of your own products and brands, you need to have a way that is especially suitable for the brand in the matter of regional franchises. The ultimate goal is to make it impossible for regional franchisees to turn over, or the cost of turning over the existing basis is very high. .
Food safety risk (catering chain operation)
Food safety risks include basic ingredients selection, delivery process, shelf life management to stores, and risks arising from the process of store hygiene management. The first step in the control of food safety risks is to start with product research and development, and consider delivery and storage; raw materials that are too expensive need to be balanced according to consumer preference and food safety control. For example, starting from perishable ingredients, all canned food needs to be marked with the date when the lid is opened.
3.4 Major Players
Constituent stocks include baby-friendly room [603214.SH], ST Hongtu [600122.SH], Tianyin Holdings [000829.SZ], Aisidi [002416.SZ], Jifeng Technology [300022.SZ], Dr. Glasses [300622. SZ], Huazhi Wine Shop [300755.SZ], Kidswant [301078.SZ].
Global non-Chinese major companies include Daido Kogyo Co. Ltd., Katayama Chain Co. Ltd (KANA), Tsubakimoto Chain Co., Webster Industries Inc., PEER Chain, Dong Bo Chain, Iwis Antriebssysteme GmbH & Co. KG.
Chapter 4 Future Outlook
We believe that the future development of the professional chain industry has the following trends:
- Technological innovation: The professional chain operation industry will actively adopt technological innovation to improve operational efficiency and customer experience. For example, artificial intelligence will be used to optimize supply chain management, forecast demand and enable intelligent inventory management. Big data analysis will help companies gain insight into consumer preferences and market trends, so as to better formulate marketing strategies. IoT technology will realize equipment interconnection and automatic control, improving operational efficiency.
- Diversification of consumer demand: Consumers' demand for personalized products and services continues to grow, and professional chain operators will continue to expand their product lines and provide more diversified choices. For example, restaurant chains offer menus that accommodate different dietary preferences and special dietary needs. Educational chain institutions provide individualized learning programs and teaching methods.
- Green and sustainable development: The professional chain operation industry will actively adopt environmental protection measures and implement sustainable development strategies. Reducing waste of resources is a key objective, such as reducing the use of logistics and packaging by optimizing supply chain management. Improving energy efficiency is another important aspect, such as adopting energy-efficient equipment and lighting systems. At the same time, companies will also promote environmentally friendly products to meet consumer demand for sustainable products.
- Internet and e-commerce: The professional chain operation industry will further expand the Internet and e-commerce channels. By establishing online platforms and mobile applications, businesses can better interact and communicate with consumers, and provide online ordering, appointment and delivery services. In addition, businesses will utilize social media and digital marketing to enhance brand awareness and market presence.
To sum up, technological innovation, diversification of consumer demand, green sustainable development and Internet e-commerce will be the main development trends of the professional chain operation industry. Enterprises need to actively adapt to these trends and continuously improve their competitiveness in order to maintain a leading position in the market.
Cover Photo by Kiwihug on Unsplash