WeChat Social E-Commerce The New Successful Tool For F&B Industry

F & B Industry was allegedly to be the least susceptible by the Internet. With the current pandemic outbreak, the difficult situation they are encountering especially on the movement control and lockdown is unpredictable and came as a surprise. During this difficult period, they are strongly impacted by the rising cost of food supplies, labor cost, rental, as well as competition among brands and products which  challenge their acquisition of customers. We have reached out to few restaurant owners to assess how they are sustaining under the current outbreak. (**The names have been renamed to protect business owners’ privacy)

01— We should not stand idly by during the Covid-19 outbreak period.
Mr. Ting and his wife have been running a restaurant business for 5 years. They started from a 50 sqm shop lot store and expanded to a 120 sqm well-known restaurant with an average monthly expenses of RMB 300,000. Their restaurant has been doing well, and in order to accommodate more customers, they have spent RMB 300,000 in renovating their restaurant last year. However, with the sudden Covid-19 outbreak, their revenue income flow is at a complete standstill.

Q&A
Q1: How does the sudden outbreak affected your business?

Mr. Ting: In the past, our restaurant are always lined with long queues during peak hours. Since the outbreak, our customers couldn't go out. Even though our restaurant still operates, the average expenses still requires RMB10,000 per day. As the restaurant income flow has stopped, just the rental and staff salaries itself would hit hard on us, I do not know how long the restaurant can sustain.

Q2: How do you handle the outbreak?

Mr. Ting: During the first few days of the outbreak, we are still opened for business, but the daily turnover is very little. We could not breakeven on the expenses which includes the staff salaries, rental and utilities, thus we rather choose not to remain open.

Q3: Have you take any initiative to seek a way out?

Mr. Ding: After being in the business for so long, we have built a good reputation with loyal customers in the neighborhood. Previously, I didn't pay much attention in collecting our customers database, therefore I have no way to reach out to them. In the past, my wife had mentioned more than once before on takeaway business. However, I was too busy with the in-store business and do not have the intention to expand to takeaway business. I contacted a takeaway platform few days ago, but their entry fees and other miscellaneous fees could still be a struggle for me now.

Q4: What's next in your effort to fight the outbreak?

Mr. Ding: After running restaurant business for so long, we no longer have the capability to venture into new business. The money we saved up previously have been exhausted during our restaurant renovation last year, and we initially expected the expenses could be recovered in year 2020. My current cashflow on hand is not much left, I wish to hold my business as long as I could and pray that the outbreak will soon pass.

02— In time of desperation, takeaway platform would not be the only solution.
Andy, who is running the same industry as Mr. Ding. Two years ago, he invested RMB200,000 to start his own-brand tea beverages in a 20 sqm store in a shopping mall. A year ago, he expanded his business to a takeaway platform with an average monthly expenses of RMB20,000.


Q&A

Q1: How does the sudden outbreak affected your business?

Andy: Our customer base are mainly the shoppers in the shopping mall. The competition in tea beverages industry is particularly strong, there are several other stores along the same street or same shopping mall. During last year’s economic downturn fewer people came out to spend. In order to boost our business growth, we evolved to online takeaway channel. We are still barely surviving with store closure at current situation.


Q2:  Having said that takeaway platform is a solution to current situation, why are you barely surviving?

Andy: During this outbreak, more F & B stores are approaching the takeaway platform. As a result, we business owners have to spend more on the advertising to increase traffic and gain more exposure. There are more supplies than demands on the platform. Consequently, the net profit per order is not even enough to cover the operating cost. We are helpless!


Q3: What do you think of the "Takeaway Platform"?

Andy: During this difficult time, we mainly relied on online traffic. The daily revenue generated from takeaway platform is approximately RMB1,000 or slightly more. But our net profit is very minimal after deduction of platform fees, labor cost, utilities, rental, operating and packaging cost, thus our cost is extremely high.  


Q4: What's next in your effort to fight the outbreak?

Andy: Although the cost of food supplies had doubled up during the lockdown period, but our beverages selling price remain unchanged because we do not want to affect our brand. During the lockdown period, demands on takeaway business are still increasing. We are also seeking alternative ways to save our cost such as the  platform fees, in order for us to get through this period.

03—In time of crisis, we're trying to make a breakthrough with "WeChat Social E-Commerce".
Ken has been running pizza chain outlets for 10 years, and it has expanded to 50 stores  with average store size of 50 sqm. Its sales revenue has dropped 70% in the early days of the outbreak. He made a decision to venture into takeaway services, and this has contributed an average turnover growth of 300%.


Q&A

Q1: How does the sudden outbreak affected your business?

Ken: In all my years of running pizza restaurant, I've never felt so difficult. In the early days when the outbreak just began, the business turnover was only about 30% of its previous year turnover. In addition of a sharp fall in revenue of more than 50%, I have to deal with other problems such as the high cost employee salaries, no progress of rental negotiation, barely surviving on takeaway platform, and etc. At the end of the day, estimated losses could be more than RMB 6 million. If the outbreak continues, we will experience cashflow crisis in less than 3 months.


Q2: What do you think of the "Takeaway Platform"?

Ken: We have been in the takeaway business for a while. We understood that to gain more traffic and exposure means we have to spend more. But by doing this, it lowers our profit margins. The little profit margins couldn’t even be compared to the operating costs of 50 chain outlets. Our team was then exploring another digital channel, WeChat Social E-Commerce Solution, to engage with customers. Since the crisis, the overall turnover has dropped by 70%. WeChat Social E-Commerce Solution had surprised us by achieving an average of 300% growth in our takeaway business. We can finally breathe a sigh of relief!


Q3: How does WeChat Social E-Commerce benefits to your business?

Ken: WeChat Social E-commerce can save me a lot on digital marketing cost for traffic diversion by leveraging on WeChat’s 1.16B monthly active users and 20M active users in Malaysia. There are more than 60 entry points to channel WeChat users to our WeChat Social E-Commerce Store and we can collect customers data for further engagement at no extra cost. Moreover, no sharing of profits with other platforms has significantly improved my profit margins!

Q4: During the outbreak, what advice would you give to F & B industry regarding takeaway business?

Ken: The current crisis can also be an opportunity for the F & B industry. Takeaway business is penetrating the present mass market. Thus, adopting e-commerce could become a trend in this industry. In addition of customer acquisition from other platforms, businesses can try to diversify their channels of reaching out to customers, such as setting up your own WeChat Social E-Commerce. Effective operations to gain own private traffic and reducing the unnecessary operating expenses will increase your business’s sales revenue and improved profit margin.

04—During this turbulent time, businesses are encouraged to take the initiative to seize the opportunity and turnaround a struggling business!
Takeaway business has brought a great revenue but also fierce competition to F & B businesses. Crisis is a good timing to establish own private traffic pool. We have witnessed the rise and fall of countless business operations throughout recent years; which is also impacting our local economy. We have witnessed many businesses are struggling to stay in this hard time, and those business which stand idly by will eventually being brushed down from the market. Instead of sitting back and waiting for the situation to recover in due course, businesses should take the initiative to breakthrough!

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