Summary of Key Points
High-end bakery brands that once became popular nationwide through queueing and influencer marketing (such as Youhe, KUMO KUMO, and Reqi Baking Shop) are now facing a wave of mass closures. The reasons include: high costs due to their capital-intensive models, a lack of repeat business after the initial surge in traffic, and competitive pressure from lower-cost retailers. The brands that have survived have focused on the quality of their products, the financial health of their individual stores, and reasonable pricing.
1. Excessive spending on “baking shows” has crushed high-end brands
The “luxury” image of high-end bakeries is built on substantial investment. For example, Youhe’s “one store, one workshop” model features fully transparent baking areas where customers can watch the bakers at work—this is certainly eye-catching, but it comes at a high cost. A complete set of baking equipment costs 800,000 yuan, and加上 rent in prime locations and renovation expenses, the startup capital for each store can amount to two to three million yuan. Additionally, multiple professional bakers are needed, further increasing labor costs.
Even other brands that use a central factory to produce frozen dough and then bake the products in stores incur significant expenses. According to Huayan Securities, for a 100-square-meter store with monthly sales of 270,000 yuan, the combined cost of ingredients, rent, and labor amounts to 246,000 yuan, leaving a profit of only 24,000 yuan (a profit margin of less than 9%). If traffic declines, fixed costs (rent and equipment depreciation) remain unchanged, resulting in immediate losses—it’s like running a business that incurs a fixed monthly expense of 200,000 yuan, with potential profits of 20,000 yuan in good times and losses in bad times.
2. The flaw in relying on traffic and influencers: rapid success, rapid decline
These brands gained popularity through traffic-driven strategies, such as launching a hit product (like KUMO’s cheese cake), creating a sense of ritual (like ringing a bell to announce the cake’s release), and using social media for word-of-mouth. However, these methods have several drawbacks:
- Infrequent purchases: Cheese cakes are not consumed daily, and their shelf life means low repeat sales rates.
- Low barriers to entry: If one brand starts selling cheese cakes, others quickly follow, leading to a loss of novelty.
- Dependence on traffic: Initial popularity relies on queueing and promotional offers, but once the hype fades, customers disappear. For example, many people in Youhe’s queues were just there to try the products; few actually made purchases.
More critically, many influencer-driven brands focus on quickly making money by launching hit products and opening franchise stores without investing in product development and supply chain improvements. Once traffic fades, franchisees struggle to make profits, leading to business failures (KUMO closed 180 stores in one year).
3. Retailers’ “diminishing impact”: competing with lower costs
High-end bakeries face competition from retailers like Sam’s and Hema, which use asymmetric strategies to steal customers. How?
- Cheaper rent: Retailers rent large areas, with rent accounting for less than 10% of their turnover, compared to 15%-22% for bakery shops in commercial districts.
- Better pricing on ingredients: Retailers can purchase flour and cream in bulk, reducing costs significantly.
- Efficient labor: Complex baking processes are done in central factories, and stores only need to thaw and re-bake the products, eliminating the need for experienced bakers; regular employees can handle these tasks with training.
Consumers now often pick up Swiss rolls from Sam’s or bring a croissant with their coffee. Data shows that the proportion of customers buying baked goods from retailers has reached 51.4%, approaching that of chain bakery brands (54.3%). The demand for specialized bakery services is declining.
4. The secrets to survival: focusing on quality and cost control
Not all high-end bakery brands are failing; some are doing very well. Their common strategies are simple:
1. Diverse product offerings: They have more than one hit product and also offer regular, affordable basic items (such as daily bread) and higher-profit specialty items (custom cakes), creating a balanced business model that combines customer attraction and repeat sales.
2. Robust store operations: They avoid reckless expansion and focus on building a solid supply chain, training franchisees, and establishing consistent operational standards. Each store is a successful one, rather than aiming for a vague goal of opening a thousand stores in three years.
3. Reasonable pricing: Consumers are willing to pay for good quality bread but not for excessive decoration or marketing costs. Some brands simplify their decoration and invest more in ingredients, which is more appealing to customers.
In summary, after the initial surge in traffic and influencer marketing fades, only those brands that truly focus on producing quality bread and controlling costs will survive. There will still be a market for high-end baked goods, but it will be reserved for those who put effort and dedication into their craft.