With
profound user operation, complete supply chain, long dwell time, and rapid
expansion strategies, China's largest hotpot chain Haidilao is essentially an
internet company.
Xiaomi's
founder Lei Jun once said that Haidilao was basically the same as tech giants
like Xiaomi, Toutiao and Tencent.
Founded in
1994, Haidilao is now a world-famous catering enterprise. Its founder, Mr Zhang
Yong, is the fourth-richest person in Singapore in 2021, with a net worth
of US$16 billion. In China's restaurant sector, Haidilao has always been
imitated but never surpassed. Even Xiaomi's Lei Jun once said that he learnt
from Haidilao at the beginning of Xiaomi. By a deep dive into its operation
model, we found that Haidilao is an internet company rather than a restaurant
chain.
User
Operation
· Customer-centred Services
Haidilao is
best known for its services beyond a typical Chinese diner's expectations.
Their excellent and sometimes overzealous services have made headlines and
trending topics across China's social media. On Zhihu, the Chinese version of
Quora, under the question "What
are some unforgettable services you experienced at Haidilao?" there are more than 5,000
answers. Haidilao customers shared their heart-warming memories with Haidilao,
from babysitting to receiving free teddy bears when dining alone in case they
are lonely.
As early as
2010, Haidilao has put information technology into its enterprise management,
simplifying the internal process and bringing more convenient and personalised
service. Customers can order food on Haidilao iPads or their phones through WeChat,
Alipay, Haidilao website and App. The ordering system saves the customer's
information, records the customer's preference, and analyses the customer's
consumption ability. Waiters also put in remarks in the system if they receive
any special requirements. When customers walk into Haidilao again, they will
receive more personalised services and promotions. Haidilao's smart soup base
machine and DIY soup base system allow customers to customise the soup.
"Single customer" menu set designed for solo dinners supports
cancelling and returning any untouched plates, lowering sales but increased
potential return customers.
Haidilao has
more than 71 million registered members and has served over 250 million
customers as of 2020. Even under the impact of Covid-19, the table turnover
rate at Haidilao is way above average, 2.25.
They have been
working with food delivery giant Eleme during the pandemic. Their "little
hotpot" delivery service allows customers within three kilometres to
receive the meal in less than an hour. In 2020, Haidilao's takeout revenue
reached RMB718 million (US$112.2 million), up 160% year on year. For customers
who live too far from any Haidilao restaurants, Haidilao provides more than 20
kinds of ready-to-cook hotpot on e-commerce platforms and self-collect
locations.
· Online Operation
Haidilao
launched its website in 2003 when none of its competitors is scaling up using
the power of the internet. Its marketing strategies focus on social media and
search engines. More than 254,000 Weibo users have posted under hashtag #haidilao, and it gained over 520 million views
as of August 2021. In 2015, Haidilao opened an "internet experience
store" at a location gathered with countless internet and tech companies
in Beijing, providing an open social platform combining traditional catering
with mobile internet. They introduced activities such as "programmer's
day" and provide a forum or event venue for We Media and O2O companies,
moving the online social activities to the dining place. Thanks to its online
marketing strategies, every move of Haidilao can become a hot topic. There are
good and bad public opinions, but what remains unchanged is netizens'
attention.
Powerful
Supply Chain Ecosystem
Haidilao is
considered one of the most outstanding Chinese enterprises in catering supply
chain orchestration. Backed with Zhang's "don't put all your eggs in one
basket" strategy, Haidilao refuses to keep the entire supply chain in the
back. It acts as a platform, with each sector in the supply chain operating
independently. Besides being a part of Haidilao's kingdom, these companies
serve and empower the whole F&B industry. Some of them are even listed.
Long User
Dwell Time
Internet
companies try to keep users on their products as long as possible, which
Haidilao has done. Most Haidilao restaurants are open from 10 am to 10 pm. Some
are 24/7 and offer 12%-25% off during night times.
· Offline
A typical meal
at Haidilao starts with a two-to-three-hour queue. To calm the anxious and
hungry customers, Haidilao put a lot of thought into the waiting areas. Free
and unlimited snacks and drinks are standard. Board games are a must. Free
manicures make a trip to Haidilao complete. The longer people wait, the
hungrier they are and the more they will order later.
· Online
Besides the
basic functions such as queuing and ordering, Haidilao App offers a community
that allows users to share videos, shop online and play games to collect
"Lao Coins", which they can spend in the marketplace. The total
number of downloads of the Haidilao App on Android phones is about 32.5
million, and the average daily downloads on iPhones in the past month (July 2021)
is 8102.
Rapid
Expansion
Rapid expansion
helps a brand to occupy a distinctive place in the mind of the target market.
In Haidilao's case, a large scale has another perk: it helps keep the rent
down. It brings more customers to the malls, so Haidilao can always get much
lower rent than its competitors. In 2020, Haidilao spent RMB236 million (US$36.9 million) on rent, accounting for 0.6% of its
income. The numbers of Xiabuxiabu, the second player in the market, are
RMB220 million (US$34.4 million) and 4.0%. Hotpot can be a standardised dish
and does not require many skilled chefs, making it possible for rapid expansion
and scaling up.
According to Guosheng
securities, the
distribution of the Chinese restaurant industry is relatively fragmented. As of
2019, only 10.3% of China's restaurants are chains, and the number is 54.3% in
the US and 49.7% in Japan. A report by Frost
& Sullivan shows
that the size of China's hotpot restaurant market is expected to reach RMB707.7
billion (US$110.6 billion) by 2022. According to ASKCI Consulting, China's hotpot restaurant market's top
five concentration ratio (CR5), the percentage of the total market share of the
top five companies, was 5.5% in 2020. Even a giant like Haidilao takes less
than 3%. In addition, the accelerating urbanisation process in the country
provides more opportunities for Haidilao with its "central kitchen + chain
restaurants" fast food model and advantages in supply chain management. In
2019, Haidilao's leaders claimed that the country has enough room for 3,000 Haidilao
restaurants nationwide.
To achieve
rapid expansion, a restaurant chain that adopts an all-direct-sale model needs
at least four key factors: a complete restaurant supply chain system, a
standardised management system, a talent training system, and substantial capital.
With all those in place, Haidilao was able to scale up fastly. According to
Haidilao's 2020 financial report, the total number of restaurants was
1,298 by the end of 2020, an increase of 178.5%. There were 544 new locations
opened in 2020, almost 1.5 new ones each day.
Despite the
rising costs and declining profits due to the pandemic and a drop in Haidilao's
share price, securities agencies still recommend buying. It indicates the
market's recognition for Haidilao and its expected bullish long-term
development.
Summary
Although the
founder, Mr Zhang Yong, claims not to understand the so-called "Internet
thinking", Haidilao has always been the first to leverage new business
models and technologies and keeping up with the trend. Haidilao's nature as an
internet company is essential for its unprecedented success.
