The jar is filled with instant coffee powder. When someone comes to visit, the air is filled with a slightly bitter and burnt aroma. This is the best reception for the host.
Wu Xiaomei, the founder of Seesaw Coffee, left her first impression of coffee here.
In the past 20 years, China has experienced three waves of coffee waves, and Wu Xiaomei’s perception of coffee is also changing. Caffeine stimulates the excitement of the market time and time again, making the growth and disruption of this track mutually stimulate, becoming increasingly intense year by year.
Today, the average annual growth rate of consumption in the Chinese coffee market is 15%, far higher than the global average annual growth rate of 2%. By 2025, the size of China’s coffee market will reach 217.1 billion yuan.
“In roll out” has become the key word for the entire track over the past year. The giant Starbucks China is slowing down, while the local brand Ruixing takes the opportunity to accelerate its pace. On the occasion of the competition, Tim China (Tianhao Coffee) from Canada landed on NASDAQ, and cross-border players China Post, Li Ning, and PetroChina successively entered and opened stores.
Compared to the “size” and “competition” of the outside world, as well as the fall and rebirth of giants, Seesaw, founded in 2012, is not entirely the same. Seesaw may not have a strong sense of presence when store expansion becomes a hot spot and mainstream, but it has seized some “big” opportunities at the worst of the market.
From 2017 to 2019, the total number of Ruixing stores increased by 4498, and in the second quarter of 2022, the number of stores exceeded 7000. Manner also completed the construction of offline stores in 12 cities nationwide in January of this year, with a number of more than 210 stores in Shanghai alone. In contrast, Seesaw has gone through a long 10 years with 135 offline stores in 9 cities across the country.
The restriction on the number of stores has been regarded as a lost opportunity cost. However, when the sudden epidemic and the myth of new consumption flows were broken, the Chinese chain coffee industry experienced a rise, chaos, cold winter, and reshuffle. Seesaw’s performance doubled tenfold in 2020-2022, and online business became the second growth point curve. The potential of coffee and lifestyle brands is being reshaped.
For the future, Wu Xiaomei still planned a different business blueprint for Seesaw – “more robust than small stores, more flexible than large stores” – with products and supply chains as the “starting point”, accelerating store expansion and digital construction at a steady pace, and catching up with the next geographical advantage and 10 times growth.
1、 Start with a cup of instant coffee
In the 1990s, foreign trade business flourished. Wu Xiaomei’s hometown, Yiwu, Zhejiang, is often visited by foreign merchants. Large bottles of canned Nestle instant coffee once became fashionable. Wu Xiaomei, who is studying in junior high school, drank coffee for the first time. “(Coffee) is convenient and refreshing. I think it is magical. I often drink a cup of coffee when I stay up late to study.”
Instant coffee is the symbol of the first wave of coffee. From Nestle to UCC, we have tasted all the common instant coffee on the market. Drinking coffee has become Wu Xiaomei’s lifestyle. At the turn of the century, with the rapid expansion of the Starbucks brand in China, the second wave of coffee waves hit. At that time, Wu Xiaomei was studying in Shanghai. Standing at the top of the tide, a glass of Xingbingle opened up a new taste bud for her.
“I am from Yiwu, and the strong business atmosphere in my hometown has deeply influenced me,” quipped Wu Xiaomei. After tasting Starbucks, she began to ponder the business model of the multinational company. When choosing to start a business many years later, Wu Xiaomei thought of Starbucks again.
In 1971, Starbucks opened its first store in the Park Market in Seattle, Washington, USA. In the next few decades, Starbucks broke through the world with its coffee culture. “China has an incremental coffee market and also needs coffee culture. Why can’t it be a local coffee brand that is closer to Chinese tastes and emotions and more differentiated than Starbucks?”
Wu Xiaomei is not lack of ambition. After digging deeply into the development history of Starbucks, she decided to build a boutique coffee brand that competes with Starbucks in terms of space, service and products.
In the summer of 2012, the first Seesaw store opened in Yuyuan Road, Shanghai. The store was located at 433 Yuyuan Road, hidden in the Jing’an Design Center in the alley.
Wu Xiaomei gave the reason of “adjusting measures to local conditions”. Start-up brands can’t match the store location of Starbucks, but the design center is full of creative people and urban white-collar workers who need coffee to refresh and inspire. Seesaw finds target users at low cost, and the young atmosphere is consistent with coffee culture. “Our store is very small, with 50 square meters in the infield and 30 square meters in the outfield. There is no fixed rent, and the rent is calculated by the way of performance bonus. All the investment is very low, and because the precise customer group brings a large number of orders, it begins to make profits within a month or two after opening, and basically returns to the cost after five months.”
2、 What did Seesaw do right?
Wu Xiaomei’s decision led Seesaw through her first five years. When the time came to 2017, the hot wind of new internet retail hit the coffee track, and the entire track began to heat up rapidly. Several mainstream capitals have also turned their attention to Seesaw. As an “established” brand with a balanced development of reputation and tonality, Seesaw quickly gained the favor of capital. In June 2017, Seesaw obtained the first round of financing to become the first brand of high-quality coffee in China.
Accelerating the opening of stores is the strategic choice for the growth of coffee brands, and store coverage is also one of the important criteria for capital evaluation of brands. “Two years after the first round of financing, Seesaw tried to expand rapidly, but it was still groping at that time, and it did not go smoothly,” said Wu Xiaomei. For start-ups, “stability” is a mixed state. Seesaw has achieved stable revenue and cash flow on the one hand, but on the other hand, finding business breakthroughs has become a new difficulty. “Seesaw has encountered a problem. Seesaw needs an opportunity to change.”
There is a consensus in the consulting industry that the life cycle of small and medium-sized enterprises is about 3-5 years. Since 2020, COVID-19 has swept the world, causing some enterprises to fall into a strange circle forever, while some survivors have found a turning point, bringing a glimmer of light to the entire industry.
The seesaw is a person who desperately strives for survival. “All good enterprises are children of winter.”. Seesaw has changed its business philosophy during the three years of the epidemic, waiting for a tenfold increase in performance.
“I think the epidemic is an opportunity instead. Seesaw was in the bottleneck period at that time. When the epidemic came, we had to face the problem directly, think positively and make changes. The substantive breakthroughs of enterprises are sometimes’ forced ‘.” Wu Xiaomei mentioned Ruixing. From listing to delisting, after two years of blood exchange, rectification and adjustment, Ruixing Coffee finally stepped out of the dark moment in 2022 and began to make great strides. According to the financial report of the third quarter of 2022, Ruixing’s net income continued its previous rise, increasing by 65.7% to 3.89 billion yuan year-on-year.
Change is necessary, and it is difficult to make changes. Wu Xiaomei shared a business story of Apple. “When Jobs reviewed the past of Apple, he said that there have always been two kinds of cultures intertwined within the company, one is hippie, one is doer, one is emotional and one is rational. But I think that if we want to achieve a breakthrough in business, enterprises must find a balance between business and art, and emotional and rational.”https://forum.stoneitech.com/
Before the epidemic, Seesaw only had a single business form of offline stores, and the entire team, including Wu Xiaomei, was a fan of “niche boutique coffee culture”. Reality distinguishes business from ideal, and Seesaw must make a balance.
Seesaw自2020年开始开展三项业务。一是线下现磨咖啡，利用mini店、标准店、概念店等不同店型，精准服务相应目标用户；二是与外卖平台、第三方内容交易Platform cooperation to achieve an O2O mode of online trading and offline performance; Third, develop online retail and retail catering brands through e-commerce. Through multi category, multi channel, and multi scene gameplay, we can gain customers, enhance the business value of a single user, and comprehensively cover consumers’ coffee needs.
At the same time, Seesaw and the platform are more like co creation. Take the takeout business as an example. During the Shanghai Coffee Culture Week in 2022, Seesaw not only participated in offline activities, but also cooperated with Hung Mo to develop and launch a “malt essence latte” with Shanghai characteristics online. During the two weeks of coffee week, Seesaw’s takeout performance increased by approximately 50% month on month. In addition, in Seesaw’s Tmall flagship store, in addition to the same offline coffee beans and filtered coffee, there are also frozen dried coffee powder, coffee liquid, and other categories, bringing non overlapping incremental revenue to Seesaw.
The layout of online business helps Seesaw break through the growth bottleneck. According to public data, Seesaw’s average annual sales growth rate from 2020 to 2022 will be 220%, and the sales of take-out and online retail businesses will both contribute 30%.
“We have been making a comeback. Seesaw has done something right. Finally, we came to the conclusion that we have found a balance between sensibility and rationality. In the three years of the epidemic, we did not give up the tonality of quality coffee, but made changes according to the changes and launched online business. At the same time, we set up a product design team to actively explore new products; we built a supply chain team to do a good job in infrastructure.” Wu Xiaomei said.
She told Forbes China that after the connection between upstream and downstream, Seesaw’s product launch time was reduced from the past 28 days to 7 days, and the capacity doubled. Relying on online business, Seesaw has completed the whole process of product, customer acquisition, promotion and profit. The refined operation of public domain and private domain traffic on the large platform makes the monthly repurchase frequency of users reach 4.2. Seesaw passed the winter safely, even overtaking at corners. Wu Xiaomei’s strategy was successful again.
3、 Lululemon in the coffee industry
Returning to the theme, Seesaw is not very similar to its peers – it first studied Starbucks, and then was inspired by Ruixing’s business model. If we really want to compare Seesaw with a brand, it may be closer to Lululemon.
In Wu Xiaomei’s view, Seesaw’s next step is to look for “quality growth”, focus on better coffee for Chinese people, and build itself into a “lifestyle brand”. For Seesaw, in order to enter the market segment of premium coffee in the coffee track, premium coffee is differentiation.
This logic is easy to associate with lululemon. In the field of large sports consumption, Lululemon is more niche than Nike, Adidas and other sports goods giants, but it has targeted the market segment and established an unshakable advantage in yoga. Seesaw wants to be lululemon in the coffee industry.
“Sinking” has been a hot word in the coffee market in the past year. Starbucks plans to arrange offline stores in 300 cities nationwide by 2025; Ruixing’s new joint stores mainly cover low-tier cities with strong growth; Coody Coffee, Lucky Coffee and other brands featured “5 yuan American style” and “9.9 Latte”. When the market of first-tier and second-tier cities is increasingly saturated, the coffee in the hands of young people in small towns has brought tangible benefits and new customers to enterprises.
Seesaw did not join this wave of “sinking”. According to Wu Xiaomei, at present, Seesaw’s 135 stores are self-operated. The strategy of opening stores in the next few years is still to focus on the intensive opening of stores in the first and second tier cities in East China to improve penetration and popularity.
“Friends are in the education market in low-tier cities, but for Seesaw, the layout of the sinking market is not efficient, and our logic is still to create ’boutique’.” The new and old are the same topic of new consumption and the coffee track. From “new users” to “core users”, Seesaw’s boutique logic has again proved effective compared with the low-cost strategy.
According to Wu Xiaomei, when the first Seesaw opened, 60 to 70 percent of its users were women in the workplace. Ten years later, Seesaw’s regular customers remained loyal to premium coffee and contributed more than 50% of its monthly member sales.
“Compared with foreign countries, the number of people who consume coffee at high frequency in China is small. Making coffee more suitable for Chinese people, better to drink, and more suitable for Chinese people’s eating habits may be the best solution for both the stock market and the incremental market for a long time.” Wu Xiaomei said.
SeesawThe creative coffee product line “maintains the quality of high-quality coffee, emphasizing inspiration and creative expression”, bringing a new group of customers – young people aged 18-25 – to the milk tea track. “They prefer to drink Seesaw instead of milk tea with creative coffee,” Wu Xiaomei said. Looking back on Seesaw’s actions under the “coffee and tea” trend at that time, I can’t help but sigh that the team seized the dividend and opened up the market scale for Seesaw.
“Boutique is to provide users with good products and a better experience based on market demand,” Wu Xiaomei said. Seesaw has been building a community since 2021. Currently, each store has more than 1000 regular customers in the community. There are various interesting activities and interactions in the community, with rich and colorful content. At the same time, it breaks the restrictions of geographical space and provides users with more timely services and companionship. Especially during the special period of the Shanghai epidemic in 2022, the Seesaw community was once the main force of community group buying. Through the community, Seesaw has provided coffee group buying services to over 100000 members in 1500 communities, selling 1 million convenient coffee products, satisfying“
Of course, in addition to her commercial success, Wu Xiaomei has not forgotten that Starbucks initially impressed her coffee culture. “I hope more people will consider Seesaw as a lifestyle when they mention it in the future,” said Wu Xiaomei, who has 100 ways to relax and entertain, and a cup of coffee is also on her to-do list. “This is my original intention when I founded Seesaw. I want to open a coffee shop to help urban people relieve pressure, provide more people with creative lifestyles, and imagine a better life,” she said.
