After exceeding 20,000, why does Lucky stop making money?

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Yesterday night, Lucky released its second quarter 2024 results. According to the financial report, the total net income in the second quarter of 2024 was 8.403 billion yuan and the total net profit was 871.1 million yuan. The 20,000 stores were opened this month, bringing the total number of stores to 19961.

Then, in the early hours of this morning, Starbucks released its latest results, which showed that net income for the quarter was $733.8 million, up 5% from the previous quarter, when the number of stores reached 7306 at the end of the quarter, up 213 from the previous quarter and 13% from last year.

From this point of view, both lucky and Starbucks are on the rise in revenue and stores. But if you notice same-store sales, it doesn't seem optimistic. Ruixing said in its financial report that same-store sales at its own stores fell 20.9% from a year earlier. Starbucks quarterly report also showed that same-store sales in China fell 14% year-on-year, with average unit prices and transaction volume shrinking.

This means that while the brand has more and more stores and the paper report is thriving, the new stores may not bring the expected sales to the brand.

As a result, in the coffee market of "more monks and less meat", the first thing on the brand's mind is to trade lower prices for more sales, so that the competition of 9.9 yuan is getting fiercer and fiercer, dragging down some of the peers who were still watching from the other side.

Among them, we have to raise the C position of the price war to be lucky. Since a price war with Kudi last year has been welcomed by consumers, brand awareness has been rising, the number of users has increased, as well as declining operating margins and increasingly obvious profit losses in the financial results.

In order to stop the loss in time, Ruixing began to shrink the low price, raising some of the best-selling items back to the original price. As a result, a large number of users posted posts on the platform mocking the brand "can't afford to play" and turned to other brands, resulting in a significant drop in store sales. At the same time, competitors set their sights on Lucky's lost users and quickly grabbed the market with 9.9 yuan or even lower 6.6 yuan, making the price war more and more intense, and Starbucks, which disdain the price war, could not escape and was forced to enter the war.

There is no denying that low prices do get product sales, but sales are not the same as profits. For some small and medium-sized brands that do not have sufficient financial support, the practice of exchanging price for quantity is actually selling a cup at a loss, which is tantamount to drinking poison to quench thirst, and it will only be dragged down in the long run, resulting in the end of closing down.

And for head brands that can afford to spend money, the price war actually makes them uncomfortable. As a result, various brands have started a battle for points, in an attempt to use more stores to drive overall sales and increase profits. Perhaps in the brand's point of view, the more stores, the more market share.

But the increasingly intensive point layout virtually reduces the living space of the market, which intensifies not only the competition between brands, but also the competition between stores, resulting in some stores with poor locations "living beyond their means". Perhaps, in the bloody industry competition, "opening a store does not make money" is no longer a concern for small and medium-sized brands, but will also become a concern for lucky, Starbucks and other head brands.

Picture from: Internet

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