A laundry shop that "doesn't stick to its main business"

A chain dry cleaning store originally focused on laundry has continuously launched a series of businesses completely unrelated to its main business, including parcel collection and rice sales, with these side businesses generating more than half of the total revenue.

Recently, a new service has appeared in the Tian Tian Laundry stores spread across Guangzhou subway stations—luxury goods care: washing a small LV bag costs 260 yuan, while washing a fur coat costs 880 yuan.

Tian Tian Laundry is one of the industry leaders, but many citizens have a deeper impression of its non-laundry services: you can buy laundry detergent and shampoo in the store, recharge your phone and Yang Cheng Tong card, and even buy movie tickets and lottery tickets.

Moreover, if your parcel arrives but no one is home, you can have Tian Tian Laundry collect it for you; if you run out of rice or eggs at home, you can buy them at Tian Tian Laundry. However, shelves with eggs and rice are usually not seen here, nor are piles of packages during logistics transfer.

A chain dry cleaning store originally focused on laundry has continuously launched a series of businesses completely unrelated to its main business. Moreover, these "non-mainstream businesses" account for more than half of its revenue.
Interestingly, some venture capitalists are fond of Tian Tian Laundry's "off-main-business" model, but they were turned away.

Tian Tian Laundry already has more than 150 stores, limited to the Guangzhou market.

Riding on others' success is difficult, so side businesses are done out of necessity.

Twenty years ago, Guangzhou resident Lu Zhiji often took the Guangzhou-Kowloon through train between Guangdong and Hong Kong. He noticed that many Hong Kong businessmen working in Guangzhou frequently brought back branded clothes in large bags to Hong Kong for cleaning, and then brought them back in large bags after cleaning. This gave him the idea of opening a laundry store.

At first, he also imitated the then common "front shop, back factory" model—taking clothes at the front and washing them at the back, but it never grew big; so he went abroad for research and found that there are various ways to run a laundry store.

For example, in the US, due to low population density, all stores are equipped with laundry equipment. Japan and Europe use a separated model, where some stores have laundry equipment, but most only handle receiving and distributing clothes. The difference is: Japan sets up a washing center, and washed clothes are delivered to stores via logistics, while Europe uses a "one-to-many" model, where one store with laundry equipment serves multiple stores.

Lu Zhiji believes that the "central factory + laundry store" model is more suitable for the densely populated Chinese market. In 1993, he invested over ten million yuan to establish a central factory covering more than 20,000 square meters in the suburbs of Guangzhou. Every morning, his self-organized fleet departs from the factory to distribute washed clothes to various stores and collect clothes needing washing.

This structure places the most important washing process in a factory invisible to customers, so terminal stores no longer need equipment or technicians, becoming outlets that only receive and send clothes. Tian Tian Laundry's scale quickly expanded from one or two stores to dozens.

In 1999, Guangzhou began building the subway, and Lu Zhiji decided to enter, using this to further expand scale. At that time, the subway was still new, with unclear commercial prospects, and there was no precedent for setting up laundry stores in the subway. His idea quickly sparked controversy within the company, but he insisted and secured exclusive authorization to set up laundry chain stores along the subway line.

However, when the subway first opened, the passenger flow was not as high as expected, and customers had no concept of consuming inside the subway. Coupled with the laundry industry's off-season—from June to September each year (due to hot weather)—business volume was less than one-fifth of the peak season, Tian Tian Laundry was almost losing money year after year at that time.

Facing this common industry dilemma, Lu Zhiji began looking for new business methods. The first "cake" he targeted was self-operated laundry supplies. The reason was that some customers who came to wash clothes often asked: can you sell some to us?

Soon, revenue from this accounted for about 30% of Tian Tian Laundry's total revenue. This greatly boosted Lu's confidence. Next, he began casting a wide net, engaging in subway card and mobile phone recharge, movie ticket and lottery sales, and other businesses.

According to Zhou Jianhua, deputy general manager of Tian Tian Laundry, the "non-main services" income accounts for more than half of Tian Tian Laundry's total income, not only smoothing out the traditional laundry's off-peak and peak seasons but also bringing at least 30% growth to the laundry business.

"Most effective for elderly people who don't use the internet"

The diversified business income brought new inspiration to Lu Zhiji. He believes Tian Tian Laundry can become a "convenience service point." He began cooperating with some brands to sell native eggs, organic rice, and so on in stores. However, the store does not stock these goods; when customers come to wash clothes, staff will hand out a flyer. If a customer places an order, Tian Tian Laundry directly passes it to the upstream brand, which is responsible for home delivery. Tian Tian Laundry earns a small commission.

Cooperation with a single brand was not very effective. Zhou Jianhua said the income from this area was not much. In recent years, the surge in online shopping made him realize that Tian Tian Laundry might have a role to play here.

After years of exploration, they found a website called Youdian Shopping for deep cooperation. The specific cooperation method is: Youdian Shopping is responsible for sourcing, Tian Tian Laundry handles offline promotion and terminal ordering, and after receiving orders, third-party logistics deliver to residents' homes. Profits are shared among the three parties.

"Unlike Taobao, which only provides an online trading platform, we not only provide the platform but also directly participate in profit sharing," Zhou said. Tian Tian Laundry's biggest advantage is that its outlets are generally located next to residential communities. While customers wash clothes, a single flyer can promote its online ordering products.

"This method is most effective for elderly people who are not very good at using the internet," Zhou analyzed. These people still have at least ten years, during which Tiantian Laundry can be explored. According to his calculations, the cost for traditional products to enter supermarkets is at least 20%, while Tiantian only needs to share 10% of the profit, which is already "very considerable."

It is said that the cooperation between Tiantian Laundry and Youdian Shopping has been in adjustment for two years. Previously, they were working on network architecture and supply integration, and now it is about to be launched.

Transaction volume of 400 million, profit only several hundred thousand

However, diversification has allowed Tiantian Laundry to find new profit channels, but it has also brought new problems.

Tiantian Laundry currently has more than 150 stores, with an annual turnover of about 70 million yuan from laundry services. However, the cash collected from value-added services such as Yangcheng Tong top-ups and mobile phone recharges exceeds 600 million yuan per year, more than eight times the main business.

But the revenue generated by these services is very limited. Taking Yangcheng Tong top-ups as an example, Zhou revealed that this alone generates a cash flow of more than 400 million yuan per year. The rebate provided by Yangcheng Tong company is 0.25%, and Tiantian Laundry's gross profit in this area is about one million yuan per year. However, the management costs it has to pay are very high.

According to the agreement, Tiantian Laundry must transfer the money to Yangcheng Tong's account on the same day it receives it. Collecting such a large amount of money is a challenge. Zhou introduced that Tiantian Laundry's management team has only about forty people in total, of whom a quarter are dedicated to this service. Their daily task is only one: to shuttle continuously among 150 stores and deposit the received cash into banks. To motivate the staff, employees receive commissions after recharging. At a major station like Tiyu Xi, a store clerk can earn more than 200 yuan per month just from recharging bonuses.

"After deducting the salaries of these full-time employees and the cost of bank cash escort, the profit in this area is only several hundred thousand yuan," Zhou complained.

The newly launched luxury goods care service charges 260 yuan to clean a small LV bag. Although the profit is substantial, it relies entirely on manual labor. According to Chen Tao, the technical director of Tiantian Laundry, talent in this area is extremely scarce. He has to personally take charge.

Due to adopting the "central factory + laundry store" model, Tiantian Laundry has always insisted on direct operation (only a few stores are franchised. According to Zhou, after this year, the company will also cancel franchising and only operate directly). It is still limited to the Guangzhou market. Its competitors, such as Rongchang Laundry and Funait in Beijing, have expanded their outlets across large and medium-sized cities by adopting lower-cost franchising.

But Zhou Jianhua said he does not feel panic. He even rejected venture capitalists who favored Tiantian Laundry's business model. He said he would consider cooperation with capital only after increasing the number of stores to 300 in two years, aiming to replicate Tiantian Laundry's regional model nationwide.