Three Squirrels: how China’s largest snacks retailer react to Covid-19

Covid-19 promoted instant food and packaged food sales, but also reduced offline sales of snacks. How did Three Squirrels react?

Company Introduction

Three Squirrels is a snack company starting from online shopping on Alibaba and JD.com in China. Founded in 2012 by Zhang Liaoyuan, and IPOed in 2019, Three Squirrels created a legend of selling $14 million nuts within in 20 mins. It currently has over 500 SKUs, includes nuts, baked snacks and meat snacks, with annual sales around 10 billion RMB ($ 1.6 billion dollars) in 2019.

Three Squirrels literally means the three squirrels: little cool, little beauty and little cheap. Using the cute and vivid image of squirrels, the company draw lots of attention from customers and made great marketing campaign to promote the brand.

 

Influence due to Covid-19

The corona virus outbreak created both opportunities and challenges to snack companies, including Three Squirrels.

 

  • Positive influence: More and more people stay at home, which promoted the sales of instant food and packaged food, epically instant noodle, snacks generally.

 

  • Negative influence: The logistic was stopped, which reduce e-commerce platform reducing sales volume right after the outbreak. Since Jan 24th, one day before Chinese New Year, and one day after Wuhan transportation was stopped due to Covid-19, the sales volume of snacks online only delivered 0.67% year-on-year growth. From Jan 31st to Feb 6th, the sales online reduced 31.92% compared with the same time last year.

 

Three Squirrels’ Reactions to Covid-19

Reacting to the breakout of Covid-19, Three Squirrels took out below changes:

  • Focusing online store, by increasing SKUs.

80% of sales comes from online sales in 2018. To meet with the needs of having multiple snacks when quarantined at home, Three Squirrels decided to increase SKUs, such as ready to cook hotpot, bread, biscuits and multi nuts.

 

  • Launch Food delivery service from Feb 27th 2020

From 2016, Three Squirrels started to open offline stores to provide extended customer experience and better customer service. The customers in store could see cute squirrel-toys, watching fancy videos and try products. Until end 2019, there are over 300 stores offline in China.

From Feb 2020, most stores stopped due to the corona virus, but the offline customer data is still there. Using those customer data, the company started to cooperate with Ele.me and other food delivery companies in China, to provide delivery service to customers. Customers who used to go to offline stores could order from delivery platform and get products within a few hours.

 

  • Extension of membership to keep customer retention

Many customers were quite loyal with Three Squirrels.  Among the top 3 snacks companies in China, Three Squirrels enjoyed the most loyal customers from 2012. To keep customer retention rate, Three Squirrels decided to extend membership by one more month. For people having membership in stores in Hubei province, they could get 2 more months membership.

 

  • Extremely customer service

The customer service of Three Squirrels was always praised by customers. During the Covid-19, Three Squirrels provide extremely customer service, including play video games with customers, free talk with customers to overcome the boring time together with its 400K customers. The daily customer visit maintain 35k per day on its T-mall store.

Three Squirrels Offline stores

 

What else could Three Squirrels do?

  • Find the best marketing channel, such as short video platform, to reduce cost

The 2019 report showed that the sales in 2019 reached 10 billion RMB ($ 1.6 billion dollars) in 2019, with 45.6% year on year growth. But the net profit reduced 18.8% compared with last year.

The reduced profit was most due to the lower ROI of marketing activity to acquire and maintain customers. The cost of marketing is increasing recently.

Covid- 19 actually provided new opportunity. More and more customers spend time on short video platform. The average daily user time in Douyin increased to over 2 hours per day recently, but the ads cost is much lower than ads on Alibaba Taobao platform. The ROI on Douyin, Kuaishou is much higher than ROI on Alibaba Taobao platform.

 

  • Create fun videos of Squirrels feature

The success of Three Squirrels is highly related to the image of Three squirrels, which are easy to remember and fun to share. Three squirrels also create social feature when people buy products. Three Squirrels had the ambition of develping Three Squirrels towards Disney direction. During the Covid-19 spread period, it is a perfect time to create a digital platform for Three Squirrels funs. I must admit that it is hard to create interesting content. But with the marketing team, and reduced video making cost, this could come true in this digital time.

 

Combining the 2 suggestions above, if Three Squirrels customers and employees could make interesting “Three Squirrels” related videos, post on short video platform, or its own platform, to promote network effect, it will help promoting sales and strengthening brand image in this special time.

 

Reference

  • Pearly Neo. China Focus: Snacking firm Three Squirrels, convenience store trends, export news and more feature in our round-up.
  • Zhenxing Li. Delivery food by Three Squirrels.

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5 thoughts on “Three Squirrels: how China’s largest snacks retailer react to Covid-19

  1. Very interesting – I’d look to Chinese internet startups for what to do in the COVID-19 era, not only because they went through it first, but also because they are always ultra-fast and creative. The customer service with a focus on helping us pass home quarantine time was particularly interesting and one that I haven’t seen US counterparts take advantage of just yet.

    1. Yes, Qian. If you come back to visit China, you can enjoy lots of goods and services delivering to home. Come to visit me. haha.

  2. Thanks for writing this – super cool. I particularly like the leveraging customer data from offline stores to create a hyper-local delivery service keeping the customers happy. And combine that with the digital strategy, this makes customers even happier and reduces boredom. It will be interesting to see what happens now that economy is reopening. Will they realize that the offline stores are no longer needed and instead just have warehouses and deliver to the customers?

    1. Thank you Panda. You raise an very important question about whether offline is needed. Actually in 2006 when most similar companies were trying go online, Three Squirrels decided to have a online and offline combined strategy, similar like Jack Ma’s New Retail Theory.
      I think offline and online will finally find a balanced point in the future, and offline will not disappear.
      One reason is the irreplaceable experience. For example, in offline stores of Three Squirrels, consumers could try products, play offline games, watch video together, and enjoy the atmosphere. Even many consumers finally decided to buy online, offline plays a role of marketing the brand.
      Another reason is cost. Online marketing cost is increasing in China. For the mature brands, it is hard to attract more consumers online with a relevant low cost. While an offline stores’s employee cost and renting fee could even be lower than investing in Alibaba front page. That’s Three Squirrels decided to go offline after a few years online experience.
      So I think after Covid-9, offline stores will not be fully replaced.

  3. Thanks for the article – really interesting! What strikes me most about this is that even with seeming “commodities” such as snacks, Three Squirrels still managed to differentiate itself. This just goes to show that branding and customer service will always have the ability to influence consumer behavior. It is crazy that that led them to even successfully introduce a recurring membership pricing model for snacks! I think this is ultimately what will push the Company to come out of this crisis stronger than before. Whereas other, generic snack companies might not survive, Three Squirrels will be able to leverage its brand and customer service to grab more market shore post the pandemic.

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