Tuesday, December 4, 2012

Subway in China: all that you shouldn't do!

It seems that the Subway Outlet on Jiefang Lu in Changsha shut down.

This confirm my analysis, as I wrote this article several month ago. 
Also I feel a little frustrate when I see that large companies like Subway don't recruit the right people and don't follow the correct strategy. I mean I have been saying the following about Subway since 2007 and sent my application in vain.




Subway in China is all that you shouldn't do in term of strategy.

The only hope and chance of Subway in the future is the fast change in Chinese customers tastes. Remember I told you that younger Chinese start to love melted cheese which is the key success factor for Mac Donald, Pizza Hut...
Also Subway benefits from a strong international image. It is popular among foreigners and american. This can help greatly Subway in the future.

Still for now Subway hardly survive in mainland China (while it prospers in Hong Kong and in a few mainland Chinese bigger more international cities). 
Its main customers are foreigners and some young Chinese who love: bread, cheese, salad...





Many prohibition on the door. I took a photo of the outside from the outside.




The first Subway in Changsha opened in 2007. I remenber that at this time I was so glad about it: the only place where you could eat bread and cheese. I was also astonished that Subway would open in Changsha: they were going to be bankrupt for sure!
Since 2007, nothing or almost nothing changed in Subway strategy in China... what a waste.

But maybe only the Chinese franchiser lose something in fact. After all they are the one who open a Subway in a risky mainland China environment. And they are guily enough to trust a concept that can not for the time being work in China (or not everywhere, it can work in some specific location where you have many foreigners and younger educated Chinese for instance).
Even though whenever a Subway outlet goes bankrupt it is never good for the image of the whole Group.



What are Subway mistakes in China?



  • A common, basic decoration

Subway decoration has nothing special. You can find similar design anywhere.
Back in 2007, the first Subway outlet simply had the map of New-York suwbay: a little too easy to impress Chinese customers or to please them...
Today there is a small improvement: food ads on the walls, same as in Pizza Hut. It is a little better but far from enough.



  • A very high monthly rent and a huge surface on the first floor

Subway is a fast food concept. It should therefore be located in the first floor and therefore support a high rent.
Furthermore the space is not optimized. There is a big kitchen for the storage?



  • The misuse of space

There are only a few seats. But mainland Chinese want to sit. They will hardly ever take away a sandwhich at least not in Changsha yet!
From outside customers can not buy any drink. You order everything at the back of the restaurant: this is another gap for take away.



  • Relatively high prices

We find three offers see pannels at the back of the picture: 18, 22 and 25rmb. It is expense as you should add the price of a drink. 
Just to give you an idea, in a Chinese street restaurant you can order a big meal for 10 rmb. 
And KFC, Mac Donald offer lunch menu with a drink, a frie and a burger from 15 to 20 rmb.



  • Subway offer is not suitable to Chinese customer taste

Subway food offer is the same all around the world, in Europe or in America.

Their bread is not suitable to Chinese people.
Why keeping on offering 4 or 5 different kinds of bread when Chinese people like none!
Why not simply offer 1 type of bread that Chinese people would like: let me suggest toast for instance or thin crispy ciabatta... You could also have bread with special aromatics herbs, or sesame, sugar bread, pork greace bread...

Sauces are not adapted to Chinese people taste.
Sauces are the same everywhere. Even Mac Donald in Changsha makes its burger spicy!
The Mayonnaise could be sweet for instance or you why not a Salty and sweet sugar ketchup

Sandwich filling is not suitable to Chinese people taste.
Many ingredients are not available since it would cost too much to throw the ingredient not sold. But this is not a problem anyway.
Some fillings should not be offered as most Chinese people don't like them. Other fillings should be developped.



  • The choice is far too complex
Most Chinese people are lost. They take a long time to order and a wider offer has more chance to disappoint as compared to a clever target, narrow offer.
The image is not clear in many Chinese customers mind: sandwiches? what about these breads? and the sauces?...



Positive aspects:
There are some positive aspects in Subway concept



  • Internet access and WI-FI

This attracts customers all day long



  • The history of Subway is put forward

Pannels at the entrance of Subway explain the rich history and remind the Group strong image.
Subway hopes that like Starbuck it can attract foreigners and create a strong brand while putting forward its international presence its unique success story. 

Most Chinese people love large Group: the larger the better.
Most Chinese people love old history: the older the better.
Most Chinese people love foreigner brand: foreigner means quality and authenticity.

If opinion leaders or foreigner go to Subway, Chinese customers will follow. Especially younger Chinese who have similar tastes as foreigners.






  • Subway offer is a little bit adapted

You can choose a Mexican roll instead of bread!

You can order some drinks from a home made advertisement pannel on the counter...surprising But in fact drinks should be a large part of many Subway outlets income in mainland China, as long as the drink offer is put forward nicely. I have seen milk tea, manguo juice, peach juice: good choices





  • On the outside, Subway tries to attract while showing apparent small price: the sandwich of the day

Still this advertisement remains uncomplete. It has nothing to do with Mac Donald or KFC ads.

I didn't see any advertisement campain for Subway in China.



Conclusion

Subway should adapt its offer and prepare its future in mainland China.

The Group prefer to wait for Chinese customer taste to change, while betting on its international image and fame among foreigners.
This is a risky bet. It can work as long as no competition arises. Also you should consider that in China foreigners are less and less popular. They might not always be opinion leaders and reference for Chinese customers.

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