Commentary: How Mixue made billions selling US$1 ice cream

Fighting for the Same Customers: The Rise and Challenges of Mixue

1. The Rapid Expansion of Mixue in China

Mixue, a brand that has quickly become synonymous with convenience and affordability, has aggressively expanded its presence across China. The company’s stores are now a common sight, even in small towns, where multiple outlets often line the streets. This rapid growth has led to a phenomenon where some stores are merely 200 meters apart from one another, creating a highly competitive environment. While this saturation may seem like a sign of success, it has also raised concerns about the sustainability of such a model. The sheer number of stores vying for the same customer base has begun to show signs of cannibalisation, where the density of outlets starts to eat into each other’s sales.

2. Growing Complaints and Financial Pressures

As Mixue’s network continues to grow, so too have the complaints from franchisees and customers alike. Many have taken to online platforms to voice their dissatisfaction, claiming that Mixue is prioritising profits over the well-being of its franchisees. The company’s franchise agreements have come under scrutiny, particularly for not requiring a minimum distance between new and existing stores. This has led to intense competition among franchisees, many of whom are struggling to stay afloat. The financial strain is evident in the numbers: in the first nine months of 2024, the average daily gross merchandise value per store fell by 5 per cent to 4,184 yuan, highlighting the challenges of maintaining profitability in a saturated market.

3. The High Cost of Success: Franchisees’ Struggles

For franchisees, running a Mixue store is no easy feat. On average, each store processes 367 orders a day, with orders coming in every 2 minutes during the 12-hour operating period. This relentless pace leaves little room for error, and franchisees are under immense pressure to keep up. The financial burden is equally daunting, with some stores taking two to three years to break even—a timeline significantly longer than what Mixue employees initially suggested. Local media reports have shed light on the disparity between the company’s promises and the harsh reality franchisees face, further fueling the growing resentment among small business owners.

4. The Franchise Model and Its Flaws

At the heart of Mixue’s success is its franchise model, which has enabled the company to expand rapidly across China. However, this model has also been criticised for shifting operational risks onto franchisees. By not enforcing a minimum distance between stores, Mixue has created an environment where franchisees are forced to compete not only with other brands but also with neighbouring Mixue outlets. This hyper-competition has led to financial anxiety and burnout among franchisees, many of whom feel that the company is prioritising its own growth over their sustainability. Despite these challenges, Mixue continues to open new stores at a faster rate than it closes them, leaving many to wonder how long this model can endure.

5. The Impact on Small Businesses and the Economy

The struggles of Mixue’s franchisees are a microcosm of the broader challenges facing small businesses in a weak economy. With little negotiating power against large corporations, small business owners are often left with few options but to accept unfavourable terms. Mixue’s capital market success has further exacerbated the problem, as the company’s aggressive expansion has intensified competition in an already saturated market. This hyper-competition is unsustainable in the long run and raises concerns about the eventual burnout of both franchisees and the market as a whole. As the economy continues to struggle, the strain on small businesses is likely to worsen, making it even more difficult for them to survive.

6. The Future of Mixue and the Lessons It Teaches

Despite the growing dissatisfaction and financial pressures, Mixue’s rapid expansion shows no signs of slowing down. The company’s success in the capital markets has emboldened its growth strategy, even as franchisees and customers voice their concerns. However, the current model is unsustainable and portends a future of burnout for both the company and its franchisees. The lessons from Mixue’s story are clear: while aggressive expansion and hyper-competition may yield short-term gains, they come at a significant cost to small businesses and the economy as a whole. As Mixue continues to navigate this challenging landscape, it remains to be seen whether the company can find a balance between growth and sustainability, or if the cracks in its model will eventually lead to its downfall.