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A Journey of Entrepreneurship

Fei Fei Xu stands with me after the Goldman Sachs 10,000 Women course this week.

In 2011, I wrote a short case study on BingoBagel, a promising coffeehouse concept started by Fei Fei Xu in Chengdu.  This week, I was able to visit Fei Fei’s new shop in Raffles City Mall and get an update on her progress.

On my first visit to BingoBagel’s original location, I could see that Fei’s concept was occupying a difficult position in the consumer culture of Chengdu.  At that time, there were only a couple of Starbucks in town and they were attached to big hotels patronized by international travellers. And, indeed, BingoBagel’s core appeal was clearly to Western expats who looked to keep up their on-the-go habit while living in China.  But since the Chinese themselves did not drink much coffee and had never heard of bagels, Ms. Xu was working hard to find a way to offer services that would draw custom from locals without distracting from her initial idea–to bring bagels (and coffee) to China.

BingoBagel still features flowerpots and country style, but the packaging has been updated with a new logo.

Her first store had an airy, rustic quality. Decorations, such as flowers in watering cans, clearly echoed an interior style called “country” in the US, but the look was unique in China. American classic rock and country played in the background, but Fei struggled with American-style hours:  not enough hard-driven expats going past the store to justify early morning staffing.  To expand her base, she added lunchtime deliveries of full meals.  That’s because expats didn’t come around much after the early coffee rush, but locals still sit down to eat a regular midday meal with others rather than grabbing a sandwich to gobble at the desk like their manic Western counterparts.

The second store, rather than being located in a business district, was in a residential area.  She specialized in the lunches, calling that store “BingoBrunch.”  The atmosphere in that store was quite minimalist and rather institutional (though bright and airy)–not particularly conducive to sociability over either coffee or lunch.

It seemed to me, back in 2011, that Fei Fei was struggling with what marketers call “positioning.”  Her concept was “located” somewhere between a Western practice (a coming trend that had not yet arrived in China) and traditional Chinese food behavior. This “betwixt and between” approach was happening because she needed to draw from two different audiences to support herself.

Now, it is normally desirable for a positioning to “sit” between two established norms, but it has to be carefully presented as a coherent concept, or it just looks sloppy and confusing.  Because Fei Fei was still working with her basic concept, the stores suffered from an unclear identity and purpose (poor “positioning”) from the consumer perspective.  The absence of a clear focus produced contradictory choices for everything from office hours to baked offerings to the playlist. Worst, you could see that the namesake product–that is, the bagels–had now been relegated to the bottom shelf of the rack and that sales in her most distinctive offering were dwindling. A new form of flavored ice she had introduced was popular, but it required substantial investment in equipment, was as new to the culture as bagels, and tended to detract from the concept.

It seemed to me that the rapid expansion she planned would bring about a day of reckoning, putting pressure on her concept and causing her to struggle to maintain consistency across sites.

Once the hotel and office building are operational, Raffles City's dramatic architecture, comfortable restaurants, entertainment offerings, and luxury shopping should draw crowds. BingoBagel just has to hang on til then.

Fei has completed one new store, a BingoBagel in the new Raffles City Mall, since I last visited.  She did not expand further because business built more slowly in the mall than it had with the two previous stores. This slow growth was at least partly do to circumstances beyond her control.  For instance, this mall, with its dramatic and innovative architecture, was supposed to be anchored by a hotel and an office building.  A year in, the hotel still has not opened and the offices are only 50% full. So, despite the subway station on the lower floor, foot traffic has not been good.

Big international names like Starbucks, Costa Coffee, Dairy Queen, and McDonald’s are in other, more prominent places in the mall, which leaves BingoBagel Number 3 to fight it out on a food hall with an array of lesser known stores. However, unlike the standalone competitors in the first site, those in the mall are mostly local chains, some of which have better established brands than BingoBagel.  Further, many offer coffee, pastries, and ices, which Fei Fei also serves.  So, her need to be distinctive, to put her core concept forward, and build brand identity was suddenly much more urgent than it had been.

The emphasis is clearly back on the bagel. Here, Fei Fei holds one of several oversize bagels on display in the new store.

She does have a competitive advantage in that her store offers a quiet, enclosed space that the others do not have.  Once crowds build, there will be desire on the part of some shoppers and workers to escape the crunch for private conversations and work. She has adapted the country decor, though I suggested this might be carried out to some art for the walls (which would also make the space seem cozier).

Fei Fei is trying all kinds of ideas to build brand loyalty among the people who work in the office building. (I suggested a loyalty card, but both she and my colleague, Stephanie He, said Chinese people didn’t really have anything they bought every day the way Westerners buy coffee.) The redesigned graphic look is now much punchier and more modern-looking.  She has also invested in some oversized plastic bagels to show on the counters.  Her personnel are trained to instruct consumers in how to eat a bagel, what to put on it, and so on.  Interestingly, bagel sales have increased quite a bit and now sell out every day. Her efforts seem to be paying off: though several local stores on her hallway have already closed, she expects to break even in September.  By then, the hotel should be open and it would be reasonable to expect traffic to pick up.

The hallway where BingoBagel is located is filled with other local food stores.

As Stephanie and I walked around the mall, we saw that the big Western coffee places were all full of customers, many of them using laptops.  One store had a big sign saying “a coffee a day keeps the burden at bay.” It’s pretty clear that the coffee culture is building in Chengdu now, which may actually help Fei Fei by increasing consumer interest and perhaps inspiring desire for variety (how many times have you sought out some local coffeehouse just so you don’t have to go to Starbucks or Costa Coffee or Café Nero again?)

Two more BingoBagel stores will open soon, both also in shopping malls. So this experience at Raffles City will benefit Fei Fei, teaching her lessons she could not have had any other way. However, these stores will be the island-type, rather than a shop you enter, and so it will be more difficult for her to differentiate by decor.  Fei Fei can use displays of packages, as well as bagels, along with custom “country” counters, to try and build a brand identity in this very different architectural setting.

All this expansion is being covered by the continued strong performance of the first store, which still grows at the impressive rate of 10% a month.  All packaging and labeling has been made consistent between the first store and the Raffles City location. The residential store, once called “BingoBrunch,” is now just a production center for the first store and the one in Raffles City.  So Fei Fei seems to be clarifying and consolidating around her original concept, which I think is a good move.

Clarifying her positioning, using that to stipulate what items and practices are indispensable at each new location will be crucial to the continued expansion of her business.  She needs to determine her “invariants”–another marketing term that refers to any aspect of the look, service, product, or language, that needs to be maintained consistently even if sometimes altered or interpreted to fit new demands, such as standalone counters. So, for instance, the invariants for Chanel include the name and the typeface, but also that waffle-stitch leather and the pearls; for Burberry, the plaid is an invariant.

Some items are already clearly among the BingoBagel invariants.  First, the name, which she had previously changed in one store (“BingoBrunch), is now always “BingoBagel.” Along with this name must necessarily come an emphasis on the bagel as a product offering.  Fei tried to help enculturate her customers by producing a brochure that told the story of bagels, how they are usually eaten, and so on.  The brochures were quite charming, but she found that customers didn’t read them.  Trying to communicate through her employees seems to be working better and the giant plastic bagels also seem to help.  I suggested she try promotions around various spreads to be offered on a weekly basis.

The BingoBagel storefront offers a peek into an inviting environment, something that will attract shoppers as a respite from the neon and chatter, when traffic picks up.

She will continue the country decor and will try to make it more pervasive.  Though a country look is nothing new in the West, it is distinctive in China and seems to work, especially when there is separate space for shoppers to tuck in and have a quiet chat.  I would suggest maybe she could reinforce with contemporary country music and maybe some rustic art on the walls.  Now, to be sure, there is a bit of a disconnect here, if you are viewing from an American perspective:  bagels are an urban food, a Jewish food, which “fights” with the country look and feel if you are from that culture.  But this is China and the combination is both distinctive and attractive.  Creating attractive new combinations is what branding and entrepreneurship are about.

People are already coming to Fei Fei wanting to franchise her shops in other cities. Venture capitalists are also sniffing around–they can smell a winner.  All this bodes well for future success.  But she is still inventing and developing her concept.  Until it is well articulated, consistent, and compelling across several types of locations, it would be difficult even to stipulate what a franchise would mean, how it would be executed.  And I would be concerned that venture capital would cause a loss of control, not just financially but conceptually.

Anyway, Fei Fei is not really ready for those kinds of steps, I don’t think.  She still thinks of BingoBagel as her “baby,” still feels she is in the business to engage in an activity–baking–that she enjoys for its own sake.  But she is also visibly engaged with and interested in the challenges presented by her growing business.  So, like most entrepreneurs, she is working through her business as a journey.  It is extremely rare that a business simply pops up, fully created, as a viable concept.  Most businesses have to be cultivated, most entrepreneurs learn what works for them by experimentation and experience.  Most enjoy the journey as much as the outcome.  I look forward to catching up with Fei Fei again, farther along the road.


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