XingKeDuo scored 100 million RMB Series B, can an express salon go big?

This is a 400-billion-yuan industry but there are no leaders at present.

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Express salon XingKeDuo has recently completed a 100 million RMB Series B funding, jointly invested by CICC Pucheng, Shun Wei Capital, HongDao Capital, and Future Capital. The funds will be used for store expansion, system development, and talent recruitment. Previously, the company had received millions of dollars of angel funds from Sinovation Ventures, Future Capital, Angel Crunch, Hong Dao Capital, and Shun Wei Capital. Hong Dao Capital led the 30 million RMB Series A funding while Shun Wei Capital led the Series A-plus funding of tens of millions RMB.

XingKeDuo has a similar business model as Japan’s QB HOUSE. In its early days, Xingke promises a maximum of a 15-minute express haircut. In 2017, XingKeDuo added more emphasis on quality service without setting limits on duration. From their data, the current average cut is about 22 minutes. In terms of pricing, the platform offers a variety of options based on the location of the store and the hair stylist. The average price is around 50 yuan.

XingKeDuo’s stores are mainly concentrated in shopping centers, office buildings, and parks, with an average area of 50 square meters. On top of the haircut area, there are about 4-6 service desks and a retail display area. During the haircut, the hair stylist can propose suitable hair care products, but hard sell is not allowed. Customers are able to make a complaint they are uncomfortable with their hairstylist.

Since its establishment in 2015, XingKeDuo has opened nearly 100 stores in Beijing, Shanghai, Chongqing, Hangzhou, and other cities, serving more than 2 million users of mostly young people (62%). It was reported that the platform received more than 100,000 customer feedbacks per month, with 99.54% of customers being satisfied with the service.

XingKeDuo had faced challenges such as human resource and operation efficiency.  Founder Zhuang Wei told 36Kr that in the hairdressing industry, training and retaining hairstylists is a big factor of survival. Consumers “recognize hairstylist and not stores”. When a hairstylist quits, most customers will leave with them.

At present, XingKeDuo has nearly 400 hair stylists. The team has a complete training system and career path system, providing two promotion paths for management talents and professionals. The company regularly organizes training for hair stylists, including training on data analysis and the Internet. XingKeDuo claimed that their staff turnover rate is half of their competitors, and their hairstylist income is 15-20% higher than industry standards.  Through a standardized brand management and service, XingKeDuo wants to strengthen their brand image and improve customer retention.

In all kinds of hairdressing services, a quick haircut yields a relatively lower profit but has the highest volume of customers. With more creative services in the hairdressing industry, an express cut provides a standardize and straightforward alternative with transparent pricing.

This convenient and predictable service will be coupled with Internet tools to enhance user experience and efficiency in the future. Zhuang mentioned their IT systems are independently developed by the team. With data analysis tools, user’s needs and experience are monitored and controlled.  For example, if a hair stylist received a poor evaluation from a 25-40 woman, he will later have to go through training on hairstyling for middle-aged women.

This is a 400-billion-yuan industry. However, there are no leaders at present and brand share is scattered. Zhuang believes that with the increase of manpower and rent costs, stores with low operating efficiency will gradually withdraw from the market and be replaced by new consumption models.

There will be a polarization of two customers segments, one who will go for high-end brands and the other for simple services such as a quick cut. There will be more demand for personalized and customized beauty services and the more niche services will emerge.

The team said that with the accumulation of experience and the gradual maturity of their SOP, the time needed to break-even has shortened. Breakeven can be achieved in 4-6 months.  Currently, XingKeDuo claims that all of their stores are profitable. The revenue sources include haircut service and sales of US-imported products. In 2017, the company’s annual revenue exceeded 100 million RMB.

There are now more than 470 people (including hair stylists) in the company, and founder Zhuang Wei was born in Taiwan with extensive experience in the hairdressing industry.