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HeyTea - On Creating Tea Culture 2.0 (2/2)

A study of HeyTea's innovation to bring inspiration to the beverage market 2.0 in China.

· retailing

{{{Caroline (Yunjie) Lai}}}

More than eight years have passed since HeyTea's first physical store opened in 2012. HeyTea has gone from an initial small-scale startup to the household name for which young people are willing to line up for 2 hours. What has HeyTea done right to create Tea Culture 2.0 in China? How can HeyTea's growth story inspire other beverage producers to meet Gen Z's appetite?

Source: Nieyu.com

Venture capitalists find it challenging to define HeyTea's business scope, whether it is a beverage retailing brand, an internet company, or an emerging lifestyle brand. HeyTea does not only the innovate front-end customer engagement process but also digitalizes offline stores, creating synergies between online and offline shopping experience. With the most numbers of co-branding activities, HeyTea is also trying to expand its business to all aspects of target customers.

In the second part of HeyTea's analysis, we will focus on HeyTea's marketing approach, brand recognition, and digitalization approach to illustrate how HeyTea surpassed other imitators and created the phenomenal tea beverage revolution.

HeyTea's Customer Life Cycle Management: Be the brand and your friend

Understanding HeyTea's customer base only partially demystifies its success, as the HeyTea phenomenon was created by successfully leveraging social capital. Because HeyTea's target customers are primarily affected by the internet and their social circles, HeyTea developed a new approach to managing customer life cycle and attracting young customers' eyes, hearts, and more importantly, their money.

Naming

If you take a look at the HeyTea menu, you realize it's straightforward to memorize the products compared to others. For example, In 2017, HeyTea released a new fruit tea called Strawberry Cheezo 芝芝莓莓, a freshly made drink with green tea, strawberries, and cheese cap. Instead of naming it "Fresh strawberries cheese green tea", HeyTea made it sound cute and easy to remember. HeyTea applied a similar approach to all product lines: King Fone 金凤茶王 (the direct translation is King of Tea), Fruity Boom (满杯水果), Very Grape (多肉葡萄), etc. HeyTea made each drink name speak its flavor. The sensory naming approach contributed to HeyTea's rapid spread and its popularity.

Source: OpenRice from HeyTea in Hong Kong

Packaging

For almost every customer who waits for 2-6 hours before they can sip a cup of HeyTea, the first thing they will do is take a well-crafted picture and post on their social media. An ugly packaging would not let people have an incentive to share. Therefore, HeyTea puts much effort into making every detail of its packages speak to its audience in a aesthetic social-media friendly manner, always ready-to-be-shared.

Source: Sina News

Most of HeyTea's packaging is transparent so that people can see the various drinks' vibrant color. For all the cold beverages, HeyTea puts fresh fruit in the glass to create layers of paint. For hot beverages, it uses paper cups to protect customers from the heat. HeyTea also used its cup design to create another layer of surprises for customers. Couples could get their couple of cups designed with pink tones and the lovely quote, "You are my King Fone" (你是我的金凤) or "You are my Yu Lu“ (你是我的玉露).

Source: Weibo

During the New Year period, customers receive a special edition Chinese New Year cup set. Even with the paper bags, no one being aware before, HeyTea made it a blank space for creativity and statement. The Christmas limited edition bag carried the funny slogan "Come to my cup". The New Year paper bag was made with Chinese iridescent clouds and dragon tattoos.

For the same tea, customers feel different when they see other packages. The scavenger hunt gamification encourages them to pay attention to new product releases or city-based limited editions. Gradually, they become loyal fans and help promote HeyTea culture to their social circles. If one gets the new package earlier than his or her friends, one will post on social media to show off, and the HeyTea achieved its marketing goal.

Store interior design

Unlike many brands that stick to one color to create brand recognition, HeyTea enjoys bringing a distinct shopping experience with its diverse interior decoration. It localizes the color tone with local culture, giving customers endless surprises when visiting each store. This makes every visit an aesthetic discovery journey rather than a simple shopping experience.

Source: HeyTea Hangzhou

For instance, the HeyTea stores in Hangzhou's old town bring the traditional Chinese colors from Hangzhou embroidery, while the store in Zhengzhou's World Trade Center brings overwhelming futurism design elements. Whereas when stepping into a HeyTea store in Wuhan, customers will be immensely impressed by its zen and calmness. When HeyTea embeds its store in the context of a city, locals appreciate its effort, and a social media post by each visitor is worth the effort put in.

Source: HeyTea Zhengzhou

Source: HeyTea Wuhan

Besides color variation, HeyTea also sets different levels of stores for customers to experience local cultural diversities. The first HeyTea Pink opened in Shenzhen, where the interior decoration is pink, a unique soft tone, particularly suitable for young female. There are pink dining chairs, pink bobo pools, pink balloon dogs, and abstract gardens in the store. These pink chairs are from the GUISSET series of French designer ZAOZUO, the red speakers are from Danish brand Bang & Olufsen, and the spinning chair is from the British designer Thomas Heatherwick.

Source: HeyTea Shenzhen Pink Store

The Black Gold store usually shows up in a city centers such as Beijing´s Sanlitun or IFS in Shanghai. Such locations are popular choices for office ladies, businessmen, and street-fashion KOLs. The Black Gold store incorporates mainly black elements supplemented by gold materials, presenting a modern artistic style. The store also provides limited black gold tea, for which many customers are willing to wait even 4 hours.

Source: HeyTea Shanghai Black Gold store

HeyTea Lab, different from the other two, creates a more free, young spirited, and diverse culture, taking the customers on a completely different customer experience.

Source: HeyTea Lab Store

HeyTea Ecosystem: Beyond a beverage brand but a lifestyle

Source: Sohu News

Young customers are impatient and fickle due to the overwhelming product supplies and fast internet experience, so HeyTea equips them with even faster and more diverse products beyond beverages. With that, HeyTea is trying to tell its audience that HeyTea is a lifestyle, rather than a beverage brand.

HeyTea is famous for its frequent co-branding campaigns, covering almost all the aspects of young customers’ life: makeup, clothes, hats, stereos, bags, umbrellas, phone cases, and even condoms. From 2017 to 2020, HeyTea ran the largest number of co-branding campaigns among beverage brands with 54 in total, while LeLe Tea followed with 32, and Nayuki (奈雪的茶) only had 22. The first co-branding was the joint marketing with Guangzhou's W Hotel in June 2017. Since then, it has gone viral after testing the waters. It is worthy to notice that HeyTea's co-branding is not only about marketing but includes product development. It usually takes months for both companies' R&D to develop a harmonious taste combining two different products with local cultures. In Beijing, HeyTea runs cooperations with household Beijing hotpot brand Dong Lai Shun to add sesame sauce to its bread in celebration of Bejing's hotpot culture. If you are a Beijinger, it's difficult to resist the temptation to buy one of those products in support of Beijing culture and an expression of local pride.

Source: HeyTea WeChat Account

The co-branding activities help expand HeyTea's product lines since Chinese tea is often limited to green tea, Oolong, or King Fone. Customers, bored of the same old flavors, are eager to try new, quality products. By adding new flavors on both products and marketing, HeyTea relies on its co-branding marketing philosophy which is 1+1 > 2.

HeyTea's digitalization: HeyTea Go

It is hard to imagine that HeyTea regards itself as an internet company even though its primary business is rooted in offline stores. The secret lies in its mini-programs and app HeyTea GO. HeyTea's CTO Peilin Chen found back in 2017 that many young people like checking their phones while waiting for their teas in stores. Chen then led the project to create the digital space for customers to order, track, and engage with HeyTea.

There was natural traffic from day one, and DAU began to grow naturally. Next, Chen began to promote the QR code at every store entrance. The slogan itself was tempting: "You don’t need to wait." Many users began to onboard, with 4 million users in total reached within 6 months, the repurchase rate increasing by 300%, and the DAU reaching 170k. According to HeyTea's internal data, 70% of WeChat Pay users choose Mini Programs to place orders, and stores also enjoy an average growth rate of 6% from the previous month. HeyTea GO is now ranked among WeChat's Top 100 Mini Program in terms of traffic. The collective data indicates that it is HeyTea GO that has made Heytea's digital transformation.

Source Ireneyi.me

HeyTea's next step was to build a membership system based on HeyTea GO once the online platform collected enough traffic. HeyTea's membership system underwent three phases: The first one was a physical membership card, just like the Starbucks membership card. Members could show their cards when they make purchases, but Chen quickly found it was inefficient and inconvenient. HeyTea promptly shifted to the second stage that customers would automatically register when they finished their purchases. If one made orders, their order amount would exchange for membership points for birthday gifts or other benefits. Then, HeyTea entered the third stage when point membership turned them into annual paid membership that starts from 179 RMB per year to get coupons and can be upgraded if customers reach a certain purchase amount. HeyTea gamified every aspect of its membership system. HeyTea named its membership system HeyTea universes. Each member represents a residence in this little universe. Copied the experience from Glory of King (王者荣耀), it also gamified the membership ecosystem to engage young customers further: There are 6 levels from Silver, Gold, Platinum, Diamond, Black Gold, Black Diamond. Each level indicates different benefits such as fast pass or buy-one-get-one-free. HeyTea also provides birthday gifts and dual credit to encourage premium membership.

Source: Marketing Pie

HeyTea now has 500+ stores in the world, most of them in mainland China. For the highest grossing ones, the daily cash flow is 100k RMB (~15k USD), with average daily selling of 3000 cups at 30 RMB per cup. To grow from 1 store to 500 stores, it took HeyTea only 8 years. By comparison, Starbucks entered China 20 years ago and currently owns 4300 stores in China. HeyTea always surprises customers with its innovation. Since the beginning of the Covid-19 pandemic in Wuhan end of January, HeyTea has implemented a no-touch delivery service, for instance. By March, 436 stores out of ~500 stores had adopted the method. It also acted quickly to collaborate with Meituan's delivery service to cover deliveries in 10 km distance. To decrease friction in-store, HeyTea places boxes in stores where customers can use its order code to open boxes and help themselves.

Source: 36Kr

To compensate for the lack of physical shopping experience in the HeyTea store, HeyTea sets its official Douyin account to use social media and a short video to maintain further daily active users such as the "draw your HeyTea" hashtag campaign. One single post reached 1.7 million likes and became the most popular hashtag afterwards.

Source: HeyTea Douyin Account

HeyTea leverages the traditional store to deliver brand styles and relies on the internet to discover, create, and meet customers' demands quickly. The success of HeyTea sheds a light on the larger O2O movement, combining digital and offline experiences. It provides inspiration for both, traditional retail brands willing to use online tools to engage young customers, and for internet companies willing to engage in offline retail to create new shopping experiences.

To summarize, HeyTea's secret weapon are mainly four points:

The product is still the king: The solid product development ability leads to long-term and stable brand reputation and customer support

From the first ACE product, cheese cap tea, to the fruit tea later and current trendy soybean milk tea and brown sugar babo tea, HeyTea's product development ability is solid and sustainable. Therefore, it can support the quick expansion speed while secure an excellent customer reputation. The R&D ability solely separates HeyTea from its imitators and followers.

 

Marketing that speaks to the audience

HeyTea breaks the physical barriers that used to separate online and offline marketing approaches. HeyTea's marketing speaks to its target audience. Take a look at its WeChat account: one can find its content is beyond the product shelf but a "HeyTea universe" on fashion trends, food choice, and lifestyle where it attracts HeyTea residences.

Turn every aspect into brand culture and recognition

The paper bag, cup sets, store interior decoration, and mini-program HeyTea Go, they all talk about HeyTea culture. While many traditional retail brands waste much money on digital marketing or elevator ads, HeyTea turns every aspect into branding recognition building. With its unique color code and font, HeyTea organically engages its audience.

Data-driven system to pinpoint the customer profile

The most crucial reason for HeyTea's valuation given by Sequoia and Tencent lies in its data-centricity. Early on, HeyTea recognized the value of data and started to build the full-cycle data management system to better profile target customers and serve better products with a strong product development team. Combined with a mature supply chain, HeyTea never misses to deliver products and campaigns that trigger high demand.

All opinions expressed in this essay represent our personal views only.

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