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Wen / Hong Jian
Source: capital detective (ID: deep)_ insights）
After several rounds of rumors, “ten yuan store” famous and excellent products finally joined the IPO army.
In the early morning of September 24, Beijing time, mingchuang Youpin submitted a prospectus to the securities and Exchange Commission (SEC) to list on the New York Stock Exchange under the code “MnSO”. At present, mingchuang Youpin has not disclosed the number of shares to be issued and the price range. The underwriters of the IPO are Goldman Sachs and Bank of America Securities.
Compared with its counterparts in several rounds of financing, mingchuang Youpin has not done much in the capital market before. As there is little introduction of external financing, the founder Ye Guofu holds 80.8% of the shares, while only Tencent and Hillhead capital (HH spr-xiv Holdings Limited is the fund of Hillhead capital), both of which hold 5.4%.
Equity structure of mingchuang Youpin
There are quite different opinions on famous, creative and high-quality products in public opinion. Some supporters regard their offline model as the standard, and think that the low-cost products are in line with the trend of the public’s pursuit of cost-effectiveness. However, some people have doubts about its mode of small profit but high sales. In addition, negative labels such as “fake Japanese system” and “plagiarism” are almost everywhere.
At the beginning of this year, it was reported that mingchuang Youpin will go to the United States for IPO within the year. Now, with the disclosure of the prospectus, the “king of offline cheapness” that has opened up all over the streets has finally shown the whole picture to the market.
The impact of the epidemic is serious, but the pace of expansion is not stopping
At the beginning of the prospectus, mingchuang Youpin defined itself as “the world’s first retailer of private brand lifestyle products”. Judging from the Gmv and the number of stores, this description is not exaggerated.
According to the report of Frost & Sullivan, an independent research institution, in 2019, the global private brand comprehensive retail Gmv reached 52 billion US dollars, and mingchuang superior products accounted for 5.2% with us $2.7 billion (about 19 billion RMB).
According to the prospectus, as of June 30, 2020, mingchuang Youpin has established a retail network of more than 4200 stores in more than 80 countries and regions, including more than 2500 stores in the Chinese market and more than 1680 in the overseas market.
Mingchuangyupin was founded in 2013, and it is amazing to reach such a volume in 7 years. However, a close look at the growth of various indicators will find that the growth process of famous, innovative and high-quality products is not all a story of rapid progress, especially in the twists and turns of 2020.
Since the end of last year, the number of stores in China of mingchuang superior products has ended the previous growth trend, from 2543 to 2533 at the end of June this year. Similar situation also appears in overseas markets. In the first and second quarters of this year, there was little growth in overseas stores of mingchuangyu products.
Quarterly growth of the number of domestic and overseas stores of mingchuangyipin
The global epidemic is obviously the main reason that hinders the development of mingchuangyoupin, as its business is mainly offline. The trouble is that the epidemic not only slowed down the expansion speed of famous innovative products, but also seriously affected their financial performance.
According to the prospectus, the first quarter and second quarter of this year’s revenue were 1.63 billion yuan and 1.55 billion yuan (if there is no explanation, the unit is RMB), down 25% and 38% year-on-year.
In terms of profit, the operating profit of mingchuang Youpin this year also went down. In the first quarter, it realized an operating profit of 39.83 million yuan, and the operating profit margin dropped sharply to 2.4% from more than 10% before; in the second quarter, it changed from profit to loss, recording an operating loss of 29.66 million yuan, and the operating profit margin dropped to – 1.9%.
Regarding the impact of the epidemic, ye Guofu, founder of mingchuangyu products, said this year that the epidemic has brought opportunities. Mingchuangyu will raise its target of opening 600 new stores in the world to 1200 by 2020, because a large number of high-quality properties with good location and low rent can not be wrong.
This is also one of the purposes of mingchuangyu’s IPO. According to the prospectus, the purpose of the raised funds is to expand the global store and retail network, upgrade the warehousing and logistics network, and upgrade the digital operation system.
The reason why they are so obsessed with opening stores is that the business model of famous and innovative products is the key.
In the business model of famous creative products, the core links of design, R & D and supply chain are all controlled by themselves, while the rent and decoration of stores are entrusted to the franchisees. Such “asset light” mode is conducive to its rapid expansion. No matter whether it is directly operated or franchised, the commodities are uniformly distributed by mingchuangyu products, and franchisees pay mainly licensing fees and goods guarantee Kim.
According to the prospectus, the revenue of famous innovative products mainly comes from commodity sales revenue, franchise management service fee and other three parts, of which the commodity sales revenue accounts for about 90% of the total revenue. In other words, the core means for famous, innovative and high-quality products to obtain income is “selling goods”. If you want to grow, expansion is the most direct way, that is, the more stores you open, the higher the sales.
Income structure of famous, innovative and excellent products
Corresponding to the radical expansion, famous and innovative products are still in a loss state. At the end of June of each year, the net losses attributable to the shareholders of mingchuang Youpin were – 290 million yuan and – 260 million yuan respectively, and the net loss rates were – 3.1% and – 2.9%, respectively.
Worry about small profits and quick turnover
Like his own company, ye Guofu himself has considerable discussion in public opinion.
Ye Guofu was the founder of the retail chain brand “aiyaya” before the establishment of mingchuangyoupin. This ten yuan shop brand specializing in young women’s trinkets once made Ye Guofu on the rich list. However, due to the rapid development of e-commerce in recent years, “Ouya” has gradually disappeared from the public view.
In 2013, ye Guofu found a new way to get rich. In his new venture project “famous and excellent products”, he expanded the target market from women’s cheap jewelry to a broader field of boutique department stores. However, there are still obvious traces of “ouah ah ah” in the business model: not only is it still mainly offline, but also follows the previous strategy of “small profits and high sales”.
Ye Guofu, founder of mingchuangyoupin
As for famous, creative and excellent products, the most talked about by public opinion is its “Shanzhai” attribute. To be fair to all, both logo and product design have the meaning of imitating the Japanese brand UNIQLO and Muji. As a new domestic brand, famous foreign brands can obviously gain recognition more quickly.
The abacus of famous and innovative products is: to provide similar quality products at a price much lower than that of peers, and to expand the market rapidly, so as to do big business with small profits and quick sales. This idea has obviously worked. Although it has been questioned by “Shanzhai”, with the advantage of low price, famous and innovative products quickly opened the market, and stores were blooming all over the country and even the world.
In a sharing in 2017, ye Guofu summarized the breakthrough way of famous and innovative products as “three high and three low”, namely high appearance value, high quality, high efficiency and low cost, low gross profit and low price. In terms of disassembly, the realization path of “three highs” is to find high-quality suppliers, and realize high-speed iteration of products on this basis, and optimize inventory and turnover efficiency.
In the background of the times, the “three highs” of famous and innovative products are largely due to the mature and flexible supply chain in China. In contrast, the “three low” is the result of the intention of famous creative products, and it is also the key to occupy the user’s mind.
According to the prospectus, the retail price of more than 95% of mingchuangyu products in China is less than 50 yuan. Ye Guofu has repeatedly said in public that only low cost and low gross profit can have a real low price. He also said that the gross profit rate of mingchuangyu products is only 8%, while that of peers is about 40%.
It sounds like a great impact for enterprises to take the initiative to let consumers use high-quality and low-cost products. But if the gross profit rate is really only 8%, it will be very difficult for enterprises to make profits. In fact, judging from the situation of the prospectus, the gross profit rate of mingchuangyu products is not what ye Guofu claimed.
In fiscal year 2019 and fiscal year 2020, the gross profit rate of mingchuangyu products was 26.7% and 30.4%, showing a gradual upward trend. The explanation of the prospectus is that the increase in gross profit rate is due to the decrease of VAT rate and the promotion of joint name products with high gross profit.
In terms of looking for big IP co branding, famous and excellent products are already familiar. Since its establishment, mingchuangyupin has cooperated with Hello Kitty, naked bear, pink leopard, marvel and Mickey. The significance of CO branding is to obtain the premium brought by IP, so as to improve the company’s profit performance under the mode of small profit and high sales.
In addition to widely joining hands with big IP, another feature of mingchuangyu is its globalization. According to the prospectus, in fy2019 and fy2020, the revenue from overseas markets has accounted for more than 30% of the total revenue of mingchuangyu products.
Global income distribution of famous, innovative and excellent products
In Ye Guofu’s view, globalization is a way to disperse risks, because “eggs are easy to be destroyed in one basket, and globalization is the best way to avoid risks.”
But in addition, I am afraid there are financial considerations in promoting globalization actively.
According to the “capital detective”, famous creative products prefer high-end location with large flow. The former is the factor that all offline stores will consider, and the latter is the key to the rise of famous creative products. The reason why they want to choose high-end locations is that they have two main intentions: 1
The first is to use the added value of the location / business district itself to enhance the brand value of famous, innovative and high-quality products, so as to avoid the “sense of price drop” brought by the strategy of small profits and high sales;
The second is to form a contrast with the surrounding shops, strengthen their own price advantage, and attract consumers who have consumption ability but pay attention to cost performance.
This is a smart way to make use of our strength. The problem is that the high-quality spots meeting the requirements in China are limited after all. If the profit account of a single store is not calculated well, the more expansion, the more burden it will become. In this context, it is imperative to focus on a broader global market. However, due to the global epidemic situation, the expansion of famous innovative products will still face uncertainty.
In addition to the need to find more high-quality points, the small profit but high sales model has brought other problems.
Compared with the hot online trend in the retail industry, mingchuangyoupin has always been more dependent on offline. This is not only related to the founder’s insistence on offline entities, but also has practical considerations – cooperation with e-commerce platform means that additional advertising and marketing expenses and logistics expenses need to be paid, and the profits will be further diluted.
However, after the impact of the epidemic, mingchuangyu products actively embraced the online market. It launched a social e-commerce platform called “employee purchase of mingchuangyu products”. It also cooperated with famo, meituan and Shunfeng to deliver goods in the same city. It also joined the boom of live delivery. In the prospectus, mingchuangyoupin also explained its strategic thinking in the future, saying that it would further develop its own e-commerce channels, strengthen cooperation with third-party e-commerce platforms at home and abroad, and use social media to enhance brand influence. Under the impact of epidemic situation, the off-line anti risk ability of famous, innovative and high-quality products will be reconsidered by the market, and the impact of channel changes on their profits needs to be continuously observed.
Looking back on its development, with its outstanding cost performance advantage and radical expansion, mingchuang Yipin has rapidly expanded its business, becoming Muji and Watson’s “most terrible competitor in the world”. However, behind the rapid growth, the mode of small profit and high sales has also hindered the famous and innovative products. How to obtain new growth on the basis of the existing one will be the key issue after the listing of famous innovative products.
(statement: This article only represents the author’s point of view, not Sina’s position.)