Author Liu ran
On the evening of October 15, Beijing time, NYSE: MnSO successfully rang the bell on the New York Stock Exchange with an opening price of $20. By the end of October 20, U.S. stocks had coincidentally fallen back to the opening price of $20, with a market value of $60.8.
Since September 2018, mingchuangyu has received the support of 1 billion yuan from Tencent and Hillhouse capital (the first external financing), which may have released the signal that the famous Chuangyu products will go back to the market. Now, the success of mingchuangyu products has also magnified the value of the business of “ten yuan a piece”.
On October 19, ye Guofu, founder of mingchuangyu products, issued an open letter. In the letter, he recalled the most questions asked by Wall Street elites during the roadshow: first, where is the core competitiveness of mingchuangyu products? Second, what do you think is the problem if mingchuangye fails? Third, how can you solve the problems when you are faced with the famous, innovative and high-quality products opened to more than 80 countries and regions in the world, with more than 4200 stores?
In view of the core competitiveness, ye Guofu said that it is “the strategy of extreme cost performance, innovation and globalization”, which is indeed the channel that famous innovative products are taking and will maintain in the future. However, on the latter two issues, ye Guofu said frankly that “soul torture”.
Just before the listing, Taobao’s special edition released the news of “one yuan store” to create momentum for the mode of “small profits and quick sales”; at the same time, the quality sampling news of famous and innovative high-quality products was also beating around the Bush and asking them: “is a good business at 10 yuan a piece?”? In the increasingly fierce competition, can the famous and innovative products give the answer that satisfies the market?
Scale is the foundation of everything
From a boutique store (formerly “Ouya”) to “China’s largest chain retailer” in the report of securities dealers, the status of mingchuang superior products in the world is directly related to the number of stores all over the country.
According to the statistics of public data, it took only two years for famous and innovative products to expand the number of its stores to more than 1000. Since then, the number of stores has been rising in the unit of 1000. According to its prospectus, as of June 30, 2020, mingchuang Youpin has opened 4222 stores around the world, including 2500 stores in China and more than 1680 overseas.
Further observation will find that the direct stores of mingchuang Yipin only account for 3.1%, while the proportion of third-party franchise and dealer stores is as high as 96.9%.
Franchising is the main way to open stores for famous creative products. However, it is different from the franchise mode of only exporting brands, which provides “nanny management”. Specifically, the franchisees provide brand authorization, supply chain (product), design and management system to franchisees and distributors. Franchisees are only responsible for the rental and decoration of stores, and pay licensing fees, deposit of goods and management consulting fees, etc. As for the financial system, all the revenue is collected by mingchuang superior products, but the next day it will settle accounts with the franchisees in real time.
The prospectus shows the loyalty of franchisees brought about by the system: retail partners of mingchuangyu products usually recover their store investment within 12-15 months after opening their stores; as of June 30, 2020, 488 of 742 retail partners have invested in stores for more than 3 years.
We don’t have to open a store by ourselves, but it can improve the efficiency of expansion. This labor-saving “light” franchise mode has made famous and excellent products become textbooks for many retail enterprises.
Of course, the reason why the relationship between mingchuangyu products and franchisees is that fenlibao, whose shares Ye Guofu once held (which he withdrew in 2016), has maintained by using the product P2P model. The franchisees start their stores with fenlibao financing, and the financing money flows back to mingchuang Youpin through the relevant franchise fees paid by the franchisees. Now, because of the self financing risk, the platform has been shut down. Maybe mingchuang high-quality products need to explore new ways to ensure the maintenance of franchisees.
Because of the above model, the income sources of famous innovative products are also relatively concentrated. At present, there are two main sources of revenue for famous innovative products: one is from the sales of products, including sales to miniso retail partners and distributors; the other is sales through offline and online channels; the other is the authorization fees and product warranty fees charged from franchisees and distributors, as well as management consulting service fees based on sales. Among them, in fiscal year 2020, the revenue of famous innovative products from commodity sales was 8.1 billion yuan, accounting for 89.7%; the income from the latter was 590 million yuan, accounting for 6.6%.
In addition, due to the relatively fixed source of revenue, the growth trend of revenue data of the two fiscal years disclosed by mingchuangyu products is relatively stable. In the fiscal year 2020 (from July 2019 to June 2020), the revenue of mingchuangyu products is RMB 8.979 billion, which is 4.4% lower than that of RMB 9.395 billion in fiscal year 2019 (July 2018 to June 2019).
The reasons for the decline of 4.4% and the decline of quarterly revenue in special period were mainly attributed to the impact of the epidemic in the prospectus.
It can be said that scale is the premise basis for famous innovative products to ensure their supply chain advantages and revenue.
Where is the ceiling?
“The last layer of paper has been torn off by the famous, innovative and high-quality products, that is, the virtual high retail terminal price. One is the old and heavy channel, and the other is the greedy control of the price by the brand merchants. If these two are eliminated, the price space suddenly appears. The point of competition may not really be online or offline, but the distance from the factory to the store. ” Wu Xiaobo, a financial writer, once summed up the supply chain model of famous and innovative products in 2015.
Mingchuangyu firmly believes that it is a business with low gross profit (the gross profit margin used to be as low as 8%). However, in the prospectus, the gross profit margin of mingchuangyu jumped to 30%: its gross profit in fiscal year 2020 was 2.732 billion yuan, 8.8% higher than that of 2.511 billion yuan in the previous fiscal year, and the gross profit rate increased from 26.7% to 30.4%.
In the understanding of Fang Jiayi, the author of tiger smell, this is because the previously mentioned low gross profit comes from the concession of the supply link to the franchisee. If we calculate from the sales revenue of the store and the dividend distribution of the franchisee, 30% is in line with the normal retail level, so there will be a difference between the caliber of high gross profit and low gross profit. But in general, the control gross profit of famous and innovative products is still at an extreme level.
In terms of net profit, mingchuangyu is still in a loss at present. After stripping off some loss making businesses and other non recurring profits and losses, the loss of mingchuangyu products in fy2019 is 294 million yuan, and that in fy2020 is 261 million yuan. However, the prospectus also shows that the operating profit related to the main business is still in a good state: the operating profit of mingchuangyu products is 1.017 billion yuan in fiscal year 2019 and 767 million yuan in fiscal year 2020.
The operating profit is positive, which may prove the healthy state of mingchuangyu products in the main business from the financial point of view, but the prospectus also shows that the operating related costs are very high: the sales and distribution expenses of mingchuangyu products in the two fiscal years were 818.3 million yuan and 1190.5 million yuan respectively, and the general administrative expenses were 593 million yuan and 796 million yuan in the same period.
It can be said that famous and innovative products have paid a lot of costs in terms of expansion, marketing and design.
The “extreme cost performance ratio” that mingchuangyu products want to pursue is exactly the pattern effect produced by people’s desire for low price: it seems that the price of a piece is not expensive, but people often buy a basket of things unconsciously when they walk into famous creative products. In fact, the customer price is not always low. The products bought back are worn out and no one feels distressed.
According to Ye Guofu, “ten yuan” is the critical point. “Famous and innovative products now have seven warehouses across the country, and the products will not go through any distribution level. In addition, the low gross profit ensures that 70% of the products in the store can be priced at 10 yuan and still make money. Ten yuan is a gold price. This certain price will not create any purchase burden on Chinese consumers. It is easy to consume and liberate a generation of young people. ” Ye Guofu once explained the logic between such consumption psychology and low gross profit.
In this way, if the famous and innovative products increase from 10 yuan per piece to 15 yuan a piece or more, is it still the original one? To some extent, the answer is No. At the same time, it also brings about another problem, that is, what kind of price does it need to pay to maintain such a price in the future so as to ensure the scale of revenue? The answer is that these costs continue to grow.
At present, these expenses mainly include depreciation and amortization expenses, marketing expenses and IP licensing fees. One of the important means to attract consumers is to cooperate with a large number of IP. According to the prospectus, as of June 30, 2020, mingchuangyu has established brand cooperation relationship with 17 intellectual property rights licensors of popular brands such as marvel, Disney and kitty cat, and the cost of this aspect will be 128 million yuan in fiscal year 2020. At the same time, the annual investment of famous innovative products in the more important design research has exceeded 100 million.
Therefore, some people claim that cost performance is the core “competitiveness” of famous and innovative products, but in the future, it may also become a factor restricting the profit space of famous and innovative high-quality products under the premise of maintaining the brand positioning unchanged. We should not only maintain the model of small profit and high sales, but also find the imagination space of higher cost and profit optimization, which makes it one of the “dilemmas” existing in the financial figures.
However, the scale advantage of famous brand products may further limit the growth of sales in the same store in the future. We should know that the sales volume of the same store of mingchuang superior products has begun to suffer a setback: affected by the epidemic situation and intensified market competition, the same store sales of mingchuang superior products have shown a negative growth. In fact, in the second half of 2019, due to the intensification of market competition, the same store sales volume of miniso in China has decreased by 3.8% compared with the second half of 2018.
The prospectus also said that same store sales are likely to continue to fluctuate significantly and are not expected to increase significantly, but will decline further. In the future, will the relationship between famous brands and franchisees be more subtle?
In addition, on the way to create cost-effective products, famous and innovative products have to constantly face the quality and various litigation problems that appear in news reports. According to Tianyan investigation data, the operator of mingchuangyoupin (Guangdong Baoyang Investment Management Co., Ltd.) has now been involved in 68 legal proceedings, including 20 disputes involving infringement of design patent right, 4 disputes of infringement of trademark right, and 19 disputes of infringement of work information network communication right.
In this prospectus, the famous and excellent products also responded to a news of quality problems. In September 23rd, the Shanghai Drug Administration issued the “first phase cosmetics supervision and sampling quality inspection notice” issued in 2020. The cosmetics named “one step peeling nail polish” by the agent named “superior stripping nail polish” were found to contain trichloromethane up to 589.449 g/g, while the national standard limit was 0.40 g/ g. Over 1400 times of the standard.
All the problems that need to be solved in the future may exist for some time, because ye Guofu and mingchuangyoupin, who have just emerged from the impact of the epidemic, are concentrating on preparing for a faster expansion.
Expansion and obstacles
We can’t stop the famous and creative products.
Ye Guofu has put forward a new expansion target for the famous and innovative products. By 2022, it will have established 10000 stores in 100 countries and regions around the world, and the annual revenue scale will reach 100 billion yuan. He said he had planned to open 600 stores around the world this year, but after the outbreak, he changed his mind: “our goal is to open 1200 stores.” In the future, mingchuangyoupin will adhere to the development mode of online operation + offline retail, and actively expand new offline retail stores to promote the healthy and orderly development of the physical retail industry. ”
The plan can be described as radical, but it can be understood that, as mentioned above, it needs to continue to expand its scale to ensure the improvement of its supply chain and bargaining power. At the same time, as the competition of large shopping centers in the domestic primary and secondary markets is gradually saturated, it needs new incremental markets to ensure that its expansion speed will not fall.
Relying on the advantages of the channels and supply chain of famous, innovative and high-quality products, overseas expansion will obviously become a good story for the next increment of famous innovative products. You should know that in the United States, where the traditional one dollar store industry is relatively mature, the number of stores of dollar store alone has long been in the unit of 10000.
At the same time of ensuring speed, mingchuangyu seems to be making a new attempt – in addition to the most well-known flagship brand “miniso”, two other brands are mentioned in the prospectus, one is “Nome home” (which has been declared closed) and “wonder life”, which has not yet appeared in the public view.
It is understood that the first direct marketing “wonder” was established in June 2020 Life “store, and plans to establish and operate the second direct store in the fourth quarter of 2020. Through the words in the prospectus, we only know that the brand focuses on people who are more price sensitive. In the next year, after meeting the conditions of franchise filing, the brand is likely to become another important expansion route of famous creative products.
In addition to exploring their own possibilities, famous and innovative products may have to guard against some changes in the competitive situation.
Ye Guofu once firmly believed that the new retail was not “Online + offline” proposed by Ali. He believed that the consumption upgrading was “small and beautiful”, and insisted on the offline mode. But coincidentally, on the eve of the listing of famous creative products, Taobao has already stood in the opposition camp of mingchuangyu products in public opinion: Ali’s “1 yuan experience store” announced that it would launch its first offline experience store in Shanghai. It was reported that Ali planned to open 1000 1 yuan stores nationwide in three years.
Facing the aggressive competition in public opinion, ye Guofu responded to the media at the bell ringing ceremony: “we are very curious about what Ali’s” 1 yuan store “is doing? We think it’s incredible. We hope it will open early. We will also study hard to see what good things can be made with one yuan. ”
However, tiger sniff believes that offline, the scale advantage, location advantage and category advantage of famous and innovative products have been formed. Its existing advantages come from the first mover advantage of quickly occupying the shopping center starting from the era of c2m blank. Therefore, without seeing more copy actions of Taobao, the 1 yuan store is more regarded as the momentum of Taobao special price edition, rather than the famous and creative products facing directly at present The threat.
Tiktok Kwai, but game player is also a big player. The game player is also developing a new business phone, which is splitting the market share of the original price range products, not to mention the new C2M/OEM players who are joining the grand retail reform force, such as Ali, Jingdong, NetEase, and so on. … However, the online power of mingchuangyipin can not be ruled out that it will start to accumulate later. After all, the advantage of being the king offline has been revealed in front of the black swan incident.
At the same time, the moat of the category advantage of mingchuangyu products is not as strong as its channel advantages. It is not like UNIQLO, one of its teachers, to keep a higher barrier in the field of clothing. Now, mingchuangyu products have to make greater innovation in products and modes in the face of these players who are not weak in the supply chain and digital resources.
But on the whole, mingchuangyupin has prepared some new stories. With regard to the money raised in the IPO, mingchuangyupin also said that the funds raised this time will be used for the group to expand its stores and retail network, optimize warehousing and logistics, and strengthen its digital operation.
Mingchuangyoupin has developed its own way of operation, but in the near future, can its financial data achieve a greater breakthrough with the online and offline “ten yuan store” and c2m participants? At that time, the famous products were still “low-end MUJI products”?
Back to the beginning, the “soul torture” put forward by Wall Street to Ye Guofu still needs the soul to answer.