Behind The Magnificent Turn Of Success

At the core of Tibet road in Shanghai people's Square, a three story white building is particularly eye-catching. The bright and bright maternal and infant supplies in the showroom give birth to some new hope.

This is the first one-stop shop for mother and infant products tried by the good kids group. As the flagship store of the group, it aims to establish a good brand image for children.

Two years later, the grand blueprint for building the retail kingdom of mother and infant is becoming the new business direction for the company known for its children's car manufacturing.

"From export to increasing the proportion of domestic sales, from traditional distribution to efforts to expand our own channels, we are at a turning point."

Good boy group chief financial officer pan Le said.

It is a good boy group headquartered in Kunshan, Jiangsu. Although it owns more than 1600 products in 15 categories, including children's cars, children's beds, children's clothing and toys, its core business is mainly the production and sale of children's cars.

Harold Skin, partner of Boston Consulting Group (Halrod Sirkin) estimated that at present, the children's cars produced by good children account for about 80% of China's high-end market share, while the European and American markets are 25% and 20% respectively.

In 2007, the good kids group achieved a total sales income of 3 billion 300 million yuan, an increase of 23.1% over the same period, with a profit of 112 million yuan, an increase of 3.8% over the same period last year, and the profit contribution rate of domestic sales and export sales was about 3:7.

However, the traditional structure of over reliance on single products and the main source of income from the international market has brought unprecedented pressure to the good children under the combined effect of higher production costs and accelerated appreciation of the renminbi.

At the same time, domestic maternal and infant products have just exposed the huge market potential, let the spirit of a good child, a new road of pformation in front of us.

In the Lu Jia town, Kunshan City, Jiangsu Province, less than an hour's drive from Shanghai, there are several outdoor billboards on the road along the Lufeng road. The cute baby image is plump to every passer-by.

On both sides of the road, we can see at least four large factories with Goodbaby signs. This is the manufacturing base for the children's car group, which covers an area of 18000 mu.

Born in a school run factory, the child was born in the early 90s of the last century.

However, like many Chinese manufacturing enterprises, the rapid development of OEM export strategy has become the first independent strategic choice for good children.

"China as an export oriented country is the center of the global manufacturing industry. The development of foreign trade in 1998 is almost the development direction of all enterprises in China."

Pan Le, who joined the good children in 2004, explained the strategy of the company at that time.

That is, from that year onwards, good children began to expand overseas markets. Since then, the contribution rate of export business has increased year by year. By 2003, it has accounted for 60% of group sales revenue, and the company has pformed from local suppliers to a truly international supplier.

However, for the first time in 2005, the sudden reform of the RMB exchange rate regime made good children see the crisis.

"70% of our revenue comes from foreign trade, about 60% of which is the North American market. The appreciation of the renminbi against the US dollar does have an impact on us."

Pan Le said.

So after 2005, good children began to adjust their regional layout, outside the North American market, and began to develop other international markets such as Eastern Europe and southwest Europe.

At present, the export area responsible for the international operation center of good children group has formed a situation that the European and American markets are full and the emerging market is subsidiary. The contribution rate of the European and American market accounts for about 40% of the group's export earnings, and the rest comes from central and South America and Southeast Asia.

The expansion of the international market to some extent alleviates the dependence of good children on the single market. But since the RMB appreciation accelerated against the US dollar last year, the good children still can not get rid of the plight of the OEM enterprises. The overall growth rate of their exports in 2007 has been reduced to about 35%, which is not the same as the growth rate of more than 50% per year.

As pan Le said, the maturity of emerging markets such as Southeast Asia can not be compared with that of the European and American markets, so the growth of Companies in emerging markets in the next few years will not be as fast as they have just opened up the European market.

So where is the way forward?

In fact, before the development of export business, good children have established a traditional domestic sales network.

"The main products of the traditional domestic sales channels are children's cars. We manage nearly 4000 sales outlets in 35 branches across the country, including shopping malls and children's car franchised stores."

Pan Le said.

However, such a huge network has contributed only 30% of its revenue.

With the advent of the golden pig year and the Olympic year, China is surging up a new baby boom.

Moreover, with the increase of per capita disposable income of domestic residents, the cost of parents investing in the newborn is increasing.

According to the Boston consulting firm, the market for baby products in China, including baby food, clothing, toys, children's cars and nursing supplies, will reach 130 billion yuan in 2008 and will grow at about 17% per year by 2012 (see chart: unlimited commercial machines).

Such an attractive opportunity for a good child is not to be missed.

"At present, we should rank first in the field of children's cars in China, whether sales or profits, but we also want to expand the market share. And the market is developing rapidly, so we hope to seize the share of new cake in the market."

Pan Le said.

He said the new cake not only refers to the demand for new baby carriages, but also includes more maternal and infant supplies besides children's carriages.

Therefore, in Pan's opinion, the first thing a good boy should do is to overcome his immediate difficulties.

"The special thing about the Chinese market compared with the foreign market is that there is no need for foreign brands to worry about channels, and Chinese channels are more influential than brands."

Pan sighs.

Therefore, in order to change the passive situation of relying solely on the shopping mall counters, after the second half of 2007, good children began to focus their attention on the construction of their own new channels with stronger control, and vigorously develop the new one-stop brand chain of mother and infant products - "mother good kids", with the simultaneous launch of the "mother good child" e-commerce website and directories.

According to the design of a good child, "Mom's good children" is different from the traditional stores specializing in children's care products, children's wear and children's cars. It's located in quasi mom and 0-6 year old baby products stores, and sells a wide range of products. Apart from good children's own brand products, "Mom's good kids" also sells various kinds of baby products for thousands of brands of children's group agents or distributors.

In addition to selling products, "Mom's good children" also provides services to customers, such as child care classes for young couples without childcare experience, hairdressing services for children, and intermediary services such as Yuesao, housekeeping and so on.

"We have changed from traditional product sales to" product + service "comprehensive distributor.

Pan Le concluded.

Ye Yonghui, a partner of Boston consulting firm, affirmed the "one-stop" business mode of integrating products and services.

"Most young parents in China do not have childcare experience. They listen to the doctor's advice and word of mouth.

At present, no company in China can provide them with professional advice on child rearing, so this one-stop service mode has great potential for development.

Moreover, it grows faster than traditional channels, and sales channels of traditional department stores and supermarkets grow by 10%-15% each year, while the growth rate of exclusive stores or franchised stores can reach 20%-30%.

He said.

However, the ambition of a good child is more than that.

According to the plan, in addition to traditional channels and new channels of "good mothers", the good kids group is considering joint ventures with other famous international brands to expand retail channels. It is the first attempt to cooperate with the famous British children's clothing brand Mothercare.

In the new joint venture between the two sides, good children hold 70%, and the two sides work together to set up a more high-end Mothercare Goodbaby retail store with the theme of children's clothing.

In June this year, Mothercare Huaihai store in Shanghai will officially open, and second stores will open in Beijing in July.

Pan Le revealed that a good boy could also build similar channels with several European brands and is still under negotiation.

In the past year or so, the layout and level of good children's new retail Kingdom have been dimly visible.

Behind the rapid expansion of the pace and increasingly clear strategy is the gradual adjustment of internal structure and resource allocation, aimed at reducing unnecessary expenditure and retaining more resources for new channel construction.

Manufacturing is the most important part of good children in the past ten years. The strategy of vertical integration is from raw material procurement, processing to later production.

But with the development and expansion, the good children began to gradually outsource the manufacturing parts with low technical content, such as welding and electrical appliances, and retained the high demand for temperature, pressure, catalyst and other technical indicators.

R & D is the advantage of a good child from other suppliers, so it must be retained.

At present, besides selling to private brands in Eastern Europe and South America, the export business of good children is mainly based on design and processing (ODM).

"Over the past few years, we have invested heavily in research and development, providing one-stop services to customers who need OEM production, providing customers with a full range of solutions in conceptual design, structural design, fabric selection and production engineering design."

Pan Le said.

Take the baby cart as an example, its core technology lies in the folding rate (the proportion of space after folding and the total release) and the difficulty of the folding process. Good children have many patents in this field, thanks to its R & D team.

In terms of developing new channels, the most important thing is to solve the problem of capital first.

"The biggest difference between traditional channels and new business models is that if we want to get high returns, we must bear high risks and low risks and low returns."

Pan Le said.

Only in terms of input, he said that the initial cost of opening a new counter in the shopping mall was only about 1 million in the past, but the general stores of the "mother's good children" outlets were about 2000 square meters. Decoration investment and rental cost were all very high. The new store opened up to tens of millions of dollars. Of course, high investment means the level of profit and the ability to control brand and channel.

Where are these funds coming from?

Pan Le revealed that good children support their new channel construction by making profits from traditional businesses (including export and traditional channels), which is equivalent to traditional businesses providing financing functions for new businesses. Besides, external funds, besides bank loans and private equity financing, develop good channels for children.

However, in order to expand rapidly with existing resources, the "good mother" has adopted the strategy of direct and simultaneous promotion.

According to the "mother good child" joined the service hotline, as of June 26th this year, "Mom good children" opened 11 Direct stores nationwide, and the number of contracted franchisees also reached 55.

The business area of the direct store is generally around 2000 square meters, while the franchisee can be determined according to the location and actual situation of the franchisee, but at the same time, it must ensure that the business area reaches 150 square meters (see chart: joining expansion).

"Our goal is to be 10-20 per year, and the first tier cities may have more than one. The basic criterion of site selection is to get close to customers. For example, there is a" good mother "in Shanghai, which is located next to the famous red house hospital of Obstetrics and gynecology hospital.

Pan Le said.

Of course, joining is not without risk. The inside of a good child is obviously aware of this.

"We only provide support services. If the franchisee fails to meet our requirements, the risk of brand image will be high, so the company will strictly select franchisees and adjust the speed of the franchisees according to the actual situation," Pan said.

Ye Yonghui also suggested that the development of franchises requires uniform management and operation standards in terms of product quality, customer service, personnel management and brand image.

In the process of structural adjustment and internal resource reconfiguration, from the export oriented manufacturing enterprises to the strategic pformation of manufacturing and retailing, the role of the financial department of the good children is changing quietly.

"From export oriented enterprises to retail enterprises, the challenges faced by the financial sector are mainly in three aspects: strategic planning, budgeting and implementation, and follow-up control and adjustment."

As chief financial officer, pan Le said.

After the pformation of retail business, pan Le obviously felt the difficulty of working capital management.

For retail enterprises, inventory is the main channel for capital occupation besides the rental and maintenance cost of shops.

Formerly served as a supplier