Why Did Franchisees Grow In The Downturn Of The Apparel Industry?

Some time ago, A Bin complained to the author about joining MD. brand Unpleasant experience. MD brand purchase discount of nearly 40 percent off, while the city Brand Company Direct stores are often doing 50 percent off, 40 percent off clear inventory activities, very affecting the franchisee business in the suburbs. A Bin is very helpless, sometimes he will go directly to his direct shop to pick up the special price, because the price of the direct store is cheaper than that of the company.

At the 2013 order meeting in October, the MD brand gave A Bin a high order index. If it was not completed, his decoration subsidy would not be obtained. "As long as we can get the subsidy, it's a matter of minutes." A Bin said that the franchisees who were similar to him were not in the minority. If this happens, sooner or later, there will be an accident.

After the national day just passed, the media focused on the MD brand. A financial weekly first exposed MD "false sales, concealment 800 million stock" news, other various media follow up the report one after another. The report quotes some interviews and some data about MD former employees and franchisees, and points out that MD transfers inventory to related customers to clear inventory. At the same time, MD pointed out that in order to make the report more attractive, the sale of goods in the autumn was done in the first half of the year, and the goods in February 2013 were allotted to franchisees in advance to boost the 2012 performance.

Many media friends have asked the author's views on this matter, so I wish to make a comprehensive response here.

Helpless inventory transfer

The media reported in the report that MD's top five customers were their controlling subsidiaries. This year's major customers have changed. They are basically their bosses' friends and family groups. The new major customers, including Dalian, Changsha, Zhengzhou and Shijiazhuang, contributed 317 million yuan, 35 million 240 thousand yuan, 27 million 640 thousand yuan, 24 million 220 thousand yuan and 21 million 120 thousand yuan to MD respectively, totaling 425 million yuan, accounting for 10% of revenue.

From the financial perspective, the controlling subsidiaries need consolidated statements, while the proxy customers do not need consolidated statements. This reduces the inventory of MD but increases the channel inventory of agents. Channel inventory will eventually be sold, and only channel inventory can be sold to real consumers, leaving capital and storage space to generate new purchases and bring new performance contributions, so MD's inventory transfer is only an expedient measure.

Pre sale is more common.

Usually brand operation category. clothing The company adopts the futures commodity mode. In order to make the goods arrive in advance and sell quickly, the Brand Company will advance the goods ahead of schedule. In May, customers began to market early in the fall. shoes Short and T, June will be a large number of long T and jackets in autumn. In December, there will be quite a few commodities in spring.

MD is a local fast fashion brand. Its brand and commodity characteristics determine the need for quick listing. In October 2012, if the goods in February 2013 were too early, the goods could not be sold in season, nor could they be sold immediately, which would occupy the funds and storage space of retailers.

Pressing goods is a conflict of interests.

Pressing goods is a common problem in the clothing industry. Clothing enterprises suffering from "big inventory" are related to pressing goods. In order to clear the stock, the MD brand will be vigorously promoted in the direct stores in the region. This will undoubtedly impact the franchisee's business and increase the turnover rate of the franchisee because of the price. On the other hand, the MD brand also strongly presses the purchase targets to the franchisees. When the franchisees form a larger inventory, they can not undertake the recompression of the brand.

For Brand Company, to achieve high growth, we must continue to press targets; and for franchisees, if we continue to undertake indicators, there is only one way to go. But for MD brands that are financing through pledge equity, the strength of stock prices is based on the steady growth of performance. In the face of their own interests, there is bound to be a conflict, so MD has inflated sales and some insider information during the order meeting.

Brand and franchise game

If the game of brand and affiliate is not well solved, the franchisee will escape. From the perspective of channel structure, MD's direct business can generate more than 50% of the sales contribution, and the channel structure is relatively safe. However, from the number of channels, the proportion of MD channels is only 25%. In addition, in the first half of this year, 2 billion 200 million yuan was purchased from the franchising channel, and 43% off sales and 10 percent off retail sales were added to the sales channel. The sales volume was about 3 billion 400 million yuan, which was much larger than that of the direct channel, which was 2 billion 300 million yuan. From the perspective of profit contribution, the contribution of franchising channels is no less than that of direct battalion.

According to media reports, sales of MD in Chongqing, Chengdu, Guiyang and other places dropped by 5.9% compared with the same period in the previous year, while sales growth in the North District reached 8.44%, while in the mid year financial report, the sales growth of MD increased by 21%. When retail business performance is generally bad or even down, Brand Company should face up to the downturn of the industry, actively communicate with the franchisees and reach a consensus, handle the conflicts with franchisees in a timely and correct manner, rather than arbitrarily let franchisees obey the profits or powers of the brand.

Though criticizing the MD brand, we must pay tribute to it. MD is the early adopter of virtual operation in China. Clothing enterprise While operating and expanding, we should dare to actively develop and innovate, adopt the mixed channel mode of "one or two level market direct + three or four market joining", and put forward the national spirit and the concept of "new national goods" in the industry. All these are worthy of affirmation and praise. The road is long, fast and smooth, and twists and turns. If it is frostbitten in winter, it may be better to see ultraviolet.