BELLE Faces An Uncertain Future In The Face Of The Impact Of E-Commerce

According to the world clothing shoes and hat net, it is slow to respond to channel changes and consumption upgrading, pricing is high-end, but product strength and brand power are not strong enough.

The cost performance has declined, which has lost the favor of the new generation of consumers.

One minute speed reading

The way of success: in daily management, when BELLE's grass-roots managers find excessive inventory or unbalanced structure, they will sell through various means such as city pfer, price change, promotion and so on. At the same time, the total inventory and product structure should be adjusted weekly according to the replenishment situation.

In addition, the gross margin of BELLE footwear business has always been maintained at around 60% of the industry's leading edge.

Path dependence:

The rise not only shifted sales from offline to online, but also made consumers pay more and more attention to the price performance of products.

The shift from department stores to shopping centers has made BELLE's channel advantage accumulated over the past 20 years continue to weaken.

The road ahead is unknown: in 2016, the electricity supplier was there.

The penetration rate of the category reached 24%, that is to say, about four pairs of shoes were purchased through the electricity supplier channel.

All footwear enterprises are facing the three challenges of product homogenization, price war and high storage.

"If we do not pform, the company will only die slowly."

In the May 2016 performance press conference, BELLE CEO Sheng Bai Jiao sighed so much.

From listing in 2007 to privatization in 2017, Belle International Holdings Ltd (01880.HK, which has already been delisted, or "BELLE") first hit the market value of HK $150 billion, followed by a sharp downward spiral. In the past two years, its revenue grew by only about 2%, and net profit grew negatively.

In July 27, 2017, BELLE completed the privatization deal with HK $53 billion 135 million valuation.

CEO Sheng Bai Jiao said in his letter to his staff, "the company is really in crisis."

Although the market is depressing, BELLE still occupies 7% of the market share in the Chinese footwear market, ranking only Nike (China). The shoe market in China has been highly fragmented. According to Euromonitor, the top 30 of the footwear industry accounts for about 40% of the total market size.

As the largest female shoe retailer in China, BELLE has an advantage in terms of supply chain management, operation capability and personnel system.

Way to success

Deng Yao, the founder of BELLE, was born in Hongkong in 1934. He started an apprenticeship in shoe factory in 50s, and later set up his own factory.

Shortly after the reform and opening up, he extended the footwear business to the mainland, and then expanded the company step by step.

Deng Yao was low-key and rarely interviewed by the media. He once said he always looked at products and markets with a craftsman's eye.

CEO Sheng Bai Jiao is 18 years old than Deng Yaoxiao. In 1991, he joined the newly established Shenzhen BELLE Shoes Co., Ltd. with the title of general manager.

Prior to that, he worked in the textile development company of Shekou Industrial Zone, Shenzhen merchants.

According to Chinese business strategy, Sheng Bai pepper is active in thinking, taciturn and advocating HUAWEI style overtime culture, which is appreciated and reused by Deng Yao.

In the five years from 2007 to 2011, BELLE's retail stores in the mainland expanded from 3828 to 14950, equivalent to 2200 stores a year and 6 stores a day.

For a long time, most women's shoes in department stores were owned by BELLE.

Meanwhile, BELLE's revenue climbed to HK $28 billion 945 million.

At that time, Bi Sheng, a former Baidu marketing director and assistant to the president, was making his first venture - the establishment of the shoe vertical electric supplier.

"In those days, BELLE was a great company with strong executive power and ability to shop, but he really didn't understand the Internet," he recalls.

It is worth noting that in the past five years, China's GDP growth has been maintained at over 9%. Nearly half of the city's population is 25 to 49 years old.

BELLE insisted on the multi brand strategy. After its listing, it began the acquisition process. By the end of 2011, it had owned more than 10 private brands such as BELLE and Staccato, and more than seven licensed brands.

Because there is no obvious difference in the style design of the brand shoes, mainly the price range is different, so the meaning of multi brand strategy is more to improve the market share, and once the control of the channel means that it has the pricing power.

In 2011, BELLE set up 20th anniversary, so Sheng Bai Jiao summarized the achievements: "established and improved the supply chain based on replenishment system, and nurture a positive, detailed and responsive retail management system".

In daily management, when BELLE's grass-roots managers find excessive inventory or unbalanced structure, they will sell through various means such as city pfer, price change, promotion and so on. At the same time, the total inventory and product structure should be adjusted weekly according to the replenishment situation.

This dynamic adjustment is a big step ahead of competitors.

Another advantage is that the gross margin of BELLE footwear business has always been maintained at around 60% of the industry's leading level, which is mainly related to the adoption of the full value chain model of its own footwear brand.

That is to say, strengthening operational management in all aspects of product R & D, procurement, manufacturing, distribution and sales can turn into substantial profits.

Strong channel control, flexible supply chain management and flexible operation capabilities have pushed BELLE into the position of "one generation of shoe king".

In September 6, 2010, BELLE was listed in Hongkong's Hang Seng Index blue chip, becoming the second largest footwear market in the world after Nike.

Path dependence

However, since 2012, BELLE's business has become difficult mainly due to the change of sales channels, and its share price has dropped after reaching a historical high in February 2013.

The rise of electricity providers not only shifted sales from offline to online, but also made consumers pay more and more attention to the price performance of products.

The shift from department stores to shopping centers has made BELLE's channel advantage accumulated over the past 20 years continue to weaken.

When asked why BELLE did not change early, Bi Sheng asked, "if you invest 10 yuan to get 20 yuan profit and the other side can only get 10 yuan profit, which one will you choose?"

According to Euromonitor data, even in 2011, the penetration rate of electricity supplier in footwear category was only 3.6%. For BELLE, the channel to sink and expand the retail layout is the most cost-effective choice.

The lack of crisis awareness and the pursuit of immediate profits made BELLE unprepared for the sudden change.

According to the statistics of China general merchandise business association, the sales volume of 81 large and medium-sized department stores in 2012 was 228 billion 270 million yuan, an increase of 8.92% over the same period last year, and a sharp decline compared with the average annual growth rate of 16.5% in the department store industry from 2006 to 2011.

China's retail industry development report (2013) released by the Ministry of Commerce pointed out that in 2012, the scale of online retail pactions in China reached 1 trillion and 310 billion yuan, up 67.5% over the same period last year.

By the end of 2012, the number of domestic B2C, C2C and other retail business models has reached 2.5.

For more than 20 years, department stores have always been the core sales channel of BELLE footwear business.

As the first retail format, department stores usually have more than 50% of their sales from clothing, shoes and bags.

With the advantage of many high-end brand shoes, BELLE can usually get a lower discount than peers.

The two sides have reached a deep level of cooperation.

But after 2012, the movement of offline channels from department stores to shopping centers was obvious, and the handover of these two retail formats was difficult for BELLE.

Due to the different structure of passenger flow, it is difficult to simply replicate the business model of small open space and single brand in department stores.

Shopping Center shops are relatively independent, generally have larger space and more commodity selection, in order to have certain independent gathering ability.

That is to say, BELLE's advantage of channel control gained by multiple brands has become a disadvantage in the shopping center scene.

In addition, consumers in shopping centers are more inclined to luxury goods, fast fashion and sports brands.

And the emergence of more new brands has also made BELLE one of the options.

Online sales have become an irreversible trend while online channels are changing.

According to Euromonitor data, in 2014, the penetration rate of electric shoes in footwear category was 16%, and the penetration rate in the whole social consumer goods was 11.9%.

Ni Hua, vice president of Founder Securities, told reporters that the penetration of e-commerce is based on the logic evolution of household appliances and 3C, clothing shoes, cosmetics and super merchandise.

This is because with the maturity of the logistics system, marginal cost has gradually declined, and the electricity supplier has penetrated into low priced goods and formed a certain scale system.

For the electricity supplier, BELLE saw the opportunity very early. Sheng Bai pepper also showed a strategic importance.

In 2008, BELLE set up Taoxiu net, began to test the vertical footwear electric business, and later set up the fashion category B2C platform purchase network in 2011.

During the operation period, due to the large investment in manpower, technology and infrastructure, and the high cost of flow, there was a loss.

This is because BELLE has positioned the business as a "tail cargo platform", that is, stores can not sell products to sell online; on the other hand, vertical electricity supplier's overall business model problems, profitability is very difficult.

Lu Yinan, vice president of pig network and co founder of the former Le Tao network, said: "at that time, Taobao and Jingdong had already formed traffic flow, and other vertical businesses had high traffic costs."

Bi Sheng believes that if the inventory problem is not solved, the non consignment of B2C business model will not be established.

Most of BELLE's sales on e-commerce platform are its own products. The proportion of consignment products is very small, coupled with high flow costs, the loss is inevitable.

In addition to channel expansion, BELLE is also trying to develop new businesses to withstand shocks.

In 2012, it launched the "15 minutes" fast fashion women's shoes, hoping to further sink the channel through a low price strategy. In 2013, it invested in Japanese fashion group Barok with DH Hui investment and entered the fashion women's clothing category.

It also expanded the proportion of external suppliers in order to resist the pressure of rising costs such as labor costs.

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It is worth mentioning that BELLE's sports apparel business has been steadily increasing.

This is mainly because with the rise of healthy lifestyles, more and more consumers' aesthetic preferences have shifted from fashion to sport and leisure.

In addition, for sportswear, consumers do not have a high degree of personalized pursuit, such as seeing themselves wearing the same sneakers as others, will feel normal, and wearing the same fashion shoes, will feel embarrassed.

In 2012, the sales scale of BELLE's footwear business and sportswear business was 64: 36.

In the 2016 fiscal year, the income of sportswear business is 1.2 times that of footwear business.

However, because the sportswear business only involves the distribution and retail links, and the footwear business is a vertically integrated mode of operation, the former is obviously weaker than the latter in terms of profitability.

The recession of main business brought BELLE into winter.

In the 2014 fiscal year to the 2016 fiscal year, BELLE's performance plummeted, and the three year revenue grew by 8.74%, 1.95% and 2.21% respectively. The net profit in the 2016 fiscal year was less than that in the fiscal year 2010.

At the same time, BELLE ushered in the tide of closing stores.

In the 2015 fiscal year, mainland self operated retail outlets were reduced by 366, equivalent to 1 stores per day. In the 2016 fiscal year, the number of mainland self operated retail outlets was reduced by 700, equivalent to 2 stores per day.

In May 16, 2017's performance press conference, Sheng Bai Jiao blamed the responsibility for BELLE's pformation failure. Frankly speaking, it still can't drive a computer, even WeChat, and has not made a good prediction of market changes.

BELLE represents the kind of enterprises in the mass consumption era: they start from the production plant, then develop from the manufacturer to the channel operator, then locate the retailer, and gradually gain more profits from the cost to the retail price by occupying the intermediate links, and eventually grow into a retail giant.

Moreover, they have gone through the stage of rapid economic growth in China, enjoying the era dividend and demographic dividend.

Unknown road ahead

At 4 p.m. on July 27, 2017, BELLE was cancelled by the Hong Kong stock exchange.

This is the largest privatization deal in the history of HKEx.

The privatization price of high Ling capital group, CDH investment and BELLE management is HK $6.30 / share, with a total valuation of HK $53 billion 135 million.

This offer is 23.5% higher than the average closing price of the ten trading days before the last trading day, 5.10 Hong Kong dollars.

After the completion of the paction, Gao Ling group held 56.81% and became the first shareholder of BELLE.

Deng Yao and Sheng Bai pepper did not participate in the paction and sold all the shares they held.

For BELLE's future change plan, high allocating capital and CDH investment declined the interview request on the grounds of "the program is still being worked out".

Li Haojun, vice president of GGV Ji Yuan capital investment, said: "a company can achieve such a large volume. It must be extraordinary. BELLE is still very strong in supply chain management, operation capability and personnel management.

High allocating capital has many years of experience in the pformation of traditional retail, which will help BELLE to reverse operations in terms of product end, and finally will quit in the domestic capital market.

Consumers have less confidence in BELLE than the capital side.

Random interviews with several female consumers in Han Guang Department store and Jun Tai Department Store in Beijing indicated that they had fewer and fewer shoes for BELLE in recent years, because their styles were not new, and their cost performance was not high.

They say that whether online or offline, casual shoes are generally purchased at random, with the emphasis on style and comfort, while sneakers are mainly brand names.

"Consumers who buy shoes now are mainly middle-aged people around 40 years old."

The salesman of BELLE department store of Han Guang Department said.

The electricity supplier not only brought impact to the offline channel, but also made the commodity price pparent.

The increase rate of BELLE shoes [the increase rate = (sales sales cost) / sales cost] is about 4.

That is to say, a pair of women's shoes priced at 600 yuan cost about 120 yuan.

In this way, the middle and low end consumers can easily be attracted by other products with higher cost performance and more fashionable styles, such as Charles&Keith, Ecco, etc.

In 2016, the penetration rate of electricity suppliers in footwear category reached 24%, that is to say, about four pairs of shoes were purchased through e-commerce channels.

All footwear enterprises are facing the three challenges of product homogenization, price war and high storage.

According to the Euromonitor report, the footwear industry in China will continue to grow at a compound annual growth rate of 4%, and it is estimated that the total scale will reach 438 billion 200 million yuan by 2021.

New force

No strong competitor is also the reason for BELLE's decline.

Until now, the net profit of BELLE footwear business is still larger than that of all 10 Chinese listed companies, including Hong Kong stocks and A shares.

However, with the increase of the size of the shoe market, more entrepreneurs will enter the market.

They have the creativity and acuity of BELLE, a traditional retailing enterprise, and the disruptive changes they bring will no longer be applicable to the previously operational logic.

Zhao Ruohong is such an entrepreneur.

She said she herself was a high-heeled shoe control. In 2014, she suddenly felt that the choice of consumption was less and less. It seemed that she could only choose between luxury brands and Taobao, because many high-end brand shoes looked almost the same.

So she set up her own brand of high heels for 73 hours.

Today, the company has been established for two and a half years, and has opened 12 entities stores in Shanghai, Beijing, Hangzhou and Nanjing for 73 hours. It is expected that sales will exceed 100 million yuan in 2017.

Zhao Ruohong said frankly, after he started to do it, he discovered that the supply chain of shoes was very complicated, and inventory management was very complicated.

However, high heels for 73 hours have a competitive advantage that traditional women's shoes enterprises do not have - female perspective.

In her view, women buy shoes more impulse consumption, can not simply distinguish between online and offline, "make a brand must have the feeling of love."

At the beginning of the business, high heels were sold online and offline at the same time for 73 hours, and the bridesmaids, bridal shoes and party shoes were also designed according to different scenarios. Most of the designers were professionals who came back from abroad.

In addition, it often hosts afternoon tea and experiential marketing in the physical store. It will also expand the popularity of the popular TV series by embedding and inviting stars to try it on.

In the future, consumers will be further subdivided and personalized demand will become more intense.

20 year old -45 years old target consumer crowd positioning, has become too broad and old-fashioned.

In terms of product innovation and brand communication, BELLE needs to learn from these start-ups.

In 2015, the world's first C2M e-commerce platform was established, and consumers and manufacturers directly connected to destroy all the intermediate links.

At present, the necessary shopping mall has already covered many categories such as shoes, shoes, bags, cosmetics, etc.

To put it simply, this mode sells products from high-end manufacturers to consumers at low price.

Take shoes as an example. On the necessary mall, the price of the ladies' short boots produced by Armani Jeans manufacturers is 499 yuan.

This mode means that the price performance of BELLE will be further reduced if it is priced in the middle end, but the product strength and brand strength are not strong enough.

Li Haojun has always been concerned about investment in the field of consumption upgrading. He said: "the TMT industry has been on fire very quickly and has vanished quickly.

But on the contrary, the establishment of a brand always needs to be changed to qualitative change. Once it breaks out, the premium will be very high.

According to this logic, the BELLE of the delisting may also return to the king, while the high heels for 73 hours and the necessary mall still have a long way to go.

More interesting reports, please pay attention to the world clothing shoes and hats net.