Over The Past Three Years, How Did Daphne Get Off The Altar?

Daphne International Holdings Ltd, formerly known as Prime Success International Group Limited, foresaw a great potential in China's high quality footwear market in 1990. The group created its own brand "Daphne", making and selling women's footwear and becoming one of China's most successful domestic brands.

In 2018, Daphne issued a second quarter warning for 2018.

In the first half of this year, same store sales fell 9.1%, closing 416 sales outlets.

Daphne warned that losses in the first half of the year would be comparable to that in the second half of 2017.

This means that the company's losses in the first half of this year will double more than last year, reaching nearly HK $500 million.

Daphne once had a market value of more than HK $19 billion 500 million, but now it is only HK $551 million, and the price per share is only HK $0.34. Looking back at Daphne's three and a half years from its peak, there is no sign of turning over. "What's wrong with it?"

In the early 90s of last century, Daphne launched its own brand of women's shoes. It chose to take the first step in the domestic market by opening a special counter in a department store. It is also one of the few enterprises in the women's shoes industry that owns the entire industrial chain from manufacturing, design to terminal sales.

In terms of products, in order to reduce costs, Daphne mainly relies on its own team to design, with "basic funds" the main, so that most women shoes mold can be universal, through minor changes can meet differentiation.

This design idea enables Daphne to greatly improve material utilization.

The complete industrial chain cost control plus the advantage of rents, so that the "parity price" Daphne also has a good profit margin.

In terms of channels, because of the lower unit price, Daphne gradually removed the mall counters from the department store's high button points, focusing on the street store.

Since Chen Yingjie became the general manager of Daphne in 1999, Daphne has shifted the focus of its channel strategy from agents to self owned stores. This allows Daphne to react quickly to environmental changes, discount or pfer goods without having to look at the face of the mall.

In this way, Daphne expands rapidly in the mainland with the number of 300 stores a year.

In 2005, Chen Yingjie judged that with the emergence of more and more communities, public consumption habits were moving from department stores to community business circles, so the brand new "shoebox (shoe cabinet") was created and opened in communities and supermarkets frequented by the public.

At the most brilliant time, Daphne has sold nearly 50 million pairs of women shoes every year, and its market share in China has been close to 20%.

This means that every 5 pairs of women's shoes in China come from Daphne.

At the peak of 2012, the total number of Daphne stores reached 6881.

After 2012, Daphne began to go downhill.

At that time, almost all the clothing companies in China encountered the "midlife crisis": brand aging, products are not fashionable, ordering mode led to backlog of inventory, manpower, property and circulation costs rose, and were affected by the electricity supplier.

Daphne, too, has a single category, and the cost of design and development at the beginning of the year has come back.

Sales will not lead to inventory backlog, cost increase, compression profit margins, Daphne is in a quagmire.

Since the peak of 2012, Daphne has begun to close its stores, and its revenues have also begun to decline. Gross margins and net interest rates have continued to decline. In 2015, 2016 and 2017, Daphne lost 379 million Hong Kong dollars, 819 million Hong Kong dollars and 734 million Hong Kong dollars respectively.

A major reason for the continued decline in gross profit is that Daphne's average selling price continued to decline.

In 2012, it fell by 10%. In 2014, the number of units fell, and in 2015 it fell by 4.6%. In 2016, it fell 4.8% to 159 yuan, and 2017 was also 159 yuan.

Later, Daphne accumulated more than three thousand stores, but the layout of stores was not large, especially in the four to six tier cities.

Daphne has been using one to six lines of cities in the market, and there is hardly any concern for consumers in the earnings report. It seems that the main consumers of Daphne have not changed much, which also reflects the essence of Daphne channel brand.

Another reason for Daphne's fall is in inventory clearance.

Although inventories have declined, the relative pressure has not changed. The slow cleaning action is a conservative wrong game.

In addition, the provision of Daphne stock increased year by year, which means that the stock structure of Daphne has not been optimized.

Clearing the line is completely different from online.

Discount will damage the brand value, many brands often destroy or cut the inventory, nor let it flow into the market, but Daphne has long been a discount sale in the stores. If you match a music or a big horn, it will be a brand image in the mud.

When new products enter, they are always enveloped in such a shout, and it is hard to get sales boost.

Moreover, stores selling inventory will inevitably squeeze new product sales space, which has plunged into a dead stock cycle.

The era of channel brand has long passed, and the problem of Daphne is obviously not only the high cost of channel, but also the problem of brand and product. If we need to stabilize the gross profit, we should do a good job in product design, put the price up and cover the cost of sales.

More problems in Daphne management leadership.

The proportion of Daphne Direct stores is so high that it will put pressure on itself when the business is weak. But Daphne should also feel more pain. Direct stores are their own "wrist". If Daphne is willing to change, the resistance must be much smaller than those of the "order + dealer" mode.