Hailan House: Clothing In High Inventory Dilemma, On The Edge Of The Altar

It seems that the "home" of "Lan" is on the edge of the altar.

Recently, Hailan home released a semi annual report. The company's revenue in the first half of the year was 8.102 billion yuan, a year-on-year decrease of 24.43%; the net profit was 947 million yuan, a year-on-year decrease of 55.42%.

Although the performance decline has the adverse effect of the epidemic, the decline of net profit of Hailan home far exceeds the decline of revenue, and the negative growth of net profit that has appeared last year, there are also hidden dangers in its own business model.

The biggest hidden danger, of course, is the high inventory risk of Hailan house, which has been questioned.

According to the semi annual report, as of June 30, the inventory value of Hailan home was still 8.217 billion yuan, far higher than the industry average.

Due to the long operation process and short popular cycle of clothing industry, once the inventory is unsalable, it is hard to avoid impairment and high risk. So is the home of Hailan. Inventory impairment fully covered 375 million yuan of asset impairment in the first half of this year, resulting in a cut in net profit.

But surprisingly, facing the high inventory of 41% of current assets, Hailan home's inventory falling price reserves this year is only 737 million yuan, much lower than that of peers.

This is undoubtedly related to Hailan home's unique business model of combining light assets with heavy assets, that is, the upstream suppliers bear the inventory risk and the downstream franchisees make financial investment.

To put it simply, when Hailan house takes goods from the supplier, it will pay on credit first, and then pay after the goods are sold out. As investors, franchisees only bear the expenses of opening stores and employees' wages, and are not responsible for store management.

Under the quasi direct marketing mode, Hailan home divides the inventory into two parts: non returnable inventory and returnable inventory. If the inventory is returned, it is not refundable to the supplier.

The advantage of this model is that it not only shares part of the inventory risk with upstream suppliers, but also raises funds for store expansion from downstream franchisees.

However, it also produced a huge amount of advance payments and accounts payable, making the enterprise's debt high, which has reached 16.5 billion yuan.

In addition, due to the impact of the epidemic situation, the financial pressure on suppliers is relatively severe this year, so it is difficult to get full payment for the returnable inventory of Hailan home even if it is returned to the supplier.

The disadvantages of quasi direct marketing mode are more than that.

As a light asset operation company, Hailan home has no self built factory, and its products are designed in cooperation with suppliers.

In other words, Hailan home has no designer and does not have the ability to design products independently. It just provides a simple direction. The designer of the supplier carries out preliminary development, gives the sample draft, and then submits it to Hailan home for screening.

Although the labor cost is saved, the transfer of design rights not only makes the product design ability of Hailan home increasingly exhausted, but also because of the uneven level of suppliers, the products fall into the door of plagiarism, which damages the brand image to a certain extent.

Hailan house, a typical model of valuing brand, neglecting design and seeking OEM for a long time, is like the vitality forest in the beverage industry. It is a light asset model on the marketing side. However, it is not conducive to the cultivation of core competitiveness. Therefore, Hailan home seeks deep binding with suppliers and has the advantage of heavy assets. Yuanqi forest has started to build its own factories and transform into asset heavy.

It can also be said that Zhiyu is a kind of model.

The rapid growth of Hailan home into No. 1 of China's men's wear brand is closely related to the rapid store expansion ability under the quasi direct marketing mode, but it also causes the sword of Damocles with high inventory risk all the time.

Top 10 brands of men's wear in China in 2019

Top 10 brands of men's wear in China in 2019

In order to solve the inventory problem, Hailan home has also made a lot of efforts, the first is to open up the online market.

As early as the first half of 2018, Hailan home accepted Tencent's 2.5 billion yuan strategic investment at the price of 5% shares, and launched the micro mall and small program online with its help. In the second half of the year, Hailan home cooperated with meituan to explore a new retail mode of "clothing + takeout".

These are all attempts by Hailan home to reduce inventory with the help of online traffic based on the increase of offline customer acquisition cost.

The second is to cut the standard and cultivate new brands.

Mark cutting refers to that after receiving the return from Hailan home, the supplier cuts off the trademark and transfers it to a large number of small and micro sellers to stock. Due to the advertising effect of high-end brands of Hailan home, most of the cut standard products are easy to sell, which directly reduces the brand value.

With the aggravation of market competition, Hailan home has changed its single men's wear line in recent years, and began to lay out household, women's and children's clothing market segments. In addition to the main brands, it has also cultivated ovv, yeehoo, boys and girls, Hailan, black whale and San keno, trying to turn "men's Wardrobe" into "family's Wardrobe".

However, the development of new brands at this stage is far from mature. From the proportion of Hailan home's new brand revenue accounting for only about 20% of the total revenue in 2018, it can be seen that the main brand is still the main force driving the revenue.

In addition, it is to explore overseas markets to seek new business growth points.

Since July 2017, Hailan house opened its shop in Kuala Lumpur, Malaysia, and has officially entered the Southeast Asian market, and has settled in Vietnam, Singapore, Thailand and other countries. However, so far, the overseas business revenue is not ideal, accounting for about 0.6% of the total revenue in 2019.

Hailan house was originally a benchmark enterprise in the field of clothing, but it fell into plagiarism controversy because of its weak design ability, and was questioned by investors because of the high inventory crisis. It is inevitable to be regretful.

As a challenger of UNIQLO, the once brilliant metsbawi was defeated by inventory pressure. The inventory turnover days of Q4 in 2011 were only about 130 days, while the inventory turnover days of Hailan home had reached 249.28 days.

It's no wonder that many investors are panicked and worried that Hailan house will follow the example of mattersbonwe.

Therefore, if Hailan home does not want to fall into the altar, it needs to solve the high inventory risk and improve the product design ability as soon as possible.