Won The Title Of "The First Cross-Border Shoe And Clothing Stock" With A Market Value Of 3.8 Billion Yuan

The gross profit rate was as high as 75%, winning the crown of "the first cross-border shoe and clothing stock" with a market value of 3.8 billion yuan. The news that Zi Buyu (2420. hk) suddenly became a capital darling made practitioners of cross-border e-commerce circle sleepless all night.

The IPO of Zibuyu not only opened the capital channel of cross-border e-commerce, but also made many peers sigh with admiration.

Obviously, the average monthly GMV is 270 million yuan (the average data from July 2021 to June 2022, of which the GMV in June 2022 is 339 million yuan), which ranks third among Chinese sellers of footwear and clothing products exporting to North America and third-party platform sellers, opening the gap with other cross-border merchants.

What makes cross-border practitioners even more frustrated is that there is also a large alligator SHEIN with a valuation of 100 billion yuan behind Zi Buyu. Once the IPO of SHEIN, which also focuses on fashion clothing, may drain all the funds in the existing market. This is a blessing or a curse for those uncertain cross-border e-commerce enterprises.

In China's cross-border export B2C e-commerce field, the market size of clothing, shoes and hats has increased from 160.9 billion yuan in 2017 to 750.3 billion yuan in 2021, becoming the second largest category with an annual compound growth rate (47%), and is expected to reach 932.1 billion yuan in 2022.

Source: Zi Buyu Prospectus

When Zibuyu was founded 11 years ago, unlike the independent station route taken by SHEIN, it chose to settle in the then emerging cross-border e-commerce platform. This may be related to its early business philosophy.

In 2011, newly graduated Hua Bingru and his friend Wang Shijian founded Zibuyu in Hangzhou, and decided to open a flagship store of women's wear brand in Tmall the next year. In 2014, Zibuyu settled in Amazon, and then started all in cross-border e-commerce to sell shoes and clothing products globally.

In the 11 years since its establishment, Zibuyu has constantly changed its main position according to the situation from the earliest Tmall to AliExpress, eBay, Wish, and Amazon. When the platform releases mismatched or declining signals, Zibuyu always gets out in time.

According to the GMV in 2021, although Zibuyu ranked third among all platform sellers, accounting for 0.4% of the market share, its resonance in the industry is self-evident: from the "distribution" mode, Zibuyu is well versed in the way of platform operation, and wins by creating blockbusters. They can't ignore the gains and losses, worries and troubles that Zibuyu is experiencing.

　　01

Expensive flywheel

In a recent interview with Ebon Power, Zi Buyu's co-founder Wang Shijian attributed the company's winning secret to "the ability to create explosive funds".

It is reported that as of the latest feasible date, there are 1089 shoes and clothing products of Zibuyu that have entered the top 100 of Amazon's hot selling products list. Among the more than 300 brands that have been cultivated, there are 87 popular brands with annual sales of more than 10 million yuan. As of June 30, 2022, a total of 6473 hot selling products have been created (products with more than 2000 sales by internal definition).

In 2021, Subuyu Group will achieve a revenue of 2.35 billion yuan, a net profit of 201 million yuan, a year-on-year growth rate of over 75.9%, and a gross profit margin of 75.2%. Among them, the gross profit rate of its shoes and shoes products is more than 80%, and the gross profit rate of its popular clothing products is more than 80%. The life cycle of popular clothing products can even reach 3-4 years, providing a huge source of cash flow.

"Every company has its own gene, and our gene is strong product development, operation and sales, and the ability to create explosive funds." Wang Shijian told Yibang Power that after years of exploration and precipitation, Zibuyu has already produced a "flying wheel effect" in terms of products, operation and sales. For example, a certain SPU sold 10000 pieces this year, It is predictable that its comments and sales will double next year. Therefore, Zibuyu's brand can catch a group of stable and sticky consumers, and constantly polish every (popular) product in the store.

Winning with quantity, scale and best sellers is a classic game of many old cross-border big sellers. In the industry, this model is called "store cluster model", that is, the company operates thousands of stores on the e-commerce platform, operating around the logic of SPU rather than the main brand. The multi store distribution mode also makes it easier to improve the listing ranking and create blockbusters, but at the same time, it also requires a very high team's operational capability.

In this regard, Wang Shijian said to Ebon Power:

First of all, the company's operation talents are very stable, the turnover rate of middle and senior management is very low, and the average cooperation period of the management team is 6 years. In the design team, nearly 30% of the staff have worked for more than three years. "Based on the stability of team talents, the experience of creating blockbusters has come down in one continuous line from the beginning to learn from each other later. Good development and operation talents have a unique 'sense of smell', and the team will also enter a healthy growth," he said.

Second, Zibuyu has strong operational data analysis ability, is well versed in the marketing strategy of popular products, has rich experience in identifying product sales trends and estimating the sales volume of each quarter, and can occupy the segment traffic of each major platform through digital marketing decisions. In addition, Zibuyu also closely tracks product rankings, competitors' pricing strategies and inventory levels, and timely adjusts the corresponding pricing to ensure a high profit margin.

Third, continue to improve products according to customer feedback and big data, thus extending the life cycle of popular products. Wang Shijian pointed out that the company has accumulated a database of tens of thousands of verified surface and auxiliary materials that are easier to create popular models. With the help of big data tracking system, the company summarized the current popular colors, patterns, prices, etc. in the footwear and clothing industry from the cutting-edge trends, and improved the product to make it more consistent with the needs of users.

It is worth mentioning that the "data oriented" design team is the key for Zibuyu to continue to create blockbusters. Among its 344 designers, 31.1% of its employees have digital operation experience and Internet industry background.

Through real-time collection and analysis of the top 100 competitive product information on Amazon and Wish, including brand, price, style, rating, comment and the ranking of each product, Zibu can identify the growth trend of different product categories and predict the seasonal fashion elements. At the same time, the company has also accumulated a large number of market research and historical order information, and created a database containing typography, design and fashion materials. As of June 30, 2022, the database contains about 62680 clothing and shoes, of which more than 9000 will be added in the first half of 2022.

In addition, Zibuyu also plans to use AI tools to provide designers with fabric and pattern suggestions to further improve the hit rate of popular items.

Wang Shijian pointed out to Yibang Power that with the help of the team's data analysis ability, accurate identification of popular trends and user needs can reduce dependence on any single designer to maintain the stability of design ability.

Of course, its investment in the construction of the designer team has spared no effort. The financial report shows that the number of designers of Zi Buyu has increased from 155 in December 2019 to 344 in June 2022. As of June 30, 2022, there are 103 designers with more than three years of experience. In 2019, 2020, 2021 and the first half of 2022, the company paid 189 million yuan, 266 million yuan, 460 million yuan and 274 million yuan of employee benefits to the design team, accounting for 18%, 27%, 37% and 37% of the total cost paid by employees during the period.

　　02

Anti SHEIN?

Wei Zhe, founder and chairman of Jiayu Capital, once proposed that "non Amazon friendly" enterprises are suitable for independent stations. This has been verified by a large number of facts. The so-called non Amazon friendly enterprises mainly include two categories: one is fashion, and the other is the category whose products need to be sold in combination.

Amazon's interface and function design is simple, and fashion products need to have more full display ways. Therefore, Amazon is not a fertile land for fashion businesses to grow. Among cross-border fast fashion brand enterprises, whether it is SHEIN, Zafuf, Cupshe, or Cider, Full Speed, Full Volume and other new enterprises that started earlier, they are all independent.

But Zi Buyu followed the opposite path.

According to the data, in 2021, the revenue from sales of products through Amazon will account for 71.2%, and in the first half of 2022, the proportion will be as high as 90.6%. In 2018, Zibuyu also opened its own website (i.e. independent station). After three years of operation, from 2019 to 2021, the revenue generated from the sales of its own website will be 110 million yuan, 360 million yuan and 257 million yuan, respectively, accounting for 7.7%, 19.1% and 11% of the total revenue. In the first half of 2022, the revenue share of its own website will further shrink to 5.8%.

In this regard, Wang Shijian said frankly that Zi Buyu's current strategy for independent stations would not be too radical, but decided to invest based on the actual profitability of the site.

In addition to the main position, the difference from the SHEIN route lies in that Zi Buyu does not define himself as "fast fashion", nor does he play the ultimate cost performance.

For example, SHEIN can control the inventory turnover days within 30 days by using the "small order quick return" supply chain model, but in the sub silent model, its inventory days in the past three years are 175 days, 177 days and 304 days respectively.

On the one hand, Zibuyu adopts the logistics mode of FBA, and needs to send the goods to the designated overseas warehouse in advance. After the user places an order, the platform will deliver the goods locally. Compared with SHEIN's small package direct mail, FBA delivers goods to customers with faster performance time, but the store's inventory pressure is correspondingly greater. If the order is out of order, it needs to be replenished in time, which is difficult to sell and easy to overstock.

On the other hand, the attributes of the Amazon platform also determine that Subuyu does not need to respond so quickly to popular items. Amazon's shoe and clothing buyers will have higher requirements for product quality, but are less sensitive to the speed of product introduction and the "trendy" degree of style design. Therefore, the life cycle of Zibuyu's blockbuster can reach 3-4 years on the basis of micro improvement.

"The key is to find the balance point. The clothing industry must want to be faster, and there will be no shortage when the single volume breaks out, but also consider the problems of inventory turnover and capital utilization. We have a lot of goods on the Wish before, and the profit is also very good, but when the platform turns down sharply, it will leave some long tail inventory, which needs time to digest slowly." Wang Shijian said frankly.

He pointed out that at present Zibuyu is also monitoring all processes with an IT based information system to shorten every link as much as possible, and the algorithm is more accurate. It is upgrading from product development, supply chain, logistics to sales. "We plan to control the inventory cycle within 150 days in 2023, which is an ideal state."

"SHEIN sells fashion and popular models with a high elimination rate, while Zibuyu sells fashion and basic models." Zhang Sijian, Zibuyu's investor, once summed up this.

In addition, because Amazon's core traffic is Prime members, that is, more high-end people, Zibuyu's products are priced higher on Amazon.

"Our dress prices are basically above 35 dollars, T-shirts are 20-25 dollars, sandals are 20-30 dollars, winter coats can be sold more than 60 dollars, boots are more than 40 dollars. On the whole, the average customer price on Amazon is about 35 dollars." Wang Shijian pointed out to Ebon Power. At the same time, Zibuyu also has higher requirements on the selection of fabrics, which can reach the level of Uniqlo. In addition, it will integrate micro innovation in fabrics, necklines, patterns and other aspects on the basis of more simple design in Europe and America.

The data shows that in the first half of 2022, the average price of Zibuyu's clothing products is 159 yuan, while the average price of shoes is 284 yuan. The overall average selling price of its products has risen from 92 yuan in 2020 to 175 yuan in the first half of 2022. From 2019 to the first half of 2022, the gross profit rate of the company was 69.8%, 72.6%, 75.2% and 75.9% respectively, showing an upward trend year by year.

　　03

Amazon dependency?

Behind the high growth and high gross profit, Zibuyu's inventory is also increasing. This may be a hidden danger for Amazon.

As of 2019, 2020 and 2021, the inventory of Zibuyu is 178 million yuan, 256 million yuan and 664 million yuan respectively. In the middle of 2022, the company's inventory will further increase to 761 million yuan.

Zi Buyu once explained this in the prospectus:

1. The main position of the company is Amazon, and the sales cycle of the Amazon platform is long. The company needs to store products that exceed the expected sales target as a buffer;

2 Under Amazon's FBA mode, it usually takes 40-60 days to deliver inventory to the warehouse, and then the platform executes orders to customers on behalf of them;

3 Under the mode of relying mainly on Amazon e-commerce platform, product out of stock will greatly affect the subsequent flow distribution of products, so it is necessary to stock up in advance. Compared with traditional clothing brands, it is more prone to the risk of inventory backlog;

4 Due to the impact of epidemic prevention and control restrictions and regional transportation restrictions, suppliers have potential deficiencies in production capacity or logistics delivery capacity;

5. The company expects that Amazon will receive a large number of orders in the second half of 2022 during the Black Fifth Festival, so it will stock up the autumn and winter products in advance (generally, the stock up time for autumn and winter products is from June to September), while the unit price of autumn and winter products is higher.

6 The company expects that the sales volume through Amazon will steadily expand with the operation scale of the platform.

In other words, in addition to the problems caused by the epidemic, the various features of the Amazon platform determine that Zibuyu must bear a lot of inventory pressure. Therefore, this puts forward higher requirements for its explosion prediction, supply chain management and other aspects.

As mentioned above, Amazon is the main position of Zibuyu's current channel layout. In 2021, its revenue from selling products through Amazon will account for 71.2%. In the first half of 2022, its revenue from third-party e-commerce platforms will account for 94%, of which Amazon's revenue will account for 90.6%.

"Amazon dependency" - this is a general summary of a group of top sellers in the industry. Whether it is Anke Innovation, which is ahead of us, Savi and Zhiou, which are on the way to IPO, or Zibuyu, who has just been listed, all face this challenge.

Some pessimistic insiders call the marketing e-commerce model relying on Amazon "parasitic e-commerce". Concerns come from several aspects:

The "Amazon Blockade" event in 2021 made people afraid of putting "all eggs in the same basket";

Amazon is still raising service fees, traffic costs, and platform policy changes, which may adversely affect the company's profitability;

The search logic of Amazon's products is to search for categories and keywords rather than brands. The flow introduction mechanism is based on the Best Seller Rank of a single product, the star rating of users, price and other factors, rather than brand awareness. This system is not conducive to businesses building brand power. For example, at present, there are 151 sub brands of Zibuyu, but none of them is particularly prominent.

However, some insiders pointed out that Amazon is still a safe choice to ensure revenue in the absence of new platforms that are eye-catching enough, and in the short term there is no obvious * * * point to stand alone. "It's easier for you to form scale effect on Amazon, and it's hard for others to follow." Allen, an investor who has long followed cross-border e-commerce, said.

In its view, cross-border clothing is in essence a "business of scale". Zibuyu's deep cultivation in Amazon is enough to build an iron wall and throw off a large part of competitors of the same kind. "For the same clothes, one has 100 comments and the other has 2000 comments. Amazon users will not choose the former because they are 5 dollars cheaper, which means that it is difficult for brands that occupy the hole below the head to climb up," he said.

Wang Shijian said that Zi Buyu was still optimistic about Amazon's future growth. He believes that the annual growth of Amazon footwear and clothing industry in North America is 10 times of Zibuyu's annual sales, which means that there is a lot of business space in North America alone waiting for Zibuyu to win.

He also told Ebon Power that in fact, the company did not deliberately pursue the "proportion" of one or more platforms. "We will treat any platform with a more open attitude, and adjust to the time as the general environment and platform change. Everything is based on actual profitability, considering its input-output ratio."

Under such underlying logic, Zi Buyu has been increasing the layout of Amazon, stopping losses on Wish in a timely manner, taking a conservative attitude towards the independent stance of burning money, and making a bold attempt at the aggressive TikTok Shop and the Temu hit by Pinduoduo. Just like a flexible leopard, waiting for an opportunity.