Image source @ Visual China
Text | New consumption of deep krypton, author | Mu Jiujiu
Wanting to squeeze into the domestic market by air fryer, VeSync's wave of operations is a bit difficult to understand.
VeSync, a small home appliance upstart that has been racing in Europe and the United States for many years, began to enter the Chinese market, but what is shocking is that the first new kitchen appliance launched in the domestic market is actually a V3 air fryer.
Under the home economy, small household appliances ushered in explosive growth, and air fryers also quickly became hot. But this year, the consumption of small household appliances has returned to calm, and the topic of air fryer being beaten into the cold palace has been heard endlessly.
According to AVC data, from January to April 2021, the retail sales of air fryers were 2.379 million units, accounting for only 14% of last year's demand, and sales fell significantly.
On the second-hand idle trading platform, small household appliances such as air fryers occupy the first place.
The first battle of returning to China is placed on the air fryer, can VeSync, a new upstart who goes to sea, still be full of spirit in the domestic market?
VeSync's 10 years at sea
When it comes to online small household appliances, domestic consumers may think of A-share listed bear appliances, while North American consumers may think of VeSync.
Among small appliance retailers, VeSync's Levoit air purifier and Cosori smart air fryer have been among Amazon's top sellers for two consecutive years and remain in position until June 30, 2021.
But in essence, VeSync is a Chinese company.
According to Aiqicha, VeSync belongs to Shenzhen Chenbei Technology Co., Ltd., which was established in 2013, and its founder, Yang Lin, is really a Chinese.
At the end of 2011, 38-year-old Yang Lin opened a small online shop in a basement in the United States, selling small household appliances such as kitchen scales, sockets, and switches.
At a time when Amazon's US site is expanding the types of platforms, merchants are encouraged to enter the platform in the form of third-party sellers. At that time, many Chinese sellers brought in products, including Yang Lin.
Initially, like most Amazon sellers, Yang Lin only sold goods on the platform, profited from supply chain advantages, and did not have a clear brand awareness.
Until she saw the opportunity of cross-border e-commerce, Yang Lin had the idea of establishing her own brand.
In 2012, Yang Lin established the brand Etekcity. With Amazon's support in logistics and customer base, Etekcity sales skyrocketed.
In 2014, cross-border e-commerce went hot. Many traditional retailers, e-commerce giants at home and abroad, and supply chain distributors have begun to lay out their venues, and competitors such as Tmall International, Yang Wharf, and JD Global Shopping in the domestic market have begun to emerge.
Subsequently, Yang Lin began to attack Amazon's European sites, and then continued to enter other Amazon sites.
Currently, Etekcity is available on Amazon's US, Canada, UK, Germany, Spain and Italy sites.
At the same time, the crazy growth of cross-border e-commerce has brought about the evolution of global business competition, the industry has begun to reshuffle, and brand awareness has been awakening and exploding.
In 2016, in addition toTekcity, Yang Lin founded two brands, Levoit and Cosor.
Currently, VeSync has three brands. Among them, Etekcity mainly sells smart small household appliances, health monitoring equipment and other products; Levoit mainly focuses on home environment appliances; while Cosor pays more attention to kitchen appliances and catering utensils.
However, judging from the VeSync prospectus, Etekcity contributed a lot before 2019, with its earnings in 2017 and 2018 accounting for 77.7% and 55.5% of the total earnings, respectively.
Source: VeSync prospectus
However, due to VeSync's strategic focus shifting to products with high gross margins such as air fryers and air purifiers in 2019, Etekcity's overall revenue share has declined, while The proportion of Cosor brand revenue and gross profit has increased significantly, with its revenue accounting for from 4.2% to 25%.
In 2020, the sudden outbreak of the epidemic, under the home economy, consumers spend more time online shopping and demand for household products, which has brought a new round of explosive growth to small household appliances.
In the first half of 2020, the company's revenue was $129 million, an increase of 71.7% over the same period last year; gross profit increased by about 176.2%, and net profit growth rate was 1025%.
VeSync was opportunistic
VeSync's success is more like stepping on the dividends of cross-border e-commerce.
Just as the three squirrels rose through e-commerce that year, the cross-border e-commerce boom brought dividends to the entrants. But after the crazy growth, cross-border e-commerce is still difficult to escape the "law of two and eight".
The so-called law of two eights is that 20% of the people occupy 80% of the wealth society.
This is no exception in the e-commerce industry, and its most prominent performance is that big brands compete for the top 20% of the position to obtain greater revenue, while the remaining 80% of merchants are generally considered to be "hopeless to break through" and eventually become the background board of big brands.
And VeSync has come to this day, becoming the 20%, and Amazon's platform support is inseparable.
From the Perspective of VeSync's sales channels, VeSync relies more on Amazon for sales, with 99% of its revenue coming from the Amazon platform.
In cooperation with Amazon, VeSync mainly has two models: Vendor Central and Seller Central:
The first Vendor Central model, similar to JD.com's own business.
VeSync, as a supplier to Amazon, sells VeSync's products to Amazon at wholesale prices, and amazon then sells products to consumers through its own platform account.
In terms of gross profit from VeSync's sales channels, Vendor Central has brought rapid profit growth to the brand, with its revenue increasing from 8.4% in 2017 to 66%.
Image source: VeSync prospectus and 2020 financial report
It is worth noting that after joining the Amazon Vendor Central model, you can enjoy free annual fees for the store, as well as preferential measures such as logistics and processing fees borne by the platform, which greatly reduces operating costs.
The second type of Seller Central is similar to the Taobao third-party seller model.
VeSync pays Amazon platform commissions, marketing and advertising fees, and then sells the product directly on the Amazon platform at the retail price, and bears the risk of product damage or loss during the delivery process.
But Seller Central often leads to increased sales leading to higher platform commissions, so VeSync relies more on Vendor Central's sales model.
In the Vendor Central mode, there are higher requirements for product quality.
On the one hand, the Vendor Central model, as Amazon's heavyweight supplier system, has a high barrier to entry; on the other hand, it lies in the return agreement between the merchant and the platform, that is, the product needs to be returned and compensated for damage or defects when delivered to Amazon.
In this way, veSync's upstream supply chain plays a larger role.
The VeSync mainly adopts the asset-light operation model, that is, the brand is responsible for design and development, and most of the product production is outsourced. In this process, VeSync has always insisted on supplier diversification, with its largest suppliers accounting for only 19.5% of the purchase volume.
Diversified suppliers are conducive to ensuring the absolute bargaining power of the upstream, and can also select the best partners.
When selecting suppliers, VeSync not only evaluates subcontractors in multiple dimensions including industry experience, expertise and production capacity, but also enters into quality control agreements with subcontractors that include quality control standards, product warranty periods and product inspection standards.
In this way, VeSync quality control provides a guarantee for the brand to focus on research and development, and also makes consumers favored.
From 2017 to 2020, VeSync's revenue increased year by year, to $85 million, $145 million, $172 million and $349 million, respectively, with a compound annual growth rate of 73%.
Encirclement and suppression from domestic and foreign brands
The small household appliance fever is also staged in China.
In the first half of 2020, the retail volume of small home appliances in China was 107.93 million units, an increase of 25% year-on-year; online retail sales were 78 billion yuan, an increase of 12.4% year-on-year.
After experiencing a blowout outbreak, the domestic small household appliance market entered a cooling off period.
On idle fish, many small household appliances with an original price of hundreds of dollars have been resold at low prices after being used several times. At the same time, sales of small household appliances are facing a serious decline.
According to AVC data, the retail sales of small home online markets in July-September 2021 were 1.33 billion yuan, 1.74 billion yuan and 2.14 billion yuan respectively, and the growth rate fell by -11.2%, -3.0% and -8.0% respectively compared with the same period last year.
Image source: Aowei Cloud Network
The calmness of the domestic market and the need to develop foreign markets have allowed many home appliance brands to implement the plan to go overseas.
Taking Xiao bear electrical appliances, a domestic small household appliance brand that goes overseas, as an example, its foreign sales increased from 85.9859 million in 2019 to 209 million in 2020, with sales increasing by 143.21% year-on-year.
As a fragrant feast, foreign markets have attracted many domestic brands to enter the shortlist.
However, if domestic brands enter the market strongly and foreign brands do not budge, how should VeSync handle itself?
The answer may be innovative product categories.
Judging from the prospectus, VeSync has a relatively high proportion of the company's R & D expense ratio in recent years, 2.1%, 2.7%, 4.8% and 3% in 2017-2020, respectively, while the proportion of R & D investment in the small household appliance industry is generally around 3%, or even less than 3%, VeSync R & D investment has been much higher than its peers.
However, due to the low overall technical barriers of the small household appliance industry, the phenomenon of imitation and plagiarism occurs frequently, and the phenomenon of market homogenization is serious. If product innovation alone, then in a short period of time, the product premium will face the risk of being pulled down.
At the same time, VeSync relies too much on Amazon, and its single channel is difficult to have an advantage in the face of the diversified channels of brands such as Xiao Bear Appliances.
In recent years, VeSync has become aware of this, began to build its own website, and cooperated with walmart, Best Buy, Target and other retail chains to launch new channels outside of Amazon.
But in terms of sales, VeSync's main sales channel is still on Amazon. Excessive dependence on Amazon's platform is bound to bring about the problem that brands are difficult to control the initiative.
Looking at the global economy, the biggest sales market is ultimately in China. To this end, in the case of small household appliances in China to seize the opportunity to go to sea, VeSync instead returned to China.
The 2020 earnings report shows that VeSync's earnings in Asia alone increased by 349.7%.
Image source: VeSync's 2020 annual report
However, as a new upstart in the sea, VeSync is still full of spirit in the domestic market, or a question mark.