Huge investment in the acquisition of Korean brands, Antarctic e-commerce is trapped in "OEM": net profit fell sharply, the stock price plummeted by 50% this year

Antarctic e-commerce, which earned 1.3 billion yuan a year for "selling trademarks" two years ago, has now begun to buy overseas trademarks heavily.

On the evening of December 26, Antarctic E-commerce announced that it intends to acquire the trademark ownership of TBH GLOBAL CO., LTD (hereinafter referred to as "TBH") held in Chinese mainland and Hong Kong, China for its own funds of 330 million yuan, and acquire 100% of the equity of Baijiahao (Shanghai) Fashion Co., Ltd., a wholly-owned subsidiary of TBH, for 180 million yuan.

Before the heavy purchase of trademarks, Antarctic E-commerce has repeatedly introduced other brands through acquisitions, cooperation and new establishments. One background is that the growth rate of Antarctic e-commerce revenue is slowing down year by year, and the net profit of the brand licensing business that has supported its profits has also been declining.

When Antarctic e-commerce can no longer rely on selling hangtags to "lie and earn", can the former hangtag king find a new way out by acquiring overseas brands?

Is "100 good" worth it?

According to the "China Times" reporter, TBH is a South Korean fast fashion company engaged in clothing manufacturing. Its wholly-owned subsidiary, Baijiahao, was established in Shanghai in 2004, and in the same year, Baijiahao entered the Chinese market by opening the first BASIC HOUSE women's wear brand store. However, after entering the Chinese market for more than ten years, the popularity of Baijia is still limited.

In this transaction, Antarctic E-commerce acquired a total of 78 TBH trademarks, including the well-known Korean women's fashion brands BASIC HOUSE, Mind Bridge and JUCY JUDY, which were established around 2000.

For the purpose of the acquisition, Antarctic E-commerce said that the value of well-known personality brands has been reflected in the rise of content e-commerce, and the acquisition of such brands can build a company brand system. At the same time, Antarctic E-commerce said that it has shortcomings in research and development, production and quality management, and Baihao can make up for its own shortcomings in the above aspects, preparing for the company's future integrated control of production and marketing research.

Zhang Yi, CEO of Ai Media Consulting, analyzed the "China Times" reporter that the main purpose of the Antarctic e-commerce layout of overseas brands is to hope to enhance their brand height through overseas brands, and to carry out a major upgrade in the supply chain and quality.

However, from the current situation, it is not easy for Antarctic e-commerce to improve product quality through Baijiahao.

On the one hand, the number of suppliers and distributors cooperating with Antarctic e-commerce is very large. In 2020, there were 1612 Antarctic e-commerce cooperative suppliers and 6079 cooperative dealers. Some insiders believe that the wide range of authorization makes it difficult for Antarctic e-commerce to control dealers and suppliers, and it is also difficult to monitor quality assurance. On the other hand, Baijiahao itself has also been criticized for product quality problems. In 2021 alone, Baijiahao was punished three times by the local market supervision and administration bureau for problems such as unqualified products. Since its establishment, the number of administrative penalties has reached 11 times.

Not only the product quality, baijiahao's own performance is not optimistic. In the first three quarters of this year, the total liabilities of Baijiahao reached 1.239 billion yuan, and the net assets were -338 million yuan. In fact, in 2019, it was reported that TBH was in financial distress and planned to sell 100 homes for $200 million to alleviate debt pressure.

Pan Helin, executive dean of the Digital Economy Research Institute of Zhongnan University of Economics and Law, analyzed the "China Times" reporter that although the current domestic reputation of Baijiahao is not good, there are still a large part of the current domestic users who have a certain preference for Korean fashion, and Korean brands also have merit in style design.

On December 27, a reporter from China Times sent an email to Antarctic E-commerce on the acquisition of brands, future brand building and other related situations, but as of press time, there has been no reply.

Net profit fell sharply in stock price volatility

Founded in 1997, Antarctica started with warm underwear, and in 2008, Antarctica proposed a business model of "brand licensing", after which Antarctica closed their own factories and specialized in OEM business. With its high popularity, the Antarctic people's "selling hangtags" business has brought high returns to it, and its products have also extended from men's and women's underwear to include clothing, mother and baby, bedding, home appliances and other categories. In 2015, Antarctica was listed on a backdoor listing and renamed "Antarctic E-commerce".

Some insiders believe that enterprises only do a single hanging tag business, although it can make short-term profits, but the scale is difficult to maintain rapid expansion, future performance growth will be limited; in addition, the difficulty of quality control is also easy to cause harm to their own brands, and the intensification of online competition will also force enterprises to change.

Antarctic e-commerce may also be aware of the risks of a single hang tag business, in 2017, Antarctic e-commerce acquired time interconnection, layout of Internet marketing business.

At present, the main business of Antarctic E-commerce includes the "brand licensing related business" operated by the Antarctic E-commerce Headquarters and the "Internet advertising and marketing business" operated through the subsidiary Time Internet. As of the end of the third quarter of this year, the revenue of Antarctic e-commerce brand licensing-related business accounted for about 18%, and the latter business revenue accounted for 81.8%.

Although the revenue of Time Interconnection accounts for a relatively high proportion, the brand licensing-related business with a gross profit margin of more than 90% is still the main source of profit for Antarctic e-commerce. In the first half of 2021, the net profit of brand licensing-related business accounted for nearly 80% of the company's net profit.

However, the acquisition of Time Internet by Antarctic E-commerce has not stopped its performance from declining.

The "China Times" reporter combed and found that from 2015 to 2018, the growth rate of Antarctic e-commerce revenue remained above 33%, and the growth rate of net profit was above 65%. However, in 2019, the revenue and net profit growth rate of Antarctic e-commerce was almost waist-deep compared with the past, with an increase of 16.52% and 36% respectively. In 2020, its revenue increased by only 6.78% year-on-year, and its net profit fell by 1.5% year-on-year. In the first three quarters of this year, its revenue growth rate was only 0.08% year-on-year, and its net profit fell sharply by 44.15%. For the decline in net profit, Antarctic E-commerce said that it was mainly due to the decline in revenue from the brand licensing service business of Alibaba channel customers. According to the financial report, in the first three quarters of 2021, in the statistical results of Antarctic e-commerce on various channels, the Ali platform accounted for nearly 46% of its overall GMV.

In addition, the profit margin of the headquarters of Antarctic E-commerce's main brand licensing business is declining year by year. From 2019 to the first half of 2021, the net profit margin of the Antarctic E-commerce Headquarters was 78.6%, 76.7% and 59.6%, respectively.

As the traffic dividend of the Amoy e-commerce platform relied on by Antarctic e-commerce fades, the GMV growth rate of Antarctic e-commerce has also declined year by year. From 2019 to the first three quarters of 2021, the year-on-year growth rate of Antarctic e-commerce GMV was 48.9%, 31.6% and 22.92%, respectively. In the first three quarters of this year, the GMV of the Ali platform, the most important channel of Antarctic e-commerce, decreased by 5.35% year-on-year.

Cheng Weixiong, a textile and apparel management expert, analyzed the "China Times" reporter and believed that the growth of antarctic e-commerce GMV led by Ali channels was weak, due to the intensification of competition between platforms, the intensification of online competition for brands, the intensification of competition in the new channel vibrato, the intensification of competition for Kuaishou, as well as community marketing and private domain marketing.

Corresponding to the weak performance, the stock price of Antarctic e-commerce has also ended the previous upward momentum. In July 2020, the share price of 24 yuan of Antarctic E-commerce reached an all-time high, and since then it has begun to fluctuate and fall. Since the beginning of this year, the stock price of Antarctic e-commerce has shrunk sharply, with a cumulative decline of nearly 50% year-to-date. As of December 28, the share price of 6.86 yuan in the Antarctic e-commerce intraday fell by more than 70%.

The dilemma of the "hang tag business"

The "hang tag business" encountered the ceiling of the Antarctic e-commerce company trying to expand the overseas market, expand the brand matrix out of the predicament, and find new profit growth points.

But the reality is not as beautiful as Antarctic e-commerce describes, and its brand route is not going well. Previously, Antarctic E-commerce has successively acquired cardile and classic teddy brands, and has carried out brand cooperation with Parlando, PONY and Muqimia. But at present, the main contribution to the Antarctic e-commerce GMV is the Antarctic brand. In 2020, among the 40.2 billion GMVs of Antarctic e-commerce, Antarctic brands accounted for more than 90%, Cardile accounted for 8.39%, and classic teddies accounted for less than 1%.

Before the purchase of the Korean women's wear trademark, in July this year, Antarctic E-commerce and international fashion retail brand C&A established a joint venture, and antarctic e-commerce is 60% controlled, Antarctic e-commerce is mainly responsible for research and development, manufacturing, management and operation.

However, half a year has passed since the announcement, and the C&A brand, which was intended to launch in October, has not made any new progress so far. On December 28, a reporter from The China Times searched on Tmall, JD.com and other e-commerce platforms and found that the brand store was still not online.

In addition to expanding the brand, the Cross-border E-commerce business of Antarctica, which is considered to be benchmarking SHEIN, has also been carried out for eight months, and it is still not a big splash.

In May this year, Antarctic E-commerce announced for the first time at the investor conference that It is a new cross-border e-commerce project, Fommos. Antarctic e-commerce said, "Our digital future will be stronger, because we cross-border is to build our own brand, Fommos brand is to meet, is expected to launch a cross-border platform around July." On December 28, the reporter searched and found that the cross-border website only had two categories of men's clothing and women's clothing, of which women's clothing only had about 20 T-shirts on the line.

Pan and Lin believe that as far as the current situation is concerned, the acquisition of overseas brands by Antarctic e-commerce cannot make it jump out of the plight of the hangtag business, but may strengthen the attributes of the Antarctic e-commerce hangtag business. He told the "China Times" reporter: "At present, antarctic e-commerce itself does not increase profits, antarctic brand dividend tends to decline, at this time the introduction of new brands, is to continue the brand dividend, the use of new brands and their own inherent OEM model, the continuation of the brand myth of Antarctic e-commerce." ”

Cheng Weixiong told the "China Times" reporter that the multi-brand matrix should have a supplementary effect on the online authorization model of Antarctic e-commerce, but it is still difficult to do the Antarctic e-commerce private brand. "In today's stage of declining traffic and diversification, it is very difficult for Antarctic e-commerce to try to acquire overseas brands to a new level, unless Antarctic e-commerce moves from online to offline, from domestic operations to cross-border e-commerce, but this is a great challenge for Antarctic e-commerce."

Responsible Editor: Huang Xingli Editor-in-Chief: Han Feng