Have you ever bought anything in the influencer shop kkv?
Author | Han Ling
Editor 丨Li Yiming
Source | Mustang Finance
With the blessing of "Double Twelve" and Christmas and New Year's Day, merchants have launched various discounts and limited products, and consumers' shopping enthusiasm for "buying, buying and buying" has heated up again. In KKV, the internet celebrity shop under the KK Group, the customers found by Xiaohongshu Recommendation are endless even on weekend nights.
Source: Mustang Financial Photography
Born in 2015, the trend retail company has grown rapidly in just 6 years at an average rate of at least one round of financing per year, becoming one of the leading players in the domestic trend play field. Today, the company has submitted a "Prospectus" to the Hong Kong Stock Exchange, which has begun to impact the "first trend of retail shares" in Hong Kong stocks. What kind of "wealth code" does this KK Group, which is committed to building an internet celebrity retail store, have behind it? Is this business easy to do?
Money-burning trend retail business:
3.5 years of revenue of 3.948 billion, loss of 7.008 billion
"Net red collection store" KKV is KK Group for the Z generation of young people to create, the entire store to bright yellow, the display of goods also make full use of color aesthetics, white wall + macaron color matching products, forming a very impactful visual effect, full of INS wind.
With high-value container scenes, a wide variety of imported goods, and a "zero-sense service" that no one disturbs, the store allows consumers to obtain a relaxed and immersive shopping experience. Shopper Wang Meng said, "I read that my favorite blogger recommended to come here to visit the store, and by the way, I took advantage of the fact that I was about to leave work to take a few photos." Through the configuration of "aesthetics + retail", KKV has gradually become a place for Internet celebrities to punch cards.
KK Group is an import trend retail business, founded in 2015, and in recent years, it has gone out of the circle on the new retail track with the consumer demand of young people under Generation Z. Today, KK Group, which has been established for 6 years, has stores in 169 cities across the country, and even opened to Jakarta, the capital of Indonesia, with a total of 680 stores.
At present, KK Group has 4 retail brands, including boutique collection store KKV and KK Pavilion, beauty collection store THE COLORIST (colorist) and tide play collection store X11. Wu Yuening, the founder of the company full of ins style in this store, is actually a post-80s person engaged in the IT industry.
After graduating from university, Wu Yuening worked as a product manager at Yiju.com. Soon after, he quit his job and returned to Dongguan to start his entrepreneurial career. Wu Yuening set his sights on the business model of O2O network chain, and chose the hot import retail field. Then he opened his first KK restaurant in the community. Subsequently, in order to quickly enter the retail market through the community convenience store model, Wu Yuening opened 3 more stores.
But at the end of the year, Wu Yuening found that this convenience store model does not make money but loses money. So he began to think about the location where he could create traffic. So he gave up the community and went to shopping malls.
In April 2015, Wu Yuening established Guangdong Kuaike Electronics Company. Eight months later, the first 2.0 version of the KK Pavilion store integrating catering, retail, book bar and coffee was opened.
In order to make full use of the space and reduce input costs, the KK Pavilion has been upgraded again, eliminating book bars and catering projects, and began to focus on cosmetics, snacks, stationery and other categories that are popular with Generation Z young people.
In May 2019, KK Group launched KK Pavilion's new flagship brand - KKV and the first domestic makeup collection chain brand THE COLORIST colorist; in 2020, with the hot sale of bubble mart and other tide play products, KK Group also launched its own tide play collection brand X11.
The launch of its new brands and "blooming everywhere" stores have made KK Group's operating income continue to grow at a high speed. According to the prospectus, from 2018 to 2020, the operating income of KK Group was 155 million yuan, 464 million yuan and 1.646 billion yuan, respectively. Moreover, in the first half of this year, its operating income was 1.683 billion yuan, an increase of 235% year-on-year.
In addition, the gross profit margin of KK Group is also very advantageous. According to the Research Report of Everbright Securities, the gross profit margin of China's retail industry in Q3 of 2021 is only 24.55%. As of the first half of 2021, KK Group's gross profit margin was 36.2%, nearly half above average. In this regard, KK Group said that the increase in gross profit margin is due to the increase in revenue of its KKV and colorist brands.
Source: Prospectus
But in contrast to the continued growth in revenue, the company's losses are increasing year by year. According to the Prospectus, from 2018 to the first half of 2021, its net losses were 0.79 billion yuan, 515 million yuan, 2.017 billion yuan and 4.397 billion yuan, respectively. In three and a half years, KK Group lost nearly 7 billion yuan.
KK Group explained that the loss was mainly caused by two aspects. First, it was because the company continued to invest in the development of its retail brand portfolio and expand its stores; second, as the company experienced multiple rounds of financing, the preferred shares that the institutions had invested in at that time had appreciated and were recorded on the balance sheet. From 2018 to 2020, KK Group's adjusted net loss was only 0.42 billion yuan, 0.77 billion yuan and 171 million yuan, which has narrowed to 0.38 billion yuan in the first half of this year.
It is expected to open one store every 1.5 days in 2022
So, how does KK Group achieve its expanding layout?
First of all, it is KK Group that relies on big data operations to continuously expand the scale of its stores. KK Group analyzes the changes in the consumption preferences of different target groups through big data analysis, adjusts the selection of its brand stores in a timely manner, and even the products on and off the shelves all depend on the capture of big data.
Moreover, in the selection of supply chain, KK Group also has a set of methods. The company provides a backend of 0 fees for the partners, and shortens the settlement period for the brand, and directly purchases goods from the brand side in the "buyout system" mode, which reduces the procurement cost and can make profits to consumers in commodity pricing. At the same time, this direct procurement model also makes the brand side do not need to send BA to the store, so that consumers can get a relaxed independent shopping experience, which can be said to be the gospel of contemporary social terrorists, and "0-sense shopping" is also deeply liked by young people.
Secondly, it is the location of the shopping center that grasps the traffic password and the creative store decoration, so that its "debut is the peak" has become an internet celebrity store in the mall, which in turn provides traffic protection for the rapid expansion of the store.
Even during the epidemic, KK Group opened hundreds of stores. According to the Prospectus, from May 2020 to December 2020, KK Group successfully opened 354 retail stores, basically opening an average of one store per day.
Moreover, the store pays attention to the appearance value from decoration to display and selection, and the products are uniformly placed according to the color system and type, and the color matching is harmonious and beautiful, which is very "eye-catching". Consumer Xiao He said that he was initially attracted by the store style of the mall KKV. "The bright yellow color is too eye-catching, and there are many kinds of imported wine in the store, and I often come over to 'taste the early'."
Coupled with the gradual rise of the "planting grass" culture of Internet social platforms in recent years, the 4 brands under KK Group have attracted many consumers who come to the store to take photos and punch cards due to their high-value style, which has triggered a large number of users such as Xiaohongshu and Douyin to share their experience of exploring the store.
Source: Screenshot of Little Red Book
In addition, KK Group has also carried out KOL and KOC refinement on platforms such as Dianping and Weibo, doubling the marketing effect.
However, multi-channel delivery has also caused KK Group to generate a lot of marketing expenses. According to the Prospectus, from 2018 to the first half of 2021, KK Group's advertising and marketing expenses were RMB1.4 million, RMB4.3 million, RMB10.3 million, RMB4.2 million and RMB2.5 million, respectively. Its marketing expenses have been on a straight upward trend in recent years, and it did not start to decline until 2020.
KK Group also said it bears a lot of costs in terms of the company's marketing, including advertising on social media platforms and promotional activities to attract more customers. If the marketing and promotion activities are not effective, it will lead to another increase in marketing costs in the future, and even affect the company's performance.
As of June 2021, the number of KKV stores has increased to 281, while the number of THE COLORIST palette stores is 240, the number of X11 stores is 12, and the number of KK pavilion stores is 107. In addition, KK Group also estimated the "store opening plan" in 2022 in the prospectus. KK Group said it expects to open about 270 new stores next year. At this rate, an average of 1.5 days will take you to open a store.
In order to avoid the drawbacks of the new retail industry, the more stores are opened, the greater the loss, KK Group has launched a franchisee mechanism with equity. Franchisees who are minority shareholders will not fully consolidate the overall profit and loss of their stores into the group's statements. Therefore, this cooperation method can minimize the impact of franchisees on the performance of the group.
However, KK Group has not escaped the "curse" of the new retail industry of opening stores while closing stores.
In April this year, because KKV Dongguan Guomao flagship store was forcibly sealed by the mall, it also aroused great concern in the industry at that time. According to insiders, it said that the mall should make business adjustments, so it required KKV to clear the goods and leave the market. After the negotiations were fruitless, there was a chaotic scene of confrontation between the two sides. However, some insiders said that the time Guomao asked KKV to withdraw, mostly because KKV did not achieve the performance and rental contribution promised when signing the contract with the mall for a long time.
It is worth mentioning that there are reports that since June this year, in about 5 months, KK Group has closed 72 stores. Among them, there are 19 KKV stores, 22 THE COLORIST stores, 4 X11 stores and 27 KK pavilion stores.
The total amount of 7 rounds of financing exceeded 4 billion yuan
IPOs are looking for new ways to raise capital
According to public information, since 2016, KK Group has carried out 7 financings, with a total financing amount of more than 4 billion yuan. The most recent round of funding was a Series F led by JD.com in July, which was valued at $3 billion (about 19.1 billion yuan).
In the "Capital Group" behind KK Group, from the PreA round to the F round, Shenzhen Venture Capital, Brilliant Capital, Matrix Venture Capital, Black Algae Capital, eWTP Ecological Fund, Hongtai Fund, Wuyue Capital, CMC Capital, Black Ant Capital, Huangce Capital, Kamet Capital, JD.com and many other well-known institutions and companies are all listed.
Behind the frequent financing, KK Group has been in a state of short supply of money for a long time. Prospectus, from 2018 to the first half of 2021, KK Group's net liabilities were 101 million yuan, 712 million yuan, 2.71 billion yuan and 6.982 billion yuan respectively; its cash and cash equivalents were 0.28 billion yuan, 233 million yuan, 168 million yuan and 1.117 billion yuan, respectively, and the group needed to rely on financing to continuously "transfuse" it.
Source: Prospectus
The impact of KK Group on the Hong Kong stock market is to continue to "transfuse" the company, while also increasing the scale of stores and continuing its expansion path.
With the blessing of financing, KKV and colorists launched by KK Group in 2019 have become rising stars. From the perspective of the group's revenue composition, KKV has become the main profit force of KK Group in less than 3 years since its establishment. From 2019 to the first half of 2021, the revenue of KKV stores was 0.082 billion yuan, 835 million yuan, 222 million yuan and 1.049 billion yuan, accounting for 17.7%, 50.7%, 44.2% and 62.3% of the total revenue in the same period, respectively.
The Colorist colorist brand, 2020 revenue of 440 million yuan, an increase of nearly 21 times year-on-year; and the first half of this year's revenue also reached 461 million yuan, has exceeded the revenue of its brand last year.
In contrast, last year's newly opened tide play collection brand X11, revenue performance is average. As of the end of June 2020 and June 2021, X11's revenue accounted for 0.2% and 2.7% of total revenue for the same period, respectively.
In recent years, due to the fact that some stores are still in the initial stage of investment and the impact of the blockade policies of supermarkets in different cities during the epidemic period, sales in the first half of this year increased by only 1.9% compared with the same period last year.
However, if KK Group wants to maintain the revenue growth of KKV and colorists, it also needs to strengthen cost management, especially the management of marketing expenses. Industry analysts pointed out that KK Group relies on a lot of marketing to drive the growth of performance, and once the marketing stops or the marketing effect is greatly reduced, it may have a significant impact on the company's performance.
In addition, what KK Group is doing is an internet celebrity retail store, although there are shopping malls with large customer flow and ins style storefront blessings, it can easily attract many consumers to shop and take photos, but how to retain consumers for a long time to shop needs to rely on products and prices to speak.
If the partners of KK Group's stores open their own offline flagship stores, such as Perfect Diary, then the minimum pricing of KK Group may be affected, and even the partners no longer need the collection stores of "middlemen" such as KK Group.
Compared with bubble mart that relies on IP to speak, and relying on low-cost mingchuang excellent products, whether KK Group can withstand the test of time and make the fame of internet celebrity stores continue to be tested. Do you know about trendy play merchandise? Let's talk in the message area.