Image source @ Visual China
Wen 丨 Box Lunch Finance (ID: daxiongfan), author 丨 peach
Only 7 years after its establishment, Mingchuang Premium products went public in the United States under the pressure of the epidemic.
On October 15, 2020, Minchuang Premium officially landed on the New York Stock Exchange for $20, issuing 30.4 million ADS (American Depositary Shares) with a market capitalization of $6.992 billion.
The ultimate cost performance + original franchise model has enabled Mingchuang Premium Products to quickly go out of the circle, and has been called "the world's largest private label integrated retailer" by Frost & Sullivan.
However, the record is only in the past 1 year. As of the close of trading on December 31, 2021, the share price of Minchuang Premium was $10.34 per share, which was already cut from the issue price of $20 per share, and the total market value had evaporated by more than $7.6 billion compared with the highest point of $35.21 per share on February 9, 2021.
As early as December 21, 2021, the Board of Directors of Miniso Premium authorized the approval of a share repurchase program that could repurchase up to $200 million of issued Class A common shares or American Depositary Shares, valid until September 21, 2022.
Subsequently, according to Bloomberg and other media reports, Mingchuang Premium is cooperating with Bank of America and UBS to discuss the second listing in Hong Kong, and is expected to raise hundreds of millions of dollars.
In this regard, Mingchuang Premium products said that it would not comment. However, the blow of the stock price and the plunging market value made the "Ye Cannon", which has always dared to speak out, extinguish the fire. Looking at Ye Guofu's interview in 2021, you will find that he has always been proud and confident, and he has become humble and no longer sharp when answering questions from the media.
Another, more intuitive change, is dress. From suit tie leather shoes to T-shirt jogging bottoms sneakers. Behind Ye Guofu's change of tide and youth is the anxiety of Mingchuang Excellent Products catching up with the young market.
In recent years, with the rise of new consumption, capital has returned to the consumer market. Trendy retail brands covering beauty, fashion play, stationery, food and beverage and household necessities are fighting with Mingchuang Premium Products head-on, both from the customer base and product positioning.
However, in the face of many difficulties, the "heroic version" Ye Guofu's strategic plan of "100 billion stores in 100 countries" formulated in 2017 has not changed after it was not achieved in 2019, and the "young soft version" Ye Guofu simply adjusted the strategic period to 2022.
Now that Guangzhou Afu has begun to "recycle" its own rhetoric because of the reform, is the plan formulated 5 years ago still applicable to the current retail market?
After reading this article you will understand:
1. The way to defeat MUJI and occupy the market
2. Does the original expansion strategy still apply?
3. How effective are the new stories in the plight of MINGCHUANG Premium?
Successful "Porcelain Toucher"
MUJI is to Mingchuang, just as Tesla is to Xiaopeng.
When Ye Guofu was struggling with the first entrepreneurial project "Oops" jewelry store being crushed by e-commerce, a brand that simply sells daily necessities, but can sell style, and makes money with high posture and high pricing, gives him hope.
In 2005, MUJI entered the Chinese market, and with its simple Japanese style and exquisite products, it became the first choice for light luxury daily necessities for petty bourgeois youth in first- and second-tier cities, and opened a new format of Japanese boutique groceries in China. After years of market education, the impression of domestic consumers on Japanese products has gradually reached its peak.
At the same time, due to logistics and brand premiums, its price is more than double that of the "daily zone".
This difference gives Minchuang excellent products the opportunity.
"Miniso Premium sells MUJI products at one-third of the price!" In a corporate speech, Ye Guofu mentioned the product pricing planned by Mingchuang Excellent Products, and did not shy away from associating it with MUJI, and his face was proud and his tone was firm.
In many interviews at the beginning of the business, Ye Guofu would emphasize that Mingchuang's excellent products are to let people buy higher quality products at reasonable prices.
In a conversation with the media, he did not say a word and lifted his pants leg to point to his socks, and said proudly: "Mingchuang excellent socks, ten dollars and three pairs!" ”
After MUJI completed the education of consumers in the Chinese boutique grocery market, it copied its price positioning and decoration style in Japan, started Japanese designers, and registered Japanese companies. Afu from Guangzhou, turned into the founder of a Japanese grocery retail brand.
In 2013, Ye Guofu cooperated with young Japanese designer Shunya Miyake to establish Mingchuang Premium Products with the core concept of "extreme cost performance". Through the pricing strategy of the traditional ten-yuan store, combined with the high-style design of MUJI, it competes with MUJI in first- and second-tier cities for territory.
According to the financial report data, Mingchuang Premium achieved revenue of 8.979 billion yuan in fiscal 2020, accounting for 32.7% of overseas revenue in the current period. In fiscal 2020, MUJI's revenue slashed, with a loss of 18.6 billion yen.
Of course, whether it is financial indicators or brand influence, Mingchuang Premium products and MUJI products are still incomparable, but Ye Guofu has also found the trick to differentiate competition: the ultimate cost performance is the foundation, and the asset-light franchise known as the "genius franchise model" is the core.
"The design and construction of the business model is at the heart of Mingchuang, and we identified this opportunity and realized it." For this model, every time Ye Guofu mentions it, it is difficult to hide his pride.
So, what kind of cooperation is The asset-light franchise model that Ye Guofu is proud of?
According to public information, assuming that the lunch box hopes to join Mingchuang Premium, then he needs to find a good business place by himself and bear the daily operating costs such as venue rent and employees.
At the same time, it paid a franchise fee of 80,000 yuan, a security deposit of 750,000 yuan (returned after 3 years), and a decoration advance payment of 560,000 yuan to Mingchuang Premium. In addition, the lunch box will no longer bear other expenses such as the cost of goods and back-end operations, and at the same time, it will not enjoy the right to operate the store.
As for the method of income distribution, when the daily business closes, 38% of the turnover (after tax deduction) of the lunch box store (33% of the food share rate) will be transferred to his account the next day, which is known as the next day sharing system.
That is to say, the lunch box is more like the role of an investor. By charging franchisees, Mingchuang Premium products can get 1.39 million yuan of income per transaction, plus 60% of the daily revenue share, to ensure that they have sufficient cash flow.
At the same time, because the actual costs incurred in the operation process such as rent, amortization, and labor are borne by the lunch box of the franchisee partner of Mingchuang Premium Products, its operating risks will be further transferred.
Compared with the traditional franchise model, the asset-light franchise model with higher controllability has prompted Mingchuang Premium Products to make faster initial incomes than SELF-operated MUJI products, and intensive store openings can also reach more consumers, so as to give priority to seizing the market.
According to the 2021 financial report of Mingchuang Premium, as of September 2021, the company has 4871 MINISO brand retail stores in the world; of which 3035 are Chinese stores and 1836 overseas, accounting for 98% of its franchise stores.
Muji, on the other hand. As its largest overseas market, China has only 275 stores as of 2020, and all of them are directly operated stores. And as the market share is further seized, the number of domestic stores is also slowing down. According to the financial report data, MUJI's stores in the 2012-2016 fiscal year increased by about 40 per year, compared with only 17 net increases in fiscal 2019.
At this point, MUJI's new stores have not moved, and the revenue of the stores that have been opened has decreased year by year, and Mingchuang Excellent Products has successfully taken off with the help of Japanese boutique groceries.
"Genius" is dull
The reason why The Ye Guofu plan is difficult to achieve may be in itself.
"In 2019, Minchuang Premium products will enter 100 countries, open 10,000 stores, and achieve annual sales revenue of 100 billion yuan."
This is in 2017, the founder of Mingchuang Premium, Ye Guofu, set the strategic plan of "100 billion stores in 100 countries". However, the 2019 plan did not come to fruition, and he subsequently adjusted the deadline to 2022.
Now that we are at the starting line of 2022, looking back at the completion of this plan, we find that the problem is not simple.
On August 19, 2021, Minchuang Premium announced its unaudited performance report and full-year financial results for the fourth fiscal quarter ended fiscal 2021. The report shows that throughout fiscal 2021, the total revenue of Mingchuang Premium products was 9.07 billion yuan, an increase of only 1% year-on-year, and after the losses of 290 million yuan and 260 million yuan in fiscal years 2019 and 260 million yuan respectively, the loss of Mingchuang premium products in fiscal 2021 expanded to 1.43 billion yuan.
As Generation Z becomes the main force of retail consumption, socializing, self-pleasing, and personality have become new consumption preferences, and the ultimate cost-effective advantage of Mingchuang Excellent Products is no longer obvious.
Consumers are not attracted, and it becomes difficult to achieve strategic planning.
On December 21, 2021, the official website of Minchuang Premium released the news that the number of its global stores officially exceeded 5,000, which is still double the target of 10,000. In addition, according to the revenue of fiscal year 2021, there is still a gap of 91 billion yuan in its revenue scale. The postponed "due date" seems to need a stronger boost.
In the case of three consecutive years of losses and a slowdown in revenue growth, the pace of expansion of Minchuang Premium Products has not stopped.
According to the 2021 financial report data of Mingchuang Premium, the number of net increase stores in the first three quarters was 72, 162 and 122 respectively. It can be seen that with the weakening of the impact of the epidemic, the speed of opening stores of Mingchuang Excellent Products has quickly returned to normal. At the same time, the number of TOP TOY stores under its tide play brand is also growing. According to the financial report data of the first fiscal quarter of fiscal 2022, TOP TOY's stores have reached 72 stores, including 9 DreamWorks stores and 63 collection stores.
The most intuitive problem brought about by the expansion of franchise is the rise in operating costs and the slowdown in gross profit growth. According to the financial report data, the cost of revenue in the latest quarter recorded 1.55 billion, of which marketing and sales costs rose 18.9% year-on-year to 341 million.
At the same time, the gross profit margin growth rate of Minchuang Excellent Products in the third quarter of 2021 began to slow down, and it has not exceeded 28%, compared with the gross profit margin of 32% at the peak of 2019, there is still a certain gap.
In this case, the expansion continues, perhaps because it cannot be stopped.
As mentioned above, Ye Guofu's original "genius franchise model" can bring stable cash flow to Mingchuang Premium, and this model has also been questioned as a "P2P" model. Under this model, the income of Miniso Premium is closely related to the number of franchisees (i.e., investors). The more franchisees there are, the more abundant the cash flow available to Miniso Premium, and the valuation imagination is further enhanced.
On the other hand, Ye Guofu has repeatedly said in public that the gross profit margin of Mingchuang Excellent Products is only 8%, while its peers are generally around 40%.
Of course, this is not scientific. According to the prospectus, in fiscal 2019 and fiscal 2020, the gross profit margin of Minchuang Premium products was 26.7% and 30.4%, respectively. However, the gross profit margin below the industry average standard still cannot support the daily operation of the company, and the "genius franchise system" not only increases revenue, but also dilutes risk.
Therefore, compared with the retail brands facing C-end consumers, The "genius franchise model" that Ye Guofu is proud of may be more like the B-end financial products. Before going out of the second way in addition to the franchise system of small commodities accidents, Mingchuang Excellent Products can only rely on continued franchise expansion to maintain.
However, the rapid expansion of disorder has brought about a squeeze on the revenue of franchised stores. On the other hand, as Generation Z, who grew up in the Internet era, has become the mainstream group of consumers, convenient online shopping, more representative of the cultural circle, tide play, tide brand has become the current young people's more preferred consumption choice.
Boutique Japanese groceries are no longer the best choice for franchisees, and Ye Guofu's "genius franchise model" is a bit outdated.
Recycle "big words" and tell new stories
"Chinese retail has reached the 3.0 era, returning to the IP and cultural creative industries, today your product innovation, if you only talk about cost performance, you can't move post-90s consumers."
At an entrepreneur symposium at the end of last year, Ye Guofu talked about Chinese retail again, with the same firm tone, waving his left hand from time to time, but the content overturned the cost-effective strategy of Mingchuang.
Abandoning cost performance and embracing C-end new retail is the second way Ye Guofu is exploring.
At the end of October last year, Mingchuang Premium ushered in a long-lost highlight moment. This time, the pusher was a bear.
On October 29, Miniso Premium products joined hands with Disney to launch the "Strawberry Bear Hug" series of co-branded products. And open up online and offline channels, offline to create 12 Strawberry Bear theme stores. Launched the "Take the Strawberry Bear Away" campaign online, successfully established 11 "Strawberry Bear" theme communities, with an average daily interaction volume of 6,000+, and in the Little Red Book, the relevant notes exceeded 700,000.
A series of initiatives have resulted in strawberry bear-related products being sold out during the pre-sale period.
Through the joint IP, the layout is directly oriented to the C-end consumers of the tide play new format, Ye Guofu seems to have really begun to transform into the retail industry.
In December 2020, Minchuang Premium announced its first independently operated tide play brand "TOP TOY", positioned as "Asian Tide Play Collection Store", officially entering the tide play market.
It is understood that under the umbrella of Mingchuang Premium Products, in addition to twinkle, Yoyo and other self-owned IP, more is like Strawberry Bear relying on co-branded IP. At present, Minion Premium has reached strategic cooperation with more than 80 IP copyrights around the world, including Marvel, Disney, Naruto, etc. have launched co-branded IP products with Minchuang Premium.
Of course, tide play is a good choice to improve gross profit margins, but the track is very hot, and the head brand has been deeply cultivated for many years, forming a strong brand appeal. When TOP TOY opened its first store, Bubble Mart had already landed on hong Kong stocks; when TOP TOY's single-quarter revenue exceeded 100 million, Bubble Mart's single-quarter revenue exceeded 1 billion.
At the same time, the non-exclusive joint cooperation means that anyone can launch similar products.
In 2020, Bubble Mart cooperated with many well-known IPs around the world to launch a number of series of blind boxes such as Naruto, Harry Potter, and Disney Princess.
Unlike the joint IP of Mingchuang Premium, according to the 2020 annual report of Bubble Mart, the proportion of non-exclusive IP in sales increased from 159 million yuan to 444 million yuan, accounting for 17.7% of revenue from 9.5% in 2019 to 17.7% in 2020.
The "ability to carry goods" under Bubble Mart's own IP is the main pillar of its revenue. In the revenue of Bubble Mart in 2020, the revenue of independent IP products increased by 54.3% year-on-year, accounting for 85%.
Head brands are entrenched, lack of their own IP, joint models are difficult to form product barriers, in the rapid development of the industry to enter, the new business of Mingchuang excellent products is not competitive enough.
The imagination of the tide play is still exploring, and Ye Guofu has set his sights on new channels.
Contrary to the attitude of Ma Yun when he first called the board, in early 2021, Mingchuang Premium launched the "X-strategy", that is, to develop new retail and achieve diversified operations. After a year of layout, Mingchuang Premium products have now entered many online platforms such as Douyin, WeChat, Pinduoduo, Tmall, and JD.com.
According to the financial report data, in the third quarter of 2021, the company's online channels (e-commerce + O2O) contributed more than 10% in revenue. Among them, the e-commerce business contributed 190 million yuan, an increase of 58% year-on-year; the O2O business contributed 0.9 billion yuan, an increase of 126% year-on-year.
It can be seen that the "X-strategy" of Mingchuang excellent products is quite effective. But since the new retail concept has developed since 2016, perhaps only the name is new. Mingchuang Excellent Products from the offline retail industry to the Development of the Internet Industry, starting nearly 6 years late, the distance of which is not easily made up by relying on improving the industrial chain and intensive offline stores.
According to the "Generation Z Fashion Consumption Insight Report" released by Huayang Lianzhong, the consumption concept of Generation Z is very casual and free, and the characteristics of liking the new and tired of the old are more obvious.
Whether it is entering a new track or laying out new channels, the business obsession of Mingchuang Excellent Products has changed to directly touching consumers and not being forgotten by young people. However, for now, this is not as simple as Ye Guofu changing his suit into a T-shirt.
Reference Articles:
1. "Global New Retail Leader, Excellent Target in the Post-epidemic Era", Guoyuan International
2. "Comparing Japanese Enterprises and Exploring the Development Potential of Mingchuang Excellent Products", Orient Securities
3. "Mingchuang Premium Products Enter the Tide of Play, Can Wild Hope's "Strawberry Bear" make Hillhouse turn back? Node Finance
4. "The market value plummeted by 70%, the thousand stores plan to cut the waist, ten yuan store is still a good business?" " new consumption
5. "The Metamorphosis of Afu: The Turning Moment of The Famous Creation Of Excellence Ye Guofu", late post