Among the pharmaceutical, electronics and energy companies lined up on the Beijing Stock Exchange, Zhuhai Yijia Technology Co., Ltd. (hereinafter referred to as "Yijia") stands out from the crowd - this is a company that makes cosmetics. Moreover, unlike the existing A-share listed cosmetics companies that mainly focus on daily chemical lines, Part of Isjia's business is dedicated to beauty salon products, that is, "professional line" products, and female readers are smeared on their faces in beauty salons with water emulsion essence, which may come from Isjia.
As we all know, in the past few years, beauty salons are a profiteering industry. So, what is the price of the "skin care kit" and "original liquid essence" that the beauty salon sells to you for thousands of dollars? When it is difficult to do beauty salons that are becoming more and more difficult to do under the double impact of medical beauty and the epidemic, it is difficult to provide more income for Isjia, where will the company's transformation go?
70% gross margin, but the business is not doing well
The main business income of Isjia can be divided into skin care products and washing products according to product classification, and each category can be divided into independent brands and large customer customization. Large customer customization is ODM, and the independent brand of skin care products is the "professional line" products, which are sold to beauty salons around the world through distributors. From 2018 to 2020, the main business income of Isjia was 149 million yuan, 186 million yuan and 1.656 billion yuan respectively, of which the income of self-brand skin care products was 44.2134 million yuan, 39.0321 million yuan and 23.0812 million yuan, accounting for 29.58%, 20.97% and 13.93% of the main business income, respectively, and the absolute amount and proportion showed a sharp downward trend.
Isjia's main business composition Source: Prospectus
However, from the perspective of gross profit margin, the professional line products supplied to beauty salons are the most profitable business of Isjia. From 2018 to 2020, the gross profit margin of Isjia's professional line skin care products was 74.69%, 70.20% and 69.55% respectively, and the gross profit margin remained around 70% year by year; the washing and care products of independent brands were mainly "Zhen Mu" series, through online direct sales, the gross profit margin was also around 70%, but the proportion of revenue was below 10%. And the peer owner played the daily chemical line of the Polaria (603605. SH), Water Sheep Shares (300740. SZ), Marumei Shares (603983. SH), the gross profit margin of the independent brand business is about 50% to 60%.
Comparison of the gross profit margin of Isjia's own brand with comparable companies in the same industry Source: Prospectus
The company said that from the perspective of product structure, the professional line products in the independent brand products contribute most of the revenue, its added value is relatively high, the marketing scene is beauty salons, the end consumer pays more attention to service, environment and experience, and is relatively insensitive to price; other comparable companies in the same industry focus on daily chemical line products, mainly using media means for publicity and promotion, online channel sales account for a relatively high proportion, usually in the formulation of price strategies to the volume, gross profit margin is lower than offline channels.
That is to say, professional line product manufacturers can first cut a leek of the beauty salon, anyway, the beauty salon will transfer the price to the end consumer by means of high added value such as service, environment, experience and so on. The company also said in the reply to the inquiry letter that professional line products are generally sold offline in the mainland, and it is difficult to obtain the price of similar products of professional line products through public information - the use of this "information asymmetry". After all, daily chemical line products are sold online, and there are many channels, which is convenient for consumers to shop around. A beautician who has been in the industry for many years also expressed a similar view to the financial reporter of silver persimmon: "In the past few years, beauty salons sold products very well, and the facial cleanser that entered the tens of dollars sold hundreds of dollars, anyway, the outside is not sold, and customers do not know how much money others sell." ”
So, you spend hundreds of thousands of dollars to buy back products from the beauty salon, the price of the beauty salon, how much is it? From the reply to the inquiry letter from Isjia to the Listing Committee of the Beijing Stock Exchange, it can be seen that the company's stock solution/essence products have been sold at a unit price of 70 yuan to 90 yuan in recent years, and the unit cost is 13 yuan to 16 yuan, with a gross profit margin of up to 80%; the cheapest toner, in recent years, the unit price is about 26 yuan to 31 yuan, and the unit cost is less than 10 yuan. Can you female readers recall how much it cost you or your family to buy a product from a beautician the last time?
Price, cost and gross margin of Iska Professional Line products Source: Reply to inquiry letter
Although professional line products make money, it can also be seen from the proportion of Ishjia's revenue that this business is getting worse and worse - because the life of the beauty salon is getting worse and worse.
"Now many people have gone to medical beauty, how fast medical beauty is, immediate results." The above-mentioned beautician said that in recent years, beauty salons have indeed been more difficult to do than before. "I used to think about opening my own shop, but now I give me money to open it, and I don't go, so the old store can survive by relying on regular customers." When the financial reporter of silver persimmon asked "is it easy to do now or a few years ago", the beautician immediately said: "It must have been good to do in previous years, and the guests were lined up." ”
Isjia mentioned in the reply to the inquiry letter that the revenue and proportion of professional line products have declined, mainly for two reasons: one is that the beauty salon channel has been seriously affected by the epidemic since 2020, and the flow of beauty salons has dropped significantly; second, the beauty salon has been affected by the impact of medical beauty and e-commerce, the user's consumption habits have changed, and the industry as a whole has been affected.
The company's response to this is that while adopting a maintenance strategy for professional line products, it tests the water line's own brand washing product "Zhen Mu", on the other hand, it increases the promotion and investment in the customization business of large customers, and cooperates with small and medium-sized brands and emerging channels. At present, the company's ODM business customers include Mingchuang Premium, Royal Nifang, Guerlain Beauty, Afu, Plant Doctor and so on.
Are large customers suspected of pyramid schemes?
When it comes to the ODM business, Isjia's ODM customers are not too worried.
In the first half of 2021, the company's fifth largest customer Nanjing Yongzhichun Trading Co., Ltd. (hereinafter referred to as "Yongzhichun"), was rumored to use its Yongchun Premium APP to use a seven-level distribution system to sell a product called "specialized planting and healthy hair nourishment set", while promoting that the product has multiple effects such as "nourishing hair follicles, healthy hair, hair growth, anti-shedding, repairing, dandruff removal, moisturizing", etc., the bonus system is divided into seven levels, 299 yuan to buy a single can be upgraded to VIP members, and then directly push five people or their own repurchase five singles can be upgraded to agents, Every time a "subordinate" is developed, there will be a direct push award, a new performance award, a see point award, a level award and other bonuses related to "pulling people's heads".
According to Aiqicha, Yongzhichun was established in December 2020 and was deregistered in November 2021, and the parent company is Shandong Yongchuntang Health Industry Co., Ltd., which belongs to Shandong Yongchuntang Group. According to the direct selling industry management platform of the Ministry of Commerce, Shandong Yongchuntang Group has obtained a direct selling license in 2015. However, according to relevant laws and regulations, the "pulling people's heads" at the third level and above has been suspected of pyramid schemes. Article 78 of the Provisions on Standards for filing and Prosecuting Criminal Cases under the Jurisdiction of Public Security Organs (II) issued by the Supreme People's Procuratorate and the Ministry of Public Security in 2010 stipulates: "Organize and lead participants to obtain membership by paying fees or purchasing goods or services in the name of business activities such as selling goods and providing services, and form levels in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration or rebates, inducing and coercing participants to continue to develop others to participate, and fraudulently obtaining property, Where there are more than 30 people suspected of organizing or leading pyramid scheme activities in pyramid scheme activities that disrupt economic and social order and have a level of three or more, the organizers and leaders shall be prosecuted by filing a case. At present, Isjia has stopped cooperating with Yongzhichun.
Another major customer, Zhejiang Gongdian Technology Co., Ltd., is also caught in the cloud of "pyramid schemes". Gongzhan Technology is the second largest customer of Isjia in 2020, with a sales amount of 11.2293 million yuan, accounting for 6.74% of the current revenue. According to Aiqicha, the actual controller of Gongdian Technology is Shen Danping, who is also one of the founders of Zhejiang Gejia Network Technology Co., Ltd. (hereinafter referred to as "Gejia Network"), and has created a number of "social e-commerce" platforms such as Global Catcher, Zebra Members and Xirou with partner Li Xiao. The first global catcher WeChat public account was banned at the end of July 2017, because of "suspected pyramid schemes", new users can become "catcher members" and "global catcher shop owners" after purchasing 399 yuan of products, can get a certain proportion of the subordinate sales commission, and each development of a member, you can also directly get 100 yuan reward; after the sales amount reaches 10,000 yuan, you can upgrade to a manager-level member, you can eat two generations of subordinate shares; up to 300,000 yuan, you can upgrade to an excellent service provider, You can get a share of the sales of everyone on the team. After the global catcher was blocked, gejia network launched a "zebra member", the operation is the same as the global catcher. In June 2020, the Hanshou County People's Court of Hunan Province issued an administrative ruling showing that the Hanshou County Market Supervision and Administration Bureau, in the investigation and handling of the suspected pyramid scheme case of Hangzhou Xunlan, Hangzhou Kuli and Guangzhou Yunting, a subsidiary of Gejia Network, submitted an application to the Hanshou County People's Court on April 23, 2020, requesting that the funds of the above-mentioned companies in the settlement account opened by Alipay Company be frozen for a total of 30 million yuan. After review, the Hanshou County People's Court found that the application of the Hanshou County Market Supervision and Administration Bureau complied with the provisions of the law and approved the freezing of the funds of the above-mentioned company in the settlement account opened by Alipay for 30 million yuan.
It can be seen from the establishment time of Xirou in May 2020 that almost at the same time that Zebra members were investigated and punished, Gejia Network launched this "plan". From the APP point of view, Xirou's membership system is divided into three levels: super user (SSV), senior partner (SSP) and co-founder (SCO), and the purchase of products can get 15% off, 65% off and 55% off respectively. New users can upgrade to super users by purchasing 99 yuan of single products, and enjoy a 15% discount on shopping; if they want to make money by selling goods in micro-businesses, they need to spend 3,000 to 5,000 yuan to buy a "helicopter package" to become a second-level "senior partner", and they can also choose to buy a certain amount of products. After becoming a "senior partner", selling the goods is equivalent to taking the original price of the goods at a 5% discount, and you can earn 35% profit.
Xirou membership system Source: Xirou APP
On the surface, the Xirou membership system is a three-level distribution model micro-business bank that "discounts and then sells goods to earn the difference", but from the perspective of comprehensive information, the situation of "pulling people's heads" and enjoying the share of subordinate performance still exists, and the internal level is not more than three levels. Weibo search for "Xirou", the number of fans of multiple associated users exceeded 100,000, but the re-evaluation likes of each Weibo were basically only single digits. And these Xirou "big V" Microblogs have invariably mentioned the "pipeline income" many times, that is, the early development of multiple agents, as long as the subordinate agents continue to sell products, the income of the superior can be continuous. And, above the co-founders (COOs), there's a hierarchy called "CHIEF Executive Officers (SEOs)."
Xirou "pipeline revenue" and CEO (SEO) Image source: Weibo
Isjia produces OEM toiletries for Xirou and the Gejia network behind it, including shower gel, shampoo, conditioner, etc., which belong to "ASIA YOUNG", "AEP" and other brands.
Beauty salon products are difficult to do, and customers of OEM products are also difficult to expand to reliable. Isjia's trip to the North Stock Exchange, why is it so difficult?