Deep Sound Original · The author | Xiao Humble
From the mobile phone peripherals such as charging treasures and headphones, to household hardware such as plug-in panels, smart lamps, air purifiers, sweeping robots, etc., the more and more products enter the market with the "Xiaomi" or "Mijia" brand, and those companies that oem for Xiaomi or Mijia brands have a common name: Xiaomi ecological chain enterprises.
Relying on Xiaomi's supply chain resources, platform traffic, and brand endorsement, Xiaomi ecological chain enterprises have stepped out of the growth curve that is difficult for conventional manufacturing companies to replicate, and there is such a statement in the Xiaomi Ecological Chain Battlefield Notes: "Xiaomi is like an aircraft carrier for ecological chain enterprises, it is the core ship of a fleet, and it also provides supplies for other ships, provides air cover, and commands operations at the same time." ”
This is undoubtedly a large fleet, but as the ships in the fleet grow, each side has its own ideas.
Some Xiaomi ecological chain enterprises are not willing to just oem for Xiaomi, they try to get more independent pricing power, open up profit margins, and hope to let the capital market see that the company's development can no longer rely on "big brother" Xiaomi.
The Imperative "De-Milletization"
At present, the companies in the Xiaomi ecological chain that have landed in the secondary market have Huami Technology, Yunmi Technology, Stone Technology, No. 9 Company, etc., and counting Sushi Technology, Yilai Intelligent, Fun Sleep Technology, etc., which have submitted prospectuses, there are nearly 10 Xiaomi ecological chain enterprises that have entered the public eye.
After these "small millets" began to take shape, they all began to stand on their own to varying degrees.
In July 2014, Xiaomi and Huami jointly launched the 1st generation of The Xiaomi Bracelet. In 2015, Huami Technology released its own brand Amazfit, and in 2018, it acquired the core assets of the smart wearable brand Zepp. Huami Technology's third-quarter 2021 financial report shows that its own brand shipments increased by 89% year-on-year, and the shipments of wearable products such as Xiaomi bracelets for OEM were down 45.3% year-on-year. In 2017, Stone Technology launched its first private brand product - Stone Sweeping Robot. From 2017 to 2020, the proportion of revenue received by Stone Technology for Xiaomi's foundry business has shrunk from more than 90% to less than 10%. The ninth company that landed on the science and technology innovation board in 2020 clearly mentioned in the prospectus that "the company does not belong to the typical ecological chain enterprise defined by Xiaomi." ”
According to media reports, in the second half of 2014, after the hot sale of Xiaomi bracelets, Huami Technology quickly established a Beijing company, supplemented the entire media PR team and exhibition marketing team, and expanded the Beijing company to more than 100 people in more than a year.
Huang Wang, the founder of Huami Technology, once said in an interview with Sina Technology: "Although it seems that you are very strong, there are many things that Xiaomi helps you. Channels, PR, and even supply chains are all for you by Xiaomi. As a startup, shouldn't you rush to make up for it at the best of times? That's when people want to join you the most. ”
There are similar worries that are not only Huami. Xiaomi's resource support is a "first-stage rocket" to help startups start quickly, but it also makes the company suffer from "millet dependence". For example, in 2015 and 2016, the revenue contributed by Xiaomi products to Huami accounted for 97.1% and 92.1% of Huami's current revenue.
In addition, as a "big brother", Xiaomi will not only be obsessed with a "brother company". In the same category, Xiaomi can work with multiple enterprises at the same time, for example, in the field of sweeping robots, Xiaomi has introduced Stone Technology, Shenzhen Shanchuan, Chaomi Technology, Yun Mi Technology, etc.
According to the expression of "Xiaomi Ecological Chain Battlefield Notes", Xiaomi does not want the ecological chain to become a "greenhouse", but hopes to create a delicate competitive relationship, "the way to draw the territory is not right".
It seems to be born with a "golden key", but the sense of crisis has never been far away from xiaomi ecological chain enterprises.
In addition to development and competition concerns, profit and brand issues are also the concerns of ecological chain enterprises. Xiaomi's starting tool is "cost performance", and this strategic tradition has been continued in the Xiaomi ecological chain. The first plug board, bracelet and sweeping robot products of Qingmi Technology, Huami Technology and Stone Technology are priced much lower than those of their peers.
The extreme cost performance is eye-catching, but it also makes it difficult for ecological chain enterprises to open up profit margins. If you want to do high profits, Xiaomi ecological chain enterprises need to get rid of the "cost performance" restrictions, and at the same time, they also need to make products have brand premiums.
A few simple examples can see the difference between xiaomi OEM and doing its own brand: the price of the first generation of xiaomi bracelet is 79 yuan, while the first bracelet product of Huami Technology's own brand Amazfit is priced at 299 yuan; the millet custom brand "Mijia intelligent sweeping robot" launched by Stone Technology in 2016 is priced at 1699 yuan, followed by the "stone" intelligent sweeping robot launched in the following year, and the pricing rose to 2499 yuan.
According to the prospectus of Stone Technology, in the first half of 2019, the gross profit margins of Mijia sweeping robot, small tile sweeping robot and stone sweeping robot were 13.91%, 28.03% and 46.18%, respectively.
Source: Stone Technology Prospectus
Private label means pricing power, but also means the release of the company's profit margins. Only doing ODM lacks imagination space, and doing a good job of its own brand has become the only way for all ecological chain enterprises.
Difficult "de-milletization"
The reason is easy to understand, but in the matter of self-reliance portal, the performance of each family is very different: some have successfully "de-milletized", some have difficulty getting rid of their dependence on millet on the way to independence, and some are still highly dependent on millet.
Taking Stone Technology, which is regarded by the outside world as a model of "de-milletization", as an example, in 2016, the revenue of Stone Technology basically came from Xiaomi brand products, but according to the 2021 interim report of Stone Technology, from January to June 2021, the company achieved revenue of 2.35 billion yuan, an increase of 32.19% year-on-year, of which its own brand achieved sales revenue of 2.2 billion yuan, and the proportion of revenue increased to 94.80%.
The gross profit of private label products is higher, and the profit performance of Stone Technology is accompanied by the growth of its sales share. According to the interim report, stone technology's net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 574 million yuan, an increase of 32.2% over the same period last year.
In order to sell its own brand products, Stone Technology has gradually reduced the proportion of sales on the Xiaomi platform in the past few years, and increased the expansion of overseas channels, and the road to independence has been stepped out. Chang Jing, chairman of Stone Technology, previously said in an interview with the media that the so-called "de-milletization" is the appearance, which is essentially to survive through millet in advance, and then naturally seek independent development.
Compared with Stone Technology, Huami Technology's road to "de-milletization" still faces no small challenge.
According to the huami technology prospectus, in 2015 and 2016, the revenue contributed by xiaomi products to huami technology was 870 million yuan and 1.434 billion yuan respectively, accounting for 97.1% and 92.1% of huami technology's revenue in the same period, showing a downward trend year by year. At the same time, Huami's gross profit margin also increased from 17.74% in 2016 to 25.25% in 2019.
According to Huami Technology's third quarter 2021 financial report, the company achieved revenue of 1.6 billion yuan in the quarter, down 28.1% year-on-year, but the shipments of its own brands Amazfit and Zepp achieved a substantial increase of 89% year-on-year, and the revenue increased by 38% year-on-year.
The shipment volume of independent brands has almost doubled, but the revenue has shown a downward trend. The implicit message of one rise and one drop is that even if the independent brand and overseas market expansion have achieved results, the performance of Huami Technology still relies on Xiaomi brand products.
On the conference call, Huang Wang also admitted that the main reason for the decline in revenue was caused by the shipment of wearable products such as Xiaomi bracelets, which were founded by Huami Technology, which fell by 45.3% year-on-year.
Both Stone Technology and Huami Technology have been listed. In contrast, companies such as Fun Sleep Technology, Yilai Intelligence, and Sushi Technology, which have not yet been listed, are still in the stage of relying on "big brother" Millet:
According to the prospectus, in 2020, the revenue obtained by Fun Sleep Technology in the Xiaomi series platform, Ali series platform and Jingdong series platform was 326 million, 46.8222 million and 72.5672 million, accounting for 68.2%, 9.79% and 15.17% of the current revenue, respectively; from 2017 to the first half of 2020, the total related sales of Yilai Intelligent from Xiaomi accounted for 58.54%, 49.61%, 51.62% and 54.92% of the company's total revenue. In the revenue composition of Sushi Technology, the revenue of Mijia brand products is significantly higher than that of Sushi's own brand. In the first half of 2021, among oral care products, mijia brand electric toothbrushes and toothbrushes contributed 58.86% of revenue; among hair care products, mijia brand electric shavers contributed 63.26% of revenue.
Judging from the feedback from the capital market, whether it can get out of the benign growth curve without relying on millet and relying on its own brand has become an important factor affecting the performance of the company's stock price.
Taking the stock price trend of Stone Technology and Huami Technology as an example, the same is the force of its own brand, Stone Technology has successfully pushed up the company's revenue and profit performance by relying on its own brand, and its net profit margin has continued to increase from 5.99% in 2017 to 30% in 2020. In the first half and third quarter of 2021, Stone Technology's net profit margin was 27.8% and 24.6%, respectively.
In contrast, Huami Technology's own brand is still on the way. According to its financial report for the first quarter of 2021, Huami Technology achieved its first quarterly net loss of 40.427 million yuan in the quarter, which is closely related to its vigorous investment in its own brand. After the release of the earnings report, Huami Technology's stock price closed down 13.25% on the same day.
Stone Technology, Huami Technology stock price trend Source: Futu
The road to independence of ecological chain enterprises is full of difficulties, and Xiaomi, as a "big brother", has also come to a new crossroads.
Compared with the ideal model of millet as a "core ship" in the early years to provide supplies for other ships, today's millet ecological chain enterprises are somewhat "differentiated".
Back to the starting point of the story, Xiaomi, which began to invest in the ecological chain from 2013, on the one hand, saw considerable room for improvement in the traditional manufacturing field, and on the other hand, because it saw the huge prospects of the IoT field. For Xiaomi, overall control is not the goal, and joining hands with many "brother enterprises" to embrace the era of the Internet of Things is the essence of the layout for many years.
According to media reports, Lei Jun once said at the "Xiaomi Ecological Chain Family Banquet" that after the most difficult year of almost no growth in 2016, he deeply realized that it is important to "maintain high growth and continuous high growth".
"How can I unite enough people to do it together, this is a question that I think about every day even when I sleep."