Sale of assets to repay debts Product quality decline Penalties Korean clothing brands are not in China

On February 10, Yi Nian (Shanghai) Fashion Trading Co., Ltd. (hereinafter referred to as "Yi Lian China") publicly apologized for its products "because the cost of down jackets with a list price of 1500 yuan was only 75 yuan", and said that the main reason for the punishment was that one of the styles of ELAND brand goods was administratively punished by the Beijing Xicheng District Market Supervision and Administration Bureau because the ingredients did not meet the relevant standards.

Yilian China is a wholly-owned subsidiary of South Korean fashion giant Yilian Group in China. The same Korean company, another Korean listed company TBH's Baijiahao (Shanghai) Fashion Co., Ltd. (hereinafter referred to as "Baijiahao") has been rumored to have been acquired by the Chinese enterprise Antarctic E-commerce.

The industry believes that the punishment of Yilian China and the sale of TBH's Chinese business (Baijiahao) are not only a sample of the localization development of Korean fashion and apparel companies in China, but also a microcosm of the changes in the situation of the "Korean Wave" Chinese market.

To pay off debts

Sell everything that can be sold

According to the data of Tianyancha App, on February 9, a number of industrial and commercial changes occurred in Baijiahao, the original shareholder TBH HONG KONG LIMITED (hereinafter referred to as "TBH") withdrew, and the new shareholder Antarctic E-commerce was added.

TBH entered China in 2004 with the help of Baijiahao. But in 2019, TBH reported plans to sell its China business and raise $200 million to ease debt. At that time, after TBH threw out the plan to sell its Business in China, the stock price even soared by nearly 30% against the background of a net loss of 57.7 billion won in 2018.

In fact, in November 2021, Antarctic E-commerce issued an announcement that the company intends to acquire the ownership of trademarks such as Basic House held by TBH in Chinese mainland and 100% of the equity of Baijiahao, with a transaction price of about RMB 500 million. So far, Antarctic e-commerce has successively acquired brands such as Basic House, Mind Bridge, and Jucy Judy operated by Baihao in China.

Compared with TBH, Yilian Group entered China earlier in 1994. According to the information on its official website in South Korea, the company's apparel business is mainly concentrated in seven countries, with China accounting for the highest proportion. TBH has achieved a compound growth rate of 60% over the past 10 years and opened more than 3,000 stores, according to the description.

Similar to TBH, in 2016, Yilian Group and Yilian China also sold their brand Teenie Weenie (hereinafter referred to as "TW") to Vignace (now renamed Jinhong Group), a Listed Company in China, with the same purpose of sale as "alleviating debt pressure".

According to public information, as of the end of 2015, Yilian Group had a total debt of 5.5 trillion won, of which short-term debt reached 3.2 trillion won. At that time, the sale of TW generated 5.7 billion yuan (1 trillion won) of revenue for the company. According to the official website of Yilian Group China, TW once accounted for the largest share of its revenue in China. For example, in 2015, Yilian China achieved revenue of 6.099 billion yuan, of which TW accounted for 34.42% of the company's main business income, followed by ELAND, which suffered penalties this time, accounting for 21.91% of Yilian China's revenue.

In addition, in 2019, Yilian Group sold all of its shares in E-Land Footwear USA Holdings to Chinese company Xtep International for US$260 million. The company comprises three global sports brands, K-Swiss, Palladium and Supra, as well as two sub-brands, PLDM and KR3W.

Times have changed

Quality control can't keep up

TBH and Yilian Group were forced to sell or partially sell their Chinese business successively, showing from one side that the Korean clothing that was once successful in the Chinese market is no longer "popular", and behind this, represented by Yilian China's "down jacket cost of 1500 yuan", the decline in the quality of Korean clothing, or the lack of sincerity of related companies operating in China, is the root cause of the sharp decline in Chinese consumers' recognition of Korean clothing.

In fact, before being fined for the ingredients not meeting the standard, last year, SPAO, a brand of Yilian China, was also fined 200,000 yuan by the Shanghai Municipal Market Supervision and Administration Bureau for falsely advertising that the fabric and lining of a wool coat contained wool (actually 100% polyester fiber).

"Securities Daily" reporter noted that after the "down jacket cost of 1500 yuan with a price of 1500 yuan" the incident continued to ferment, on the official account of the ELAND brand Xiaohongshu, a large number of consumers left messages questioning the serious decline in the quality of the brand in recent years.

An analyst, who did not want to be named, told the Securities Daily reporter: "The growth and decline of Korean brands in China are inseparable from the 'Korean Wave'. 20 years ago, the 'Korean Wave' drove Chinese consumers to consume Korean food and clothing, and this stage was also the time for Korean clothing brands to concentrate on entering China. 10 years ago, the 'Korean Wave' triggered the pursuit of Korean cosmetics by the Chinese people. However, cultural influence is also fluctuating, and it needs to be carefully managed and maintained. What's more, based on cultural self-confidence and the vigorous development of multiple industries, consumers now enjoy too many alternative Korean products in the Chinese market and even far surpass Korean products in terms of brand and cost performance. If Korean clothing cannot guarantee even the most basic quality control, then its development path in China will only become narrower and narrower. ”

Source: Securities Daily