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In the matter of listing, bananas are obviously prepared.
Originally, Banana Wasaxia was an umbrella brand founded in 2012 by Hong Kong Minus Holdings, and in 2013, Ma Long and Linze established Banana Holdings Limited, and launched the first sunscreen product double-layer small black umbrella in the same year. In 2016, Banana opened its first brand direct store in Shanghai, and in 2017, it gradually expanded its sunscreen products from umbrellas to other categories such as sleeves, hats, sunscreen clothing, masks and so on. In 2021, Banana will further expand its category to other non-sunscreen outdoor products such as canvas shoes, Martin boots, thermal clothing and accessories.
From umbrellas to sunscreen appliances to traditional clothing and accessories, almost every step of the expansion of the banana category is accompanied by a higher level of revenue, and the story told to the capital market is logical, from the "explosive law" to "winner-take-all".
According to the CCI Consulting report, according to the total retail sales in 2021, Banana is the largest sunscreen clothing brand in China. At the same time, among the emerging brands in China's footwear and apparel industry with annual retail sales of more than 1 billion yuan, it ranks first under the banana in terms of retail sales, and the retail sales growth rate in 2021 is the fastest.
Market Insights: Be the first in the niche market
If you can't be number one in a category, build a new category where you can be number one.
Lululemon fully grasped the rules of this category, it dabbled in the competition of sportswear on the Red Sea, but chose a narrow field from it, aimed at the yoga industry, and created a new trend of autumn pants wearing.
Choosing to start from the urban sunscreen crowd, the banana has seized the female customer group's just need for travel sunscreen, with a unique explosive methodology, downward to defeat the scattered Taobao goods that are not brand power, and upward pressure on Pure outdoor brands such as Columbia, North, Jack Wolfskin to make sales bigger.
For example, in the category of parasols, bananas follow the brand concept of Japan's WPC, which was founded in 1995 and broke the traditional concept that "umbrellas are only used to block the rain".
Banana has successfully raised the price of the umbrella to nearly 200 yuan, which is four times the price of the same kind of paradise umbrella, which is the same reason that Lululemon sold yoga pants for an average price of 1,000 yuan.
The rapid promotion of more categories after the successful emergence of a single product is also a good play for Lululemon.
In recent years, lululemon has also expanded sports T-shirts, sports jackets, sports sweatshirts/pullovers, etc. in addition to yoga clothes. After identifying the user group of sunscreen, Banana quickly expanded its category from umbrellas to clothing, shoes and accessories.
According to the prospectus, during the period from 2019 to 2021, a total of 22 selected items under bananas have each achieved annual sales of more than 30 million yuan, including three sunscreen selected items launched in 2017 or before, namely double-layer small black umbrellas, pocket series umbrellas and capsule series umbrellas;
Another 19 selected items will be launched between 2019 and 2021, of which five selected items will be launched in 2021, namely the Day Look series sunglasses, the carry-on series flat umbrella, the street travel series of thick-soled canvas shoes, the Chang series leggings and the Qiujiao series of light Martin boots.
In the "food, clothing, housing and transportation" market closest to the people, in addition to real estate, the core of trying to achieve as much coverage as possible is to find the "greatest common denominator of mass consumption". For example, the Wuling Mini, which has crushed Tesla's sales, and Yang Guofu, which has 5783 stores, is spicy and hot.
The milestone event of the shotgun under the banana is to treat the consumption downgrade as a consumption upgrade, similar to the practice of Mingchuang Excellent Products opening a ten-yuan store into a hundred-yuan store.
Only from the perspective of sunscreen clothing, bananas have built a market between Taobao goods and traditional outdoor brands and sports brands. Taobao goods below 100 yuan are too scattered, the price is close to the people but there is almost no sense of brand and design, sports brands and traditional outdoor brands of sunscreen clothing prices are high, there are brands with design but away from mass consumption.
The price range of sunscreen clothing under bananas is set between 109 yuan and 349 yuan, of which the best sales are 189 yuan. The pricing of other categories is also mostly based on this logic, divided into low, medium and high-end, the entry-level model is responsible for drainage, the high-end focus on the brand, and the mid-range acts as the main force of sales.
The turning point from umbrellas to more categories occurred in 2017, and the adjustment of the product structure not only increased revenue, but also contributed to the overall gross profit margin under the banana.
In terms of financial data, the revenue of umbrellas from 2019 to 2021 accounted for 86.9%, 46.5% and 20.8% respectively; in contrast, the revenue of clothing in the same period accounted for 0.8%, 17.5% and 29.5%, respectively, and has now become the category with the largest contribution to the revenue of bananas, while the revenue of other products mainly based on shoes has also increased to 5.6% in 2021.
In terms of gross profit margin, the gross profit under the banana in the past three years was 190 million yuan, 460 million yuan and 1.42 billion yuan, and the gross profit margin was 50.0%, 57.4% and 59.1% respectively.
It can be seen that the increase in gross profit margin is almost the same as the proportion of revenue under the banana category. Its prospectus also shows that the gross profit margin of sunscreen hats and sunscreen accessories under bananas exceeds 60%.
The money is spent on KOLs
The satisfaction of functional needs is a basic requirement for a product to enter the market, and true branding begins with emotional connection and social interaction. For the vast majority of non-essentials, brand personality is the direct reason people buy.
The difficulty is that emotions, personalities, commitments, and visions are intangible, and many companies simply extract a few beautiful adjectives out of thin air and put them in brochures.
How to land brand value? Like Nike and Adidas, we can tell the brand story through advertising and marketing, and convey value through celebrity endorsements. However, in the current situation where traffic costs are generally rising, this is obviously expensive.
Like Lululemon, it can also accurately target potential consumers around the world through more than a thousand ambassadors scattered around the world and permeable marketing based on the community model, which makes its marketing costs account for only 2% of revenue.
As an online brand (there are only 66 offline stores), Bananaxia cannot build a store community like Lululemon, so it has set its sights on social platforms to achieve brand exposure and delivery through KOLs.
According to the prospectus, the advertising and marketing expenditure under bananas has been 37 million, 120 million and 590 million respectively in the past three years, and it will account for a quarter of the annual revenue in 2021.
Banana has spent most of its marketing expenses on social platforms such as Xiaohongshu, Douyin, and Weibo, and the prospectus also shows that in 2021 alone, Banana has cooperated with more than 600 KOLs, bringing a total of 4.5 billion views to the brand.
In addition to KOL, Banana Is also a regular visitor to the live broadcast room of big anchors such as Li Jiaqi and Luo Yonghao. According to fat ball data, Li Jiaqi brought goods for bananas three times in one month last year, with 7 kinds of products on the shelf and sales of about 28.8 million. In the same month, Banana also cooperated with 63 anchors on Taobao Live, in exchange for 117 million sales.
This model is similar to Lululemon's community model, which is reflected in financial indicators, and it is the DTC channel that contributes most of the revenue. According to the prospectus, from 2019 to 2021, the revenue generated by the online store and e-commerce platform of Banana was 286 million yuan, 618 million yuan and 1.947 billion yuan respectively.
Revenue generated through retail stores and others (mainly including sales to large customers with mature retail networks) in the same period was only $31 million, $0.32 billion and $0.66 billion.
Dark tide under the halo
In the prospectus, Banana posted a set of beautiful-looking data, and the revenue and net profit have maintained high growth in the past three years.
From 2019 to 2021, the revenue under the banana was 380 million yuan, 790 million yuan and 2.41 billion yuan, respectively, with a compound annual growth rate of 150.1%. During the same period, excluding the change in the fair value of convertible redeemable preferred shares, the adjusted net profit under the banana was 19.68 million yuan, 39.41 million yuan and 140 million yuan respectively, with a compound annual growth rate of 162.6%, and the profitability continued to increase.
However, in the face of the growth myth created, banana is not perfect, and there is still room for improvement in terms of products, communities, research and development, and markets.
After discovering the niche market, talking about product quality is almost superfluous, as this is always a prerequisite for any company to move forward. With new companies creating breakthrough products that have been swallowed up or crushed by industry giants for a long time, it's important to maintain a sustained ability to innovate.
The prospectus mentions that bananas have their own core technologies such as Airloop fabric, original yarn sunscreen technology and omnidirectional push-pull honeycomb technology. Among them, the sales of the ice thin series of shawl sunscreen clothing launched in early 2020 with Airloop fabric reached 276.4 million yuan in 2021.
Banana also mentioned in the prospectus that the company currently has 123 patents and is applying for 72 patents. However, in the patent information center that can be found, most of the patents under the banana are designs, of which the first invention patent related to textiles and clothing is published on March 30, 2021, and the earlier invention patents revolve around umbrellas, smart toothbrushes and other products.
Under the high marketing and sales costs, the research and development costs under the banana are not optimistic. In 2019, 2020 and 2021, R&D expenditure under bananas was about 19.9 million, 35.9 million and 71.6 million, accounting for 5.3%, 4.6% and 3.0% of the total revenue respectively.
Meager R&D spending cannot sustain the ambitions of bananas. In its prospectus, it pointed out that sunscreen is only the starting point for exploring the urban outdoor lifestyle, and the future focus is on the shoe and clothing market and the urban outdoor market, and positioning itself as an urban outdoor brand.
However, under the idea of emphasizing marketing and light research and development, bananas may still have a long way to go to grow into a professional brand.
First of all, there can be no single product dependence in the product structure. The prospectus shows that in 2019 and 2020, the revenue generated by its top 30 hot-selling selected items accounted for 99.8% and 88.6% of the total revenue, respectively, and by 2021, this figure will be reduced to 74.1%, indicating that banana has made efforts in category expansion and finding new growth curves.
Second, high marketing expenses will drag down financial data. Although both Banana and Lululemon use the DTC model, half of the latter's revenue is contributed by offline stores, and the community marketing established through stores has also reduced marketing costs.
According to the prospectus, Banana has not invested too much in offline stores, although as of December 21, 2021, there are 66 stores under Banana, but 31 of them are cooperative retail stores, and the effectiveness and value of stores have yet to be tapped.
End
Overall, Banana and Lululemon have a similar growth path.
Tear a hole in a small market with a single item and quickly occupy the consumer's mind to build a brand. Lululemon entered the sneaker and apparel market with yoga pants, and under the banana opened the city's outdoor market with umbrellas and sunscreens.
As of now, Banana has not yet chosen the way of celebrity endorsement for marketing, and it is still dominated by KOLs. DTC is also basically online, and in the long run, DTC is not just about eliminating retail middlemen, but about "co-creating cultural value with consumers".
From this point of view, offline stores can bring more revenue and value to Banana, but according to the current strategy, Banana does not intend to do self-operated stores like Lululemon, but takes the form of cooperation + self-operation, perhaps worrying about the huge investment of heavy assets, and not thinking about the business model of the store.
According to the report of China Insight Consulting, China has become the world's largest footwear and apparel market in 2021, with retail sales of 3 trillion yuan and is expected to further increase to 4.2 trillion yuan by 2026. Among them, the market size of leisure and sports shoes and apparel is 1.1 trillion yuan and 290 billion yuan respectively, and it is expected to grow at a compound annual growth rate of 9.3% and 10.7% from 2021 to 2026, respectively, far exceeding the 6.8% growth rate of the entire industry in the same period.
If banana wants to become lululemon, occupy more market share in the outdoor shoes and apparel market with huge growth space, the IPO is still just the beginning, and there is still a long way to go, at least think about how to expand more male customers.
Resources:
[1] Net income rose another 42% in 2021, lululemon's halo and shadow brand number reading
[2] Lululemon Yoga Empire: The Growth path of a high-premium cultural brand
[3] Lululemon, who breaks the circle with yoga pants, the core competitiveness is not fabric technology Yuanqi capital