(Report producer/author: GF Securities, Hong Tao, Ji Wenxin)
1. Huakai Creative acquired Yibai Network and transformed into a cross-border e-commerce head seller
(1) The predecessor Huakai Creative, strategic acquisition of Yibai Network to enter cross-border e-commerce
The predecessor of the company, Hunan Huakai Cultural Creative Company, was founded in 2009, providing comprehensive services of environmental art design for large-scale indoor spaces such as exhibition halls and exhibition halls, and the product form is a variety of cultural theme space display systems. In 2017, the company was listed on the Growth Enterprise Market of the Shenzhen Stock Exchange, becoming the first A-share listed company in the industry. In 2019, the company launched the acquisition of 90% of the equity of Shenzhen Yibai Network Technology Company, and after more than 2 years, completed the merger and acquisition on June 8, 2021, successfully transforming the cross-border e-commerce industry. Since July 2021, Yibai Network has been included in the consolidated statement. In 2022, the company officially changed its name to "Huakai Yibai Technology Co., Ltd.", focusing on cross-border e-commerce and creating a business matrix of "pan-product + boutique + ecological service platform".
In 2021, the company's revenue was 2.075 billion yuan, of which cross-border export e-commerce business contributed 1.953 billion yuan. In 2022, the company predicts that its subsidiary Yibai Network will achieve revenue of about 4.3 billion yuan and net profit of 2.7-290 million yuan, achieving profitability for four consecutive quarters.
(2) Yibai Network: head seller of cross-border e-commerce
After the completion of the acquisition, Huakai Yibai has become a cross-border export e-commerce company relying on China's high-quality supply chain resources and guided by market demand, starting from the pan-product sales model and gradually forming a business combination of "pan-product + boutique + Yimai ecological platform". As of December 28, 22, the revenue accounted for 85%, 8% and 6% of the revenue of Panpin, Boutique and Yimai Ecological Platform respectively.
(1) Pan-product business is currently the most mature operation of the company, the most prominent scale and efficiency of the module, in the company's short-term development can play the role of "ballast stone", the main categories include home gardening, industrial and commercial supplies, automobile and motorcycle accessories, health and beauty, outdoor sports, etc. The company adopts a multi-platform layout, through Amazon, eBay, AliExpress, Wish, Lazada and other third-party platforms, to sell cost-effective goods in automobile and motorcycle parts, industrial and commercial supplies, home gardening, health and beauty and other categories to overseas consumers, and the export places are mainly Europe and the United States, supplemented by Southeast Asia. The company independently develops and continuously improves the information system to create core competitiveness.
(2) The boutique business is a new attempt by the company to strengthen the brand operation of cross-border e-commerce, and is an important focus and profit growth point for the company's medium and long-term development. In 2021, the company is optimistic about the future development space and potential of the boutique business, and seized the important window of industry turmoil to form a new boutique team, giving priority to product fields with relatively high unit prices and low competition, including kitchen appliances, smart homes, pet supplies, etc.
3) In 2021, the company established "EasySeller" one-stop cross-border e-commerce comprehensive service platform to provide other small and medium-sized sellers with a full range of cross-border business solutions, including supply chain services, logistics services, data-based operation management, one-stop cross-border service training, etc.
(3) The team is stable, fully motivated, and the performance target is raised to show confidence
After the completion of the acquisition, the former chairman of Huakai Creative and its concerted actors held 26.43% of the company's shares; Mr. Hu Fanjin, chairman of Yibai Network, and Mr. Zhuang Junchao, director of Yibai Network, hold 17.99% of the shares. As of February 21, 2023, the board of directors of the company has a total of 6 directors, and the original team of Yibai Network and the parent company of Huakai Creative have 3 directors each (Hu Fanjin, Zhuang Junchao and He Rixin are the original team of Yibai Network). The company's directors Hu Fanjin and Zhuang Junchao are the founders of Yibai Network, with more than ten years of working experience in the field of cross-border export e-commerce, and are still mainly responsible for the company's operation after the acquisition. Among them, Mr. Hu Fanjin holds 10.30% of the company's shares through Xiamen Mangliduo, and Mr. Zhuang Junchao holds 7.69% of the company's shares through Xiamen Chaoran Myron.
Employee stock ownership incentives are sufficient, and the increase in performance targets shows confidence. The company's employee stock ownership plan in 2022 is unlocked, and the unlocking conditions are that the net profit of Yibai Network in 22-23 years will reach 2.7 and 330 million yuan, which is 0.19 billion yuan and 40 million yuan higher than the target of non-attributable parent deduction in 22-23 years in the original M&A VAM performance commitment, demonstrating the company's operating ability and confidence.
Second, cross-border export e-commerce: long slopes and thick snow, B2C head concentration increased
(1) The external environment of cross-border industries is optimized, and the advantages of stable operation of leading enterprises are highlighted
The epidemic has stimulated the growth of online consumer demand, the global e-commerce penetration rate has accelerated, and the cross-border e-commerce industry has a large space. According to eMarketer data, global e-commerce sales will exceed $5 trillion for the first time in 2022, and the e-commerce penetration rate (the proportion of global e-commerce sales to the world's overall retail sales) will reach 20.3%, an increase of 2.4 percentage points over 2020. In the future, the change in consumption habits brought about by the epidemic will continue, and the e-commerce penetration rate is expected to increase to 23.6% in 2025. From a regional point of view, European and American countries with developed e-commerce penetration rates are also the main target markets for domestic cross-border export enterprises. The major countries in Europe and the United States are the United Kingdom (27%), the United States (21%), Canada (20%), Germany (16%), and France (12%) in order of e-commerce penetration rate. 54% of domestic export enterprises export to North America, 43% to Europe, followed by Southeast Asia (25%), Japan and South Korea (19%), etc. According to data from NetEconomics, the transaction scale of China's cross-border e-commerce industry reached 14.2 trillion yuan in 2021, a year-on-year increase of 13.6%, and the average compound growth rate from 2015 to 2021 was 14.69%. In 2022H1, the mainland cross-border e-commerce market reached 7.1 trillion yuan, and it is expected that the market size will reach 15.7 trillion yuan in 2022. In 2022H1, the mainland's cross-border e-commerce transaction volume accounted for 35.85% of the total import and export value of mainland goods trade.
In the past three years of the epidemic, mainland cross-border export e-commerce has developed in twists and turns, not only experiencing the cultivation of online consumption habits by the epidemic, the consumption stimulus brought by overseas government subsidies, but also experiencing the impact of negative events such as soaring shipping costs, European VAT collection, and Amazon ban freeze, and the pattern of Chinese sellers has also been reshuffled.
1. Industry Dividend Period (2020)
In 2020, the spread of the new crown epidemic continued to promote the transformation of online consumption habits, as well as the online development of foreign trade enterprises, the penetration rate of e-commerce was further increased, the process of Internet digitalization accelerated, and the scale of the mainland cross-border e-commerce market maintained a rapid growth trend. According to the "2020 SME Cross-border E-commerce White Paper" by Ebang Power Research Institute, in the face of the new crown pneumonia epidemic, 84% of the interviewed foreign trade enterprises chose to carry out overseas marketing through online methods. According to customs statistics, in 2020, 2.45 billion import and export lists were checked and released through the customs cross-border e-commerce management platform, a year-on-year increase of 63.3%. Cross-border e-commerce imports and exports were 1.69 trillion yuan, an increase of 31.1%.
Policies support the construction of industry infrastructure such as pilot zones and cross-border payments. The State Council took the lead in building cross-border e-commerce comprehensive pilot zones, and by the end of 2020, there were 105 cross-border e-commerce comprehensive pilot zones nationwide. According to data from the Payment and Clearing Association of China, in 2020, the RMB cross-border payment system processed 2,204,900 transactions with a value of 45.27 trillion yuan, an increase of 17.02% and 33.44% year-on-year, respectively. According to the Measures for the Administration of Foreign Exchange Business of Payment Institutions issued by the State Administration of Foreign Exchange, as of March 2020, about 15 payment institutions participating in the pilot cross-border foreign exchange payment business have obtained the Cross-border Payment License.
2. The industry's darkest hour (2021)
In 2021, the cross-border e-commerce industry suffered multiple external blows:
(1) The supply chain collapsed, and freight prices soared. In early 2021, shipping companies jointly bid up prices due to port closures, labor shortages, typhoons, container shortages, and Suez freight blockages. According to iResearch, in 2021, the transportation price of the European route and some US East routes will be at a high level for a long time, with the peak price of the European route reaching 18,000 US dollars and the US line reaching 22,000 US dollars. The average annual CCFI index in 2021 was 2626.41, a year-on-year increase of 166.80%.
(2) The Amazon ban storm severely cracked down on cross-border sellers' illegal operations, resulting in a large number of store closures, and the proportion of Chinese cross-border sellers on the platform dropped significantly. In April 2021, Amazon set off a wave of platform bans on the grounds that some sellers "improperly manipulated reviews, put gift card reviews in products, and used cash on social media to solicit fake reviews". According to the statistics of the Shenzhen Cross-border E-commerce Association, more than 50,000 Chinese sellers have been blocked or seized for violations on Amazon's platform, and the accounts of sellers such as Zebao, Youkeshu, and Aoji have been blocked one after another. Many brands under Zebao Technology, a wholly-owned subsidiary of Xinghui Shares, were banned from selling on the Amazon platform, and related Amazon stores were also suspended, and Zebao Technology lost about 809 million yuan in 2021. Among the leading enterprises, Anker Innovation and Yibai Network adhere to compliance operations, and the impact of the ban tide is relatively limited.
The ban tide has promoted the clearance of the supply side of cross-border sellers in China, and the leading enterprises continue to benefit, while new platforms such as Wal-Mart have room for development based on the need for sellers to share risks. According to Marketplace Pulse, the share of Chinese sellers on Amazon's platform dropped from 42% to 36% in 2021. Affected by the Amazon ban incident, sellers pay more attention to compliance and diversified operations, diversify risks by opening stores on multiple platforms or building independent websites, and actively create new growth points. According to Marketplace Pulse, 51% of Walmart's new 1,000 Chinese sellers at the end of 2021 were higher than the US sellers' share (only 46%).
(3) The European VAT tax reform has led to pressure on the cost of cross-border enterprises exporting to Europe. In January 2021, the UK implemented new VAT rules that currently remove VAT exemptions for sales of goods with a shipment value of up to £15 from 1 January 2021 if goods are shipped from inventory stored outside the UK to UK customers. From July 1, 2021, the new EU VAT regulations have been implemented, eliminating the "goods imported into the EU with a value less than or equal to 22 euros will be exempted from paying VAT", and all goods imported into the EU are subject to VAT. After the tax reform, the VAT threshold will be abolished, and some platforms such as Amazon will be responsible for collecting VAT, which will put cross-border enterprises' costs under pressure and profit margins squeezed.
3. Industry Recovery Period (2022-2023)
The external unfavorable factors of the industry are gradually receding, and the difficulties of the cross-border e-commerce industry have reversed. In November 2022, Amazon launched an account protection program, which basically exempts merchants who meet the protection requirements from the risk of banning. In 2022, overseas countries have successively optimized epidemic prevention policies, the global logistics supply chain has gradually recovered, ocean freight has gradually returned to the pre-epidemic level, and freight rates on popular routes have decreased by an average of 30%-40% year-on-year. According to CCTV Finance, the FBX index of the Baltic Shipping Exchange in June 2022 showed that the freight rate of the China/Far East-North America West Coast route fell by 63.1% compared with the highest freight rate level in 2021, and the freight rate of the China/Far East-North America East Coast route fell by 54.6%.
In the face of environmental conditions such as the decline of cross-border e-commerce traffic dividends, the gradual maturity of website building tools, and the restrictions of platform rules, cross-border enterprises prefer to use independent websites and multi-platform operations to diversify risks and achieve stable operation. According to Ebang Power's data, the proportion of cross-border e-commerce companies opening independent websites increased from 25% to 31% in 2021, and the average number of sites operated by each seller at the end of 2020 was 3.56. At the same time, enterprises are accelerating the use of new technologies to innovate business models, and cross-border e-commerce channels are becoming more diversified. According to the survey data of Ebang Think Tank, 27% of sellers in the market chose to switch to independent websites in response to the Amazon incident, while 21% of enterprises that have not established independent stations are preparing to build websites to carry out DTC mode.
Multiple policies such as "zero tax burden" are beneficial, and the prosperity of the cross-border e-commerce industry has improved. A review of China's cross-border e-commerce policies from 2018 to the present shows that the mainland's policies in the cross-border e-commerce industry have gradually changed from normative-oriented to support-oriented. With the strong support of national policies, the business environment of the cross-border e-commerce industry has been continuously improved, and the development prospects are bright.
(2) The B2C pattern is shuffled and strong, and Amazon is firmly in the lead
The upstream of the cross-border e-commerce industry chain is all kinds of suppliers, and with the layout of cross-border e-commerce business by different pendant enterprises, the types of suppliers are gradually diversified, and niche brands are rising. Cross-border e-commerce platforms occupy the midstream position at the core of the industrial ecosystem, branding and multi-channel layout have become the focus of cross-border e-commerce platforms, and independent websites and third-party platforms complement each other to form diversified e-commerce channels. The downstream of the industrial ecology is the end consumer, including both individual consumers and enterprise customers. At the same time, there are many service providers in the cross-border e-commerce industry, and the support service demand is more refined and intelligent, and its enabling role is more prominent.
B2B is still the main mode of cross-border e-commerce in mainland China, while the growth space of B2C is more certain. Cross-border e-commerce mainly has two modes: B2B and B2C, of which B2B is mainly for enterprise customer service, and B2C is mainly for individual customers. Orders on B2B platforms are dominated by large batches, small batches and more concentrated orders, while orders on B2C platforms have the opposite characteristics. According to the data of NetEconomics, the transaction scale of cross-border e-commerce B2B and B2C in the mainland in 2021 reached 10.9 trillion yuan and 3.3 trillion yuan, accounting for 76.8% and 23.2% respectively. From 2017 to 2021, the growth rate of B2C mode (4Y CAGR was 28.78%) was faster than that of B2B model (4Y CAGR was 12.11%). In terms of export, third-party platforms and independent websites are the two most important models of B2C export e-commerce, and the third-party platform model is relatively more mature.
Amazon is firmly in the top position and is the main third-party platform for China's B2C exports. According to data released by Ebang Think Tank in November 2020, Amazon, Alibaba International and AliExpress are the top three platforms with the highest rate of cross-border e-commerce companies, and Shopee and Lazada for the Southeast Asian market have also become important choices for overseas enterprises. In 2021, Amazon achieved GMV of $600 billion, of which third-party sales reached $390 billion, a year-on-year increase of 30% (the growth rate far exceeded 11% of self-operated sales), accounting for nearly 60%. From the seller side, there are about 2 million small and medium-sized enterprises in the world selling on the Amazon platform, and according to the research data of ECCANG ERP, 39.5% of sellers will choose Amazon as the main platform.
The rapid rise of multiple platforms to expand overseas territory. Temu focuses on ultra-low price strategies and is growing rapidly in the North American market. According to SensorTower's latest statistics, as of the end of January this year, Termu had nearly 20 million downloads worldwide, and users in North America contributed more than 90% of the share. In 2021, TikTok took the lead in opening small stores in the UK and Indonesia, and after March 2022, it has successively deployed in Vietnam, Thailand, Malaysia and the Philippines, and added a new application channel for the US station in November. In 2023, JD Thailand and JD Indonesia issued announcements that they will shut down their services, turning supply chain infrastructure as a fulcrum for internationalization and investing resources in cross-border supply chain infrastructure, including Southeast Asia. According to eMarketer, Latin America and Southeast Asia will be the only two regions with e-commerce sales growth of more than 20% in 2022. Positioned in Southeast Asia and Latin America, the GMV of shopee and Meike multi-platform has grown rapidly, and has become the third and fifth cross-border e-commerce platform in the world in terms of monthly visits.
Overseas warehouses have become an important force to ensure the smooth flow of cross-border supply chains. During the epidemic, the cross-border direct mail model encountered serious obstacles, while the overseas warehouse model had the advantages of advance preparation, high delivery timeliness, localized services, and supply chain assurance, and demand grew rapidly. According to data from the Ministry of Commerce, as of the end of January 2021, the number of cross-border e-commerce overseas warehouses exceeded 1,800, covering an area of more than 12 million square meters, a year-on-year increase of 80%. In 2021, the growth rate of overseas warehouses in the United States, Germany, Canada and Italy exceeded 40%. Among emerging markets, Southeast Asia is more prominent. In the past three years, Southeast Asia has the largest number of overseas warehouses, 71 in 2021, and its growth rate in 2020 and 2021 is also about 65%.
Amazon's FBA warehouse model can ease the logistics and transportation pressure of cross-border e-commerce enterprises, and is also very competitive in the same type of platform warehouse mode. According to JungleScout, 89% of Amazon sellers choose to use FBA fulfillment. As of May 2021, Amazon operates 1,561 logistics facilities around the world, covering an area of approximately 36.6 million square meters, covering more than 20 major countries around the world. The use of Amazon FBA warehouse can better play the scale advantage, reduce the input cost of sellers' logistics construction, and improve the anti-risk ability of small and medium-sized enterprises. Compared with Walmart's platform warehouse WFS service, the Amazon platform also has lower fulfillment fees, and storage fees in a short period of time are more economical.
(3) "Dual Drive" of Boutique and Pan-product
From an operational point of view, the current mainland cross-border e-commerce market presents a "dual-driven" market pattern of boutique model and pan-product model, and the two types of cross-border export e-commerce models of boutique and pan-product are aimed at different product types and consumer preferences, and there is differentiated competition between the two models, both of which have good development prospects. Pan-category e-commerce includes Yibai Network, Aoji Shares, Tongtuo Technology, Youkeshu, sales SKUs are orders of magnitude, the core lies in inventory management, the need to continuously optimize the information management system, improve operational efficiency, optimize per capita output, so as to increase the net profit margin level in the process of business scale expansion, the advantages of the Pan-product model are mainly reflected in:
1. Large-scale operation to improve risk resistance
Pan-category e-commerce pays attention to the scale effect of product selection, SKU coverage is wider, there will be no sudden decline in sales of a single category of products and affect continuous operation, and at the same time can quickly respond to demand and develop new products in a timely manner, so as to effectively improve the ability to resist risks, continuously expand and update the number of product development, and effectively promote the performance growth of each product line.
2. High traffic conversion rate
In order to match the size of SKUs and subdivided product categories, pan-category e-commerce companies need to open more online stores, and the store concentration is lower, and the revenue contribution of a single store is more even, so as to develop and display products that meet consumer needs in more detail, and carry out differentiated marketing activities to improve consumers' shopping experience while improving the efficiency of online store traffic conversion, so under the same scale of income, the number of active customers attracted by pan-category e-commerce is higher than that of the boutique model.
Boutique e-commerce includes Anker Innovation and Zebao Innovation, the main category is 3C electronics, product research and development expense rate and marketing expense rate are high, is an important factor to determine the expansion rate of revenue scale and net profit margin, the advantages of the boutique model are mainly reflected in its brand power:
1. High R&D investment to ensure product quality, brand premium to improve profit margins
Boutique model cross-border e-commerce industry overall R & D investment in 2%-7%, mainly selling self-owned brand products, focusing on product quality, the number of core SKUs is generally 100-200, the company participates in the entire industrial chain and supply chain research and development, design and production, the pursuit of product differentiation, in all links to enhance the product power with brand characteristics. With product power brand power to give products higher premium space, product gross margin is higher.
2. Brand effect to improve customer repurchase rate
Boutique e-commerce for specific categories of goods refined operation, online stores are few and high concentration, concentrated efforts to create single products, the brand has its own marketing attributes, relying on product quality and brand effect to accumulate customers, user stickiness is high.
3. Pan-product: Yibai cornerstone business, heavy IT investment, strong control of inventory
As a representative of the breakthrough of the pan-product model, Yibai Network has shown good sustained profitability and inventory control capabilities. The company's performance growth rate is outstanding, the gross profit margin and net profit margin are higher than the industry average, and it has strong market competitiveness. The company has continued to invest in technology research and development for many years, laying the foundation for rapid incubation of boutique businesses, and developing Yimai ecological platform to empower small and medium-sized businesses.
(1) Product development advantages: differentiated product selection, information procurement, digital warehousing
Operating the pan-product model is prone to encounter the problem of difficult inventory management, but Yibai Network, as a breakthrough representative of the pan-product model, has shown good sustained profitability and inventory control capabilities. The company's performance growth rate is outstanding, the gross profit margin and net profit margin are higher than the industry average, and it has strong market competitiveness. From 2017 to 2020, the operating income of Yibai Network grew rapidly, with a 4Y CAGR of 46.8%. In 2021, operating income declined due to factors such as rising ocean freight and exchange rate fluctuations. From the perspective of net profit, the company maintained a relatively stable profitability, and the net profit attributable to the parent in 2021 reached 216 million yuan, down from 2020.
The gross profit margin of the company in 19-21 years was 59%, 62% and 39%, respectively, about 10pp, 20pp and 18pp higher than the industry average. In 2021, the net profit of non-attributable parent increased by 32.8% year-on-year, and the net profit margin reached 6.2%, which was 44pp higher than the industry average.
We will analyze the business model of Yibai Network from three perspectives: product development and selection, IT intelligent technology and e-commerce operation:
1. Product selection: take the blue ocean category as the entry point, dislocation competition, and pave the way for the future cultivation of all categories
In the early stage, the company took the blue ocean category as the entry point, giving priority to expanding auto and motorcycle parts, industrial and commercial supplies, home gardening, health and beauty and other categories, and formed differentiated competition with other cross-border export e-commerce enterprises. The sales proportion of the company's top four categories, home gardening, industrial and commercial supplies, health and beauty and auto and motorcycle accessories accounted for about 68% (67.63% in 22H1), paving the way for the future cultivation of all categories. These categories are still in the blue ocean market, characterized by relatively long product life cycles, relatively slow replacement, and stable demand throughout the year. The profit margin of the Blue Ocean Track category is stable, and the average price of 22H1 sales products is around 14 US dollars. Compared with 3C electronic products with faster update speed, products with stable functions such as home and garden have a longer sales cycle, and the probability of loss caused by product elimination is low; In addition, horticultural products have a lower return rate than clothing categories, and will not have too much negative impact on the company's sales due to trends change, customer personal preferences, decision-making bias and other issues. The company launches 200,000-300,000 SKUs every year.
Individual product attributes vary less, reducing stocking pressure. Compared with other non-standard categories, home and garden products have fewer choices for customers in terms of color and size, and the number of SKUs for a single product is limited, which is conducive to the company's strict control of inventory levels. The diversified product structure guarantees the company's gross profit margin level from the source, and the gross profit margin of the company's single category is higher than the industry average. From 2017 to 2020, the craft collection, outdoor activities, home gardening, health and beauty of Yibai Network were all higher than 60%, and the gross profit margin of 3C electronic products was stable above 50%, ranking in the forefront of the gross profit rate of related categories of comparable companies in the same industry. From 2017 to 2021, the average unit price of all categories of the company increased year by year, and the average unit price of customers in 2021 was 110.38 yuan per unit, an increase of 1.73% over the same period in 2020.
In terms of product development mode, the company improves development efficiency by strictly controlling product development time and development cost, and implements the control logic of "small batch, multiple batch, low cost and rapid trial and error" in all aspects of product development and supply chain management, so as to improve the overall turnover efficiency of products from development and launch, purchase and sales to inventory management.
2. Warehousing and logistics: The two types of warehousing modes develop in tandem, and inventory management is steadily improved
At the industry level, overseas warehouses have become an important force to ensure the smooth flow of cross-border supply chains. During the epidemic, the cross-border direct mail model encountered serious obstacles, while the overseas warehouse model had the advantages of advance preparation, high delivery timeliness, localized services, and supply chain assurance, and demand grew rapidly. According to data from the Ministry of Commerce, as of the end of January 2021, the number of overseas warehouses of cross-border e-commerce exceeded 1,800, covering an area of more than 12 million square meters, an increase of 80% year-on-year. In 2021, the growth rate of overseas warehouses in the United States, Germany, Canada and Italy exceeded 40%. Among them, the growth rates of Canada, Italy and the United States were 155.88%, 77.27% and 44.76% respectively. Among emerging markets, Southeast Asia has the largest number of overseas warehouses, 71 in 2021, and the average growth rate in 2020-2021 is about 65%. The company comprehensively adopts two storage modes of domestic warehouse and overseas warehouse for coordinated development. The company usually takes the domestic warehouse as the starting point of the stocking test, and gradually increases the stocking scale in the overseas warehouse in the form of a small number of multiple batches for products with good sales test and market demand, and dynamically adjusts to control inventory immediately and maintain good inventory turnover.
The company's pan-product business and boutique business mainly adopt the combination of platform warehouse as the main and domestic warehouse as the supplement. (1) Domestic warehouse: The company's domestic warehouse adopts leasing mode self-management, located in Humen, Dongguan, mainly undertaking the functions of collecting and transshipment to overseas warehouses and direct mail delivery to overseas consumers. (2) Platform warehouse (mainly Amazon FBA warehouse): mainly operated and managed by the platform warehouse of third-party e-commerce such as Amazon. Different from the platform warehouse in the industry, which is mainly a boutique business, the company's platform warehouse serves the pan-product business, and the profit level is more advantageous than the domestic small package direct mail method. (3) Overseas warehouse: mainly operated and managed by large third-party warehousing and logistics service providers such as barns and Wanyitong, located in the United States, Britain, Germany, Australia and other places, responsible for distributing goods to consumers in the countries where the warehouse is located.
The company selects the optimal delivery warehouse and logistics method that meets the three-dimensional needs of platform, customer and channel through intelligent system. In 2020, the proportion of orders delivered within 48 hours after consumers placed an order reached 94.44%, an increase of 3.53 percentage points over 2019.
3. Sales link: balanced development of multiple platforms to effectively reduce business risks
(1) The company maintains a multi-platform operation strategy and continuously expands the number of cooperative platforms.
The company's pan-product business is relatively mature, accounting for nearly eighty percent of sales on the Amazon platform. The company adheres to compliance and has not suffered a great negative impact in the Amazon number restriction tide, reflecting business stability and resilience. In the future, we will continue to upgrade our multi-platform business strategy and control the level of risk. The company mainly sells goods to overseas consumers by opening online stores on third-party platforms, and simultaneously carries out online store operations on third-party platforms such as Amazon, eBay, AliExpress, Cdiscount, and Wish. Overseas end consumers place orders on third-party platforms and complete payment through third-party payment tools cooperated by Payoneer, PingPong, Alipay and other platforms.
In 22H1, Yibai Network achieved sales revenue of 1.54 billion yuan on Amazon, accounting for 78.5% of revenue; The company's total orders in Amazon are 11.4106 million, with an average order amount of 135.5 yuan. As of 22H1, the number of online stores sold by Ebai Network in Amazon was 729, with 34 new stores added and 11 closed during 22H1. Except for Amazon, 22H1 accounts for no more than 10% of sales revenue through other third-party platforms. In the future, the company will continue to upgrade its multi-platform business strategy to control the risk level. While deeply cultivating mainstream third-party e-commerce platforms such as Amazon, ebay, AliExpress, Cdiscount, and Wish, the company actively opens online stores on emerging third-party e-commerce platforms such as Walmart, Mercado Libre, Joom, and Jumia.
(2) The company operates in multiple countries and regions, and continues to expand its business territory.
The company's income mainly comes from overseas, and it pursues multi-country operations. As of 22H1, 20% of the company's revenue comes from the United States, and there is no dependence on a single country. In addition to mature markets such as the United States and the United Kingdom, the company has also developed rapidly in developed countries such as Germany, Italy, France, Spain, and Japan, seizing the huge development potential of e-commerce markets in developing countries and regions such as Latin America, Southeast Asia, South America, and Africa, and expanding its sales radius.
The Latin American market has a high population density, relatively moderate competition and high profit margins, which will be the company's key direction, and the company is currently expanding its business in Latin America through Meike's multi-platform. Meikeduo is the largest e-commerce platform in Latin America, achieving GMV of US$8.6 billion in 22Q3, a year-on-year growth rate of 31.5%, and the GMV growth rate of Mexico, Brazil and Argentina reached 23%, 20% and 38% year-on-year, respectively. During the same period, the number of unique buyers on the platform reached a record high, up 10% year-on-year to 42.5 million unique buyers.
(2) Cornerstone: Foresight to create a hardcore system to overcome the inventory and human efficiency pain points of Pan-product business
The company pays attention to building R&D infrastructure, continuously improving system performance and basically having first-mover advantages, improving the efficiency of all aspects of product development, pricing and sales, and ensuring human efficiency improvement and inventory management. The company has invested more than 200 million yuan in the IT system for five consecutive years, developed a number of automation modules, realized automatic product selection, automatic shelving, automatic price change, etc., and continuously improved human efficiency; At the same time, the company is profit-oriented, and the changes in the cost side will be adjusted in real time through the automatic price change system to ensure the stability of gross profit and avoid the inventory pressure caused by unhealthy scale growth. From 2019 to 2021, the company's R&D expense rates were 4.21%, 5.26% and 1.39%, respectively, and the proportion of R&D personnel in 2021 was 8.65%, and the functions of the R&D team effectively covered all aspects of the system development process of this project. In 22H1, the company's R&D expenses were 24.126 million yuan, and the R&D expense rate was 1.2%. Through independent research and development, the company has accumulated a number of core technologies in the industry, covering the whole chain of cross-border export e-commerce business, and carries out technical protection by applying for computer software copyright. As of June 30, 2022, the company and its subsidiaries have a total of 26 domestic patents, 29 foreign patents, and 91 computer software copyrights.
Significant improvement in unit efficiency. In 2021, the number of employees of the company was 2,290, a decrease of 11.72% compared with 2020, and the per capita sales in 2019, 2020 and 2021 were 1.279 million yuan/person, 1.642 million yuan/person and 1.902 million yuan/person, respectively, and the effect of human resource optimization was obvious.
The number of SKUs in the company's pan-category e-commerce business is large. Therefore, improving the efficiency of inventory management is the key to the company's large-scale SKU pan-product management. Relying on the self-developed algorithm, the company performs fine classification at the inventory SKU level, determines the safety inventory, stocking cycle, and single stocking volume of each SKU, predicts the sales volume of each SKU in a certain period in the future, and formulates a stocking plan to dynamically adjust various parameters to achieve a small-number, multi-batch, rapid response procurement mode, improve inventory turnover efficiency, and reduce the risk of inventory backlog.
According to cross-border references, each of the 500 U.S. retailers surveyed had $48,000 in excess inventory at each small retailer (between $100 million and $500 million in annual revenue), and large retailers (between $100,000 and $1 million in annual revenue) had a more serious problem of excess inventory. Different from the industry, which generally drives inventory, the company's overseas warehouses strictly follow the management logic of inventory-driven sales. The company strictly controls the inventory level, and is the only company that writes the inventory turnover requirement into the performance gambling agreement, and has a strong forward-looking and avoidance awareness of the hidden nature of high inventory. From 2019 to 2021, the company's inventory turnover rate was 3.05 times/year, 2.95 times/year and 4.33 times/year, respectively, and the inventory turnover rate increased significantly. The inventory age structure is more stable, and the proportion of inventory aged less than one year has increased, reaching 93.51%, 94.11% and 98.32% at the end of 2018, 94.11% at the end of 2019 and 98.32% at the end of 2020. From the perspective of asset liquidity, the proportion of the company's inventory balance to total assets in 2021 was 19.65%, a decrease of 24.57pct compared with 2020.
4. Boutique + Yimai ecological platform: create the second curve of Yibai
In 2021, the wave of Amazon banning indirectly led to the clearing of industry supply, the company seized the opportunity of the reshuffle of the industry pattern, and strategically incubated the boutique and Yimai ecological platform business on the basis of the steady growth of the basic plate of pan-product stores, after less than two years of cultivation, the boutique business is expected to usher in a profit inflection point in 22 years, and the Yimai ecological platform business has entered a period of accelerated development. At the same time, the company also began to explore live broadcast to form a crawler business layout.
The company has been actively expanding its boutique business line since 2021, and its revenue currently accounts for about 8% of the cross-border e-commerce export business. Different from the pan-product business pursuit of cost performance, the characteristics of boutique products are relatively high unit price, pay attention to brand attributes, and invest in research and development, so the average unit price is planned to be 60 US dollars. The company chooses the transportation and warehousing mode of sending to FBA warehouse in batches to maintain high inventory turnover efficiency and reduce the risk of inventory backlog. The category selection logic of the company's boutique business is consistent with that of Panpin, and most of them are tracks with relatively low competition and stable demand, and the entry threshold is relatively low. At present, it mainly covers five categories: cleaning home appliances (including vacuum cleaners, cleaning brushes); Environmental home appliances (such as selling heaters in winter, selling water-cooled fans, air conditioners and other products in summer); kitchen appliances, (e.g. ice machines); LED lights; Pet supplies (such as litter boxes).
The average unit price of all categories has steadily increased in recent years, from 60.4 yuan in 17 years to 110.38 yuan in 21 years, and slightly decreased to 96.6 yuan in 22H1. On the basis of continuous development of high customer unit price products, the company began to make medium and low customer unit price products (5-10 US dollars) to widen the price band.
(2) Yimai ecological platform: the whole link and all-round empowerment of small and medium-sized sellers
Since the outbreak of the epidemic in 2020, the cross-border export e-commerce market has grown exponentially, and a large number of small and medium-sized enterprises have poured in, but in the complex and changeable market environment in 2021, it faces greater operational risks and challenges. At the same time, because the cross-border industrial chain covers many countries and regions, external factors such as regulatory policies have caused great uncertainty to enterprises' cost control, pricing and supply chain supply. SMEs need the technical and experienced support of professional service providers to quickly complete their business chains. In this context, the company founded "EasySeller" in 2021 to seize the pain points of the industry and develop a one-stop cross-border e-commerce comprehensive service platform. From the perspective of cost structure, logistics and procurement costs account for 40%-70%, and the regulatory policies and logistics conditions of various countries vary greatly, which tests the control of profits of cross-border enterprises. According to 2021 data from Ebang Think Tank, 58% of cross-border e-commerce enterprises have profit margins between 6% and 15%, and small and medium-sized cross-border e-commerce sellers do not have the ability to vigorously develop intelligent systems. The supply chain experience and digital system accumulated by the company's long-term operation can solve the pain points of small and medium-sized businesses and escort the company's stable operation.
Yimai started formal operation in 22H2, adopting an asset-light operation model, and its revenue grew rapidly. According to the official website of Yimai Technology, the company provides international special line (bulk cargo free channel) service, ZX special line small package transportation can be delivered within 7 days at the earliest, covering 24 European countries. Yimai currently has about 130 cooperative merchants, and its current revenue accounts for about 6% of the cross-border e-commerce export business, and the overall transaction volume is constantly increasing. For small and medium-sized sellers, choosing "Yimai" can reduce the cost of operation and improve profit margins. The company is full of confidence in the development of Yimai, and expects that the trading volume will increase significantly in 23Q1. Relying on strong R&D system and supply chain management experience, Yimai platform provides value-added services, mainly through advertising service system, as well as intelligent advertising, intelligent publishing, intelligent price adjustment, intelligent stocking and other two categories, will also charge annual membership fees. Different from other platforms that can only provide some services, Emai can provide various resource support and operation support required to carry out cross-border e-commerce business from four aspects: goods, systems, facilities and services, so as to achieve all-round coverage. After the company's information system is put into operation, the specific functions are in the process of continuous upgrade and iteration. As the business matures, the company's main business ideas shift from incubation to empowerment, and the services it can provide are continuously extended.
5. Profit forecast
Through the acquisition of Yibai Network, the company transformed into a cross-border export e-commerce platform, and retained the spatial environment art and design business. Among the main cross-border export e-commerce business, the pan-product business is the largest and more mature; The boutique business has been incubated since 21 years and has quickly achieved profitability; Relying on the company's strong R&D strength, the company established Yimai ecological platform business in 21 years and achieved rapid growth.
Pan-product business: Since its establishment to the second half of 2021 during the incubation of new businesses, the company has focused on deepening the pan-product business, and limited by industry risks such as the high sea freight rate in the industry in 21 years (see the analysis of the second chapter of this article), the company's pan-product business has been hit hard in 21 years, and in 22 years, with the gradual alleviation of industry risks, the pan-product business operation has gradually recovered, released the increase in performance, and the growth rate has turned positive. Looking ahead, the company will consolidate its growth in Europe and the United States, and improve the user experience and competitive advantage of products by optimizing logistics solutions and timeliness. On this basis, the company will focus on developing the Latin American market and seize the growth opportunities of the blue ocean market. We expect that the revenue of the company's pan-product business in 2022-2024 will be 36.6/45.0/5.50 billion yuan, respectively. In the future, the company's pan-product business may focus on high-margin categories such as 3C and clothing to improve the gross profit margin, and we expect the gross profit margin of the pan-product business to be 44.6%/45.0%/46.0% respectively from 2022 to 2024.
Boutique business: The company's boutique business is mainly based on product selection, supplemented by R&D and design, attaches importance to product quality and product innovation, reduces the cost of failure through the mode of small test orders, and will be committed to realizing matrix and branding in the future, creating a core brand with sales of more than 200 million and achieving profitability. We expect that the revenue of the company's boutique business from 2022 to 2024 will be 3.7/7.3/1.46 billion yuan, respectively. In the future, the company's boutique business will expand its product pool, precipitate the voice of boutique brands, and increase brand premium, and we expect the gross profit margin of the boutique business to be 38.1%/36.8%/38.0% respectively from 2022 to 2024.
Yimai ecological platform business: Yimai platform has initially formed a master of ERP system, supply chain distribution and other businesses, and will be more clear about investment promotion and service direction in the future. We expect that the revenue of the company's Yimai ecological platform business will be 2.6/5.2/1.01 billion yuan respectively from 2022 to 2024. The company's Yimai ecological platform business includes helping small and medium-sized cross-border merchants to purchase goods, etc., with the increase in the number of signed merchants in the future, forming scale efficiency, cost reduction and efficiency, we expect the gross profit margin of Yimai ecological platform business to be 15.0%/21.2%/21.5% respectively from 2022 to 2024.
Space environment art design business: This business is the original business of Huakai Creative's parent company, we believe that the company will gradually reduce the scale of this business, and it is expected that the operating income in 2022-2024 will be 2154/1077/5.39 million yuan, and the gross profit margin will remain at 24.4% in 2022-2024. In 2023, we will continue to promote the acquisition of a 10% minority interest in Ebai Network, which, if successfully implemented, will further enhance EPS.
Split and forecast of expenses during the period:
(1) Sales expenses: From 2022 to 2023, the boutique business and Yimai ecological platform business incubated by the company are in a period of vigorous promotion, and the boutique business pays more attention to the creation of brand image than Panpin, so the proportion of platform promotion fees and publicity fees will continue to rise. The Company's storage expenses are included under the selling expense item, and we believe that the storage rate remains stable despite the increase in sales volume, benefiting from the Company's strict control of inventory levels. The company's sales expense ratio for 2022-2024 is expected to be 27.8%/27.6%/27.3%, respectively.
(2) Management costs: the company continues to improve system performance, improve human efficiency to achieve initial results, such as the number of employees in the sales team in 21 years effective pressure, so in 23-24 years of new business expansion to form a new team, the employee compensation department will be expanded, and in the long run will stabilize or even shrink slightly. It is expected that the company's management expense ratio in 2022-2024 will be 7.5%/7.5%/7.4%, respectively.
(3) R&D expenses: In line with the company's new business layout, the company will continue to focus on the construction of Yimai ecological platform, realize the performance improvement of core modules such as intelligent advertising and intelligent publishing, and will maintain the training of the R&D team. The R&D expense ratios for 2022-2024 are expected to be 1.4%/1.4%/1.4%, respectively.
In summary, we expect that the company's overall operating income will be 43.1/57.7/7.97 billion yuan from 2022 to 2024, a year-on-year change of 107.7%/33.8%/38.2%; The net profit attributable to the parent was 2.2/3.0/420 million yuan, respectively, a year-on-year change of 34.3%/41.2% in 23-24 years.
(This article is for informational purposes only and does not represent any investment advice from us.) For information, please refer to the original report. ）
Selected report source: [Future Think Tank]. 「Link」