Reporter丨Han Lu, Chen Xiaoping, Editor丨Tan Lu
The 71-year-old Sheng Baijiao is a legend of Chinese footwear.
He single-handedly created Belle, the shoe company with the highest market value, and concurrently served as the chairman of Tongbo Sports, becoming the largest first-class agent of Nike and Adi, and the business was booming.
Now, the two brands are in a state of fatigue, dragging down the shoe giant.
According to the results of the 2022/23 fiscal year announced this week, Tuobao's revenue and profit fell by double digits, with revenue of about 27.073 billion yuan, a decrease of more than 8 billion yuan in two years.
In the past year, the number of personnel has been reduced by as high as 10,000.
"Consumer mindsets and consciousness have changed." Time passed, and Sheng Baijiao had to lead the team to fight a tough battle.
Missed dividends
"Domestic consumer demand ... The overall state of volatility in the past three years has been the most volatile." The management, led by Sheng Baijiao, attributed the sluggish performance to the new crown epidemic.
An inexplicable fact for him comes from the poor performance of Nike and Adi's two major customers.
In fiscal year 2022/2023 (March 2022 to February 2023), the two main brands sold a total of 23.324 billion yuan, a full 4.24 billion yuan less, a significant decrease of 15.4%, dragging down the broader market.
The two companies have fallen for two consecutive years, and in the last fiscal year, they also fell by 3.852 billion, compared with the peak, and the decrease in two years was more than 8 billion.
This situation was encountered for the first time in 20 years.
He started working with Nike in 1999 and Adidas in 2004, rising to become two of the largest distributors in Chinese mainland.
Serve pepper
The two major brands have been the main drivers of revenue, accounting for more than 85%.
At the peak of the 2020/2021 fiscal year, Shengbaijiao helped Nike and Adi sell 31.421 billion goods, and that year, Tongbo also jumped to the peak of 36 billion.
At the beginning of the new fiscal year, the situation took a sharp turn.
In March 2021, unexpected events broke out, superimposed on the supply chain, etc., the two fell to the altar, for many consecutive quarters, lost Greater China, revenue fell at a double-digit rate, and has not recovered so far.
According to Nike's latest quarterly (December 2022-February 2023) financial report, Greater China revenue was US$1.99 billion, a year-on-year increase of only 1% (excluding exchange rate effects), and the proportion of revenue in Greater China has decreased from 22% at the peak to 17%.
The situation was good two years ago, with quarterly revenue of $2.279 billion, up 42% year-over-year.
Adidas, which is slightly weaker, is even more bleak.
From January to March this year, Greater China revenue fell 12% year-on-year to 884 million euros, and has declined for eight consecutive fiscal quarters.
Unfortunately, Shengbaijiao failed to bet on domestic products in time.
Also under the epidemic, domestic brands continued to grow, and the revenue of Anta and Li Ning increased by more than 30% in 2021, and rose by 8.8% and 14.3% respectively last year.
Taobo will only start acting for Li Ning in 2022, and it and 8 other foreign-funded brands have a revenue of only 3.5 billion yuan in the last fiscal year, and the national tide dividend is almost completely missed.
Attrition of 10,000 people
In response to the changes, Sheng Baijiao presided over the team and made many efforts.
Management has significantly promoted the transformation of the channel network, continued to close low-production and loss-making stores, and reduced long-tail inefficient stores in the store structure.
The latest financial report shows that the number of Taobo stores has been greatly reduced.
In FY 2022/23, there were 6,565 directly-operated stores and 1,559 closed, a net decrease of 1,130.
In the three years of the epidemic, the number of stores has decreased by 1,830, and the average daily closure of nearly 2 stores.
Shengbaijiao will concentrate more resources on large stores in core business districts, upgrade and transform stores with higher potential, and the proportion of large stores above 300 square meters and stores of 150-300 square meters will increase significantly, giving full play to the advantages of collection stores.
As of the end of February 2023, large stores of more than 300 square meters alone accounted for 16.1%, a significant increase of 444.
The number of stores dropped sharply, but Shengbaijiao still maintained a stable network.
The financial report disclosed that in the past three fiscal years, the change in gross sales area was +4.1%, +5.4% and -6.8%, respectively, and the physical operating area did not decrease significantly.
The main brand is sluggish, and the fighting days are sad after all.
Its peak annual net profit decreased from 2.77 billion to 1.837 billion, a loss of 1/3.
The channel network also began to show a contraction trend, not only shrinking in area, but also fully promoting large stores, only increasing by 67, less than 1/3 of the previous year.
What is particularly surprising is that at the end of February 2023, Shengbaijiao employed 30,978 employees, a significant decrease of about 10,000 from 40,913 employees at the end of the previous year.
With this kind of strength, Sheng's expectations are obviously not optimistic.
Cheng Weixiong, an expert in textile footwear and clothing brand management, said that in terms of channels, Nike and Adi's main offline distribution of physical stores, direct and online business is relatively small, once the dealer physical store network shrinks, there will be a reverse impact.
There is a view that foreign brands have moved their production lines to Southeast Asia, which has also reduced the agility of Robo.
"Changes in quality, construction period, delivery time, transportation, etc., will affect the speed of product launches, as well as the supply volume and inventory management during the big promotion."
An industry insider told the "21CBR" reporter that the localization of the supply chain is more conducive to product sales and iteration.
For Sheng Baijiao, it is difficult for him to influence the general trend of the brand, and he must find a way to boost it.
Non-stop
In the field of footwear, Shengbaijiao can be described as experienced in a hundred battles.
During the period of hosting Belle, he was over 60 years old, bluntly said that he could not understand e-commerce, did not know how to use computers, and did not have WeChat, "failed to predict the market well, and was miserably impacted by e-commerce."
"Lack of ability to cope with the complexity of the market." He reviewed it this afterwards.
After Belle's privatization, Sheng Baijiao still served as the CEO of the group, holding hands with Hillhouse, practicing digital transformation, and fighting again.
In 2019, Belle's sports and apparel businesses were combined into "Taobao" and relisted on the Hong Kong stock market.
After privatization, Sheng Baijiao originally planned to continue to do it for 2-3 years, and did a good job of carrying on the upper and lower levels, and the result has not stopped.
Tianyan investigation shows that Sheng serves as the chairman of Tongbo International, and also serves in many companies such as Baroque (Shanghai) Garments and Shanghai Yueze Consulting.
Today, retail channels are more diversified, superimposed on the rise of domestic products, and the situation he faces is more complicated than it was back then.
"We have also observed that Chinese consumers are becoming more professional and confident, have more independent thinking in consumption choices, and look forward to deeper participation and co-creation."
Sheng Bai Pepper is also rebuilding cognition, emphasizing the need to enhance interaction and resonance with users, and has stated that it "enriches the brand and product matrix according to the time and conditions." In last year's financial report, Taobo mentioned that Li Ning's sales increased by more than 50%.
Nike and Adi cannot be alone, and local brands may be the growth points that Sheng is targeting.
Optimizing the store, he also continues to upgrade digitally.
Tongbo set up a special team and built an integrated platform last year to summarize and sort out member information. By the end of February, its cumulative number of users reached 67.9 million and it operated more than 40,000 WeChat groups nationwide.
"We re-indented our thinking to polish and refine our high-quality capabilities."
Shengbaijiao is ready to integrate online and offline layout, more agile and efficient product operation, and digital capabilities to increase the efficiency of operation and management capabilities, adhere to its own high-quality development principles, and overcome the current dilemma.
This old man is still keeping pace with the times.