Recently, the Hong Kong Stock Exchange once again ushered in an "old acquaintance" - Multipoint DMALL Co., Ltd. (hereinafter referred to as Multipoint DMALL), which submitted prospectuses to the Hong Kong Stock Exchange in December 2022 and June 2023 respectively. Now it has chosen to start its journey of listing in Hong Kong again, and the joint sponsors are UBS Group, China Merchants International and China Merchants Securities International.
At first glance, it doesn't seem like a thunderous DMALL, but when it comes to Zhang Wenzhong, the founder behind it and once known as the "godfather of Chinese supermarkets", his legendary life of ups and downs must be difficult for many retailers to match.
1. The rebirth "work" of "the godfather of Chinese supermarkets"
According to Bedo Finance, DMALL is a retail cloud solution service provider, mainly providing a cloud-based one-stop end-to-end digital retail SaaS (software operation service) platform for the local retail industry, which was founded by Zhang Wenzhong in 2015.
According to the prospectus, Zhang Wenzhong, the founder, senior consultant and controlling shareholder of DMALL, first set foot in the retail industry when he founded Wumart Technology (hereinafter referred to as Wumart Group) in 1994. In 2015, Zhang Wenzhong leveraged the technology and other knowledge he had accumulated in the retail business to implement his vision that the future of the retail business should be digital, and in 2019 launched Multipoint DMALL's proprietary all-in-one Dmall OS system.
According to public information, Zhang Wenzhong was admitted to the Department of Mathematics of Nankai University when the college entrance examination was just resumed in the last century, and after returning from studying in the United States, he founded Wumart Supermarket due to the cold of his self-developed digital system, and single-handedly built it into the largest supermarket chain in the north, and in 2003, Wumart Group was successfully listed in Hong Kong (after privatization and delisting in 2015), becoming the first private retail stock in the mainland.
In 2009, Zhang Wenzhong was imprisoned for some reason, and was released in 2013 after two commutations (while in prison, he also won 4 patents and 3 provincial and ministerial science and technology awards). After being released from prison, Zhang Wenzhong has been applying for innocence, and in 2018, he was acquitted by the National Supreme Court - Zhang Wenzhong was not guilty, Wumart Group was not guilty, and the corresponding fines and property were recovered.
After being released from prison, Zhang Wenzhong published an open letter titled "The Ups and Downs of Life: Entrepreneurship, Unjust Prison, and Starting Again", "Although I have been imprisoned, I always firmly believe that justice will eventually come!" I will not regret that I stick to morality and integrity, and do not violate the bottom line of being a human being. … In prison, facing the wall, working, reading, and thinking made my spiritual world calm and fulfilling. ”
The establishment of multi-point DMALL is Zhang Wenzhong's Wumart Group delisted from the Hong Kong stock market and its release from prison, and it announced the completion of an angel round of financing of 100 million US dollars shortly after its establishment, which has refreshed the domestic angel round financing record in one fell swoop.
According to the prospectus, Duodian DMALL has completed three rounds of financing since its establishment, with a cumulative financing amount of more than 700 million US dollars, and dozens of investors such as IDG Capital, Industrial Bank, Tencent, Kingdee International, and Yunhui Limited (Yunda) stand behind it. In November 2022, DMALL completed a $51.8 million Series C+ financing, with a post-investment valuation of about $3.052 billion.
Up to now, Zhang Wenzhong controls a total of DMALL58.36% of the shares of Duodian through Wumart Supermarket and other entities, and is the controlling shareholder of the company. In 2022, Zhang Wenzhong stepped down as the chairman of the board of directors of DMALL and currently only serves as a senior advisor to the company. On the 2023 Hurun Report, Zhang Wenzhong's wealth reached 20.5 billion, ranking 261st.
According to data from Frost & Sullivan, in 2023, in terms of revenue, DMALL is the largest retail cloud solution provider in China and the leading in Asia. In terms of gross merchandise transaction, DMALL is the largest digital retail service provider of retail cloud solutions in China.
2. Solve the problem of physical retail "Wumart" supports the business
To become the industry leader in China and even Asia, the development of DMALL is inseparable from Zhang Wenzhong's technical blueprint and Wumart Group, which was founded by Zhang Wenzhong.
According to the prospectus, DMALL focuses on providing retailers with a full range of retail digital solutions, and its business is divided into three categories: retail core service cloud, e-commerce service cloud and marketing and advertising service cloud, to enhance the operation, marketing and sales capabilities of retailers and brands, so that they can better serve end consumers.
Among them, the retail core service cloud, which accounts for a large proportion of business, integrates a series of functions to help retailers digitize and optimize their operations. The Dmall OS operating system handles the most critical parts of retailers' day-to-day operations, while the AIoT solution integrates offline data for more efficient store management. The Company charges retail customers at a commission rate based on the total amount of merchandise transactions processed by the customer through the operating system or the subscription fee for the use of the operating system, as well as the costs involved and implemented; and charge customers who use the company's AIoT products at a commission rate.
E-Commerce Service Cloud is an online-to-offline retailer platform for offline retailers and brands, enabling customers to sell their products through multi-point mobile applications and mini-programs. The Marketing and Advertising Service Cloud mainly provides display marketing services in the form of banners and text or graphic marketing links for multi-point mobile applications, and collects marketing and advertising fees from advertisers and targeted marketing analysis consulting fees.
From 2021 to 2023 (referred to as the reporting period), the revenue of multi-point DMALL will be 1.044 billion yuan, 1.501 billion yuan and 1.75 billion yuan respectively, and the gross profit will be 358 million yuan, 669 million yuan and 712 million yuan respectively. The gross profit margin was 34.3%, 44.6% and 40.7%, respectively.
Among them, the revenue of retail core service cloud solutions was 439 million yuan, 881 million yuan and 1.299 billion yuan respectively, accounting for 42.0%, 58.7% and 74.3% of the revenue of multi-point mall, respectively. Revenue from e-commerce service cloud solutions was $409 million, $448 million and $0.3 billion respectively.
According to the prospectus, the digital retail business of multi-point DMALL began with the cooperation with Wumart Group, which implemented the cloud solution of multi-point DMALL in the national store network of Wumart Group, and also had a large number of business transactions with many affiliated entities during the reporting period, including METRO China entity, Chongqing Department Store Group (no longer an affiliated entity since March 9, 2024), Yinchuan Xinhua Group, etc.
During the reporting period, the revenue generated by the above-mentioned "Wumart" customers was 709 million yuan, 1.069 billion yuan and 1.31 billion yuan respectively, accounting for 67.9%, 71.3% and 74.9% of the total revenue of DMALL. Among them, Wumart Group, the company's largest customer, contributed 473 million yuan, 661 million yuan and 927 million yuan of revenue, accounting for 45.3%, 44.1% and 53%. Even in the prospectus, DMALL bluntly stated that it expects an increase in business transactions with related entities in the future.
This is where the discussion about the risk of customer concentration in multi-point DMALL comes from.
3. Fat Donglai partners have lost 3.3 billion yuan in three years
At present, DMALL covers all major retail formats, including supermarket chains, warehouse supermarkets, department stores, convenience stores, specialty retailers and retailers operating in a new retail mode. As of March 31, 2023, DMALL has served approximately 380 customers. In 2020, 2021 and 2022 and for the twelve months ended March 31, 2023, its net income retention rates were 165%, 208%, 140% and 125%, respectively.
But "biggest, leading, and comprehensive" does not mean making money. The market share and revenue performance of multi-point DMALL are relatively ideal, but the profit is a bit outrageous.
According to the prospectus, during the reporting period, the cumulative losses at the end of the same period were 5.199 billion yuan, 6.008 billion yuan and 6.602 billion yuan respectively. Net losses for the same period were $1,825 million, $841 million and $655 million respectively. The cumulative loss in three years reached 3.3 billion yuan.
And in terms of spending, it has not been reduced because of the sluggish profits. During the reporting period, the R&D expenses of DMALL were RMB614 million, RMB607 million and RMB551 million respectively, accounting for 58.8%, 40.5% and 31.5% of the total revenue, respectively. During the same period, the company's sales and marketing expenses were 608 million yuan, 307 million yuan and 180 million yuan respectively, and the huge R&D and marketing expenses may also be one of the reasons for its continuous losses.
According to the prospectus, the loss in the reporting period was due to expenses incurred with the growth and development of the business, including significant investments in research and development to support the continued development of proprietary operating systems, an increase in the number of employees in internal functions in line with accelerated growth, marketing resources used to expand the customer base and stimulate consumer traffic on e-commerce platforms, and logistics costs for integrated e-commerce services.
Compared with whether it can be improved in the later stage, multi-point DMALL did not give an exact reply. The prospectus mentions that multipoint DMALL started operations in 2015 and developed the core module of the Dmall OS system in 2018. With limited historical financial data, there is also a risk that it will be difficult to predict future earnings and appropriate cost and expense budgets.
For the funds raised in this IPO, the multi-point DMALL plan will be mainly used to develop new applications and new service modules, and seek strategic cooperation, investment and acquisition with complementary growth strategies. DMALL said it would promote overseas expansion and plan to enter the Brunei and Indonesian markets in 2024.
Just last month, Fat Donglai, a local supermarket in Henan, announced that it had reached a strategic cooperation with DMALL, a retail digital solution service provider. According to the content of the cooperation, DMALL will provide a set of digital intelligence systems and intelligent IoT services for Fat Donglai, covering many important areas such as commodity digitalization, supply chain digitalization and store digitalization.
As the founder Zhang Wenzhong once mentioned in public: "We must firmly believe that difficulties are temporary, and the company will be better." …… Satisfying consumers' pursuit of a better life is my original intention as an entrepreneur; It is my mission and pursuit to use digitalization to promote the transformation of the retail industry. When there is spring in the heart, life is full of sunshine. I set off again. ”
Can you reach your destination with more DMALL this time?