Text / Nine Talents
Producer / Node Finance
Recently, founded in 2009, The Child King (301078. SZ) officially rang the chinext board, with an issue price of 5.77 yuan per share, raising nearly 630 million yuan. The funds raised this time will mainly lead to the construction of omni-channel retail terminals, digital platforms and logistics centers, and will supplement the company's working capital. As of the close of trading on October 25, the company's stock price was 20.04 yuan per share, with a total market value of about 21.5 billion, a slight decrease compared with the first day of listing.
Of course, this is not the first time that the child king has tested the waters of the capital market. In December 2016, The Child Wang was listed on the National Stock Transfer System (New Third Board) for public transfer, and then terminated its listing on April 24, 2018. Before delisting, the market value of Child King was about 16.7 billion yuan. Based on the issue price of this listing, the total market value of the child king in the early stage of the listing is about 6.3 billion yuan, which is a significant gap compared with the original 16.7 billion yuan.
According to the prospectus, from January to June 2021, the operating income of Child King increased by 15.39% year-on-year to 4.438 billion yuan, and the net profit attributable to the mother fell by 3.69% year-on-year to 160 million yuan, without increasing profit. In recent years, China's newborn birth rate has continued to decline, after 2020 has been less than 10%, focusing on the mother and baby industry of the child king will face such a big environment?
/ 01 /
Can the big store model be "all-consuming"?
In 2009, Wang Jianguo, the founder of Kid King, sold his five-star electrical appliances to the US home appliance chain giant Best Buy, took the proceeds of $400 million, rented 3 offices at the Metropark Hotel in Nanjing, and began a new business journey. At that time, feeling the price competition in the home appliance industry and the bottleneck in the development of the domestic traditional retail industry, Wang Jianguo hoped to find a new road.
He set his sights on the maternal and infant industry.
At that time, the domestic maternal and infant industry was still in the early stage of development, and the participants in the maternal and infant market were relatively independent and scattered, mainly self-employed and mom-and-pop shops. No one expected that the market of 800 billion yuan in that year would grow nearly 3 times to 3 trillion yuan in just ten years. The child king who lives on the cusp of the wind naturally rises in turnover.
But Wang Jianguo's expectations for the child king are far from being as simple as mother and baby retail.
At the end of 2009, Kid King opened the first offline store in Nanjing Hexi Wanda, with a single store area of more than 6,000 square meters, while the world's largest single store area of mother and baby children's stores covered an area of only 2,000 square meters. In the same mother and baby track, and as early as 2018, it has been registered in the A-share baby-friendly room, the average single store area in 2020 is only 640 square meters, while in the same year, the average single store area of the child king is about 2500 square meters, and the largest single store area is more than 7000 square meters.
What kind of assumption is such a large store area, and what will be relied on to support the ping effect?
In Wang Jianguo's vision, Child King will not only be a retail channel for maternal and infant products, he hopes to reach more maternal and infant users through this consumption scene, and incorporate their surrounding needs into the bag to create a one-stop shopping experience.
In addition to the supply of ordinary goods, Kid King has also built a parenting service platform and a growth service platform for parents and children. Among them, the childcare service platform mainly provides services such as confinement, childcare and maternity for pregnant women and newborn families, while the growth service platform focuses on children's talents, sports, video and other aspects.
As of 2020, Kid King employs nearly 4,700 childcare consultants, all of whom hold national nursery professional qualifications and can perform a variety of functions such as dietitians, maternal and infant nurses, and child growth trainers. At this stage, the sales revenue of the child king is still mainly based on milk powder and diapers, and the income of cultural and educational intelligence is relatively low. In the whole of 2020, the sales revenue of Child King Milk Powder was 4.274 billion yuan, accounting for 57.86%; the sales income of diapers was 969 million yuan, accounting for 13.12%; and the income of cultural and educational intelligence was 0.65 billion yuan, accounting for 0.88%.
However, the gross profit margin of the cultural and educational intelligent project is much higher than that of the milk powder and diaper retail business. According to the prospectus, during the reporting period, the revenue of the child king service business continued to increase, and the profitability also improved. In the whole year of 2020, the sales revenue of child Wang Wenjiao Intelligent accounted for 0.88%, and the gross profit margin reached 43.38%, second only to underwear home textiles (54.85%), foreign trade children's shoes (54.17%), much higher than milk powder retail (18.62%), diaper retail (21.20%).
At the same time, the Giant-style store not only undertakes retail and service functions, but also is an important contact point for the child king to "pull new". It is reported that before the opening of the new store, the child king will arrange in advance to cover the community and cross-industry institutions within 3-5 kilometers of the store, in the form of deposit expansion, water storage seed users. At present, for newly opened stores, the child king will generally reserve more than 6,000 members in advance.
In addition to the opening reserve, "Pulling New" runs through the daily operation of the Child King store. In the daily work of shopping guides, the number of new DOWNLOADs of APP and the number of new friends added to Enterprise WeChat are important components of KPI assessment. In addition, stores will also use their own venues to hold offline activities, and the number of annual event venues will also be included in the assessment system. Kid King's store activities are also very diverse, covering everything from babies to new mothers.
The "all-you-can-eat" play method of creating a one-stop shopping experience in the big store model, supplemented by the multi-dimensional "pulling new" with the store as the contact point, soon achieved quite a good effect, making it an aircraft carrier-level existence in the mother and baby industry. As of 2020, the number of Kid King members exceeded 42 million, an increase of more than 2.6 times compared with 11.43 million at the beginning of 2017, of which the number of active users in the past year exceeded 10 million.
/ 02 /
Aim at consumer motivation
The "single-guest economy" model
In the face of so many user savings, how to keep them motivated to consume for a long time has become the biggest test of the child king.
For the traditional retail industry, the location of the store directly determines the operating efficiency of the store. A good store in the "city" can survive even if the service is not satisfactory, with a huge daily flow of people. This is also the original intention of Wang Jianguo to bid farewell to five-star electrical appliances, and he hopes to walk out of a different retail road in the child king.
Different from traditional retail, Child King does not rely on the natural traffic of the store itself, and compared with "one-hammer trading", Child King pays more attention to the refined operation of existing users. Intensive cultivation has made the child king move from a rough traffic economy and economy of scale to a "single-guest economy" that deeply excavates user value. The "single-guest economy" model of Child King mainly follows the logic of "interaction produces emotion - emotion produces stickiness - stickiness brings high-value members - high-output value members word of mouth affect potential consumer members", and is committed to increasing the consumption life and consumption contribution of individual users.
At present, Kid King has built a complete multi-line online channel architecture such as mobile APP, public account, mini program, and micro-mall. During the pre-sale period or after the user enters the store for the first time, the child king shopping guide will guide the user to add the personal WeChat of the shopping guide, scan the code into the group, pay attention to the child king public account, and download the child king APP during the communication process. After the user completes the above series of steps, the child king will push the preferential invitation of "new customer one dollar purchase", prompting the user to complete the first order, forming a preliminary trust in the child king channel.
Of course, at a time when direct consumer (DTC) has become a universal concept, it is not difficult to build channels, but how to use these channels efficiently to accurately reach customers. In this regard, Child King said in the prospectus that based on the user data collected in the service process, Child King has established more than 400 basic user tags and more than 1,000 intelligent models, and on this basis, it provides targeted services of "thousands of faces".
At the same time, Kid King has developed more than 1,300 digital tools to digitize the entire operational process. Through the self-developed management tool "Human-Guest Integration" APP, parenting consultants can understand the user's behavior characteristics and shopping service needs according to the user's identity information, behavior information, and transaction information, and efficiently provide customized services.
According to the prospectus, in 2020, the R&D expenditure of The Boy King totaled 0.87 billion yuan, accounting for 1.04% of the operating income, a slight decrease compared with 2019 (104 million yuan), but more than double that of 2018 (0.41 billion yuan). At present, Kid King has a total of 12 research projects, covering channel member marketing, intelligent customer service, content management and other aspects.
When the user leaves the store, the child king will surround the user through online channels to create an immersive shopping experience for the user. In the user's WeChat group, the shopping guide will regularly push in-store preferential information according to the known user behavior characteristics and shopping service needs; through the APP terminal, Child King will regularly provide appropriate discounts to the right users based on the intelligent model, promote the frequency of online repurchase, and maintain user stickiness.
In addition, in terms of user stickiness, The Child King's online channels will continue to expose offline store activities and feed back store traffic, so as to achieve the integrated development of online and offline.
/ 03 /
The choice under marginal growth dilemmas
Do you do retail or branding?
On the other side of the good situation, the child king who is walking in opening up customer channels and digging deep into the customer road has fallen into the dilemma of marginal growth.
In 2018, 2019 and 2020, the gross profit margin of Baby King's maternal and infant products was 25.50%, 23.78% and 22.82% respectively, showing a downward trend. Except for the increase in transportation expenses from sales expenses to operating costs from January 1, 2020 (about 0.75 percentage points in 2020), the consecutive year-on-year decline in gross profit margin was mainly caused by the decline in the overall gross profit margin of related products.
The products sold by Child King are divided into two categories: distribution and consignment sales, and the gross profit margin of distributors is lower than the gross profit margin of consignment goods. In 2020, the gross profit margin of distributors was 18.41%, an increase of 0.05 percentage points compared with 2019 (18.46%); the gross profit margin of consignment goods was 24.55%, down 0.59 percentage points compared with 2019 (25.14%).
According to the prospectus, the difference in the gross profit margin between distributors and consignment goods is mainly due to the bargaining power of the child king. Child King dealer products are usually well-known brands, the number of brands is small, the price is relatively transparent, the Child King does not have additional bargaining power; the consignment goods are mainly long-tail supplementary goods, the number of brands is large, and the brand needs to be promoted with the help of the Child King channel, and the Child King has more bargaining space.
However, in the sales revenue of the child king, the sales revenue of the distributor's products is much higher than that of the consignment goods. Take milk powder and diapers with a high proportion of sales revenue as an example: in 2020, milk powder distribution achieved sales revenue of 2.971 billion yuan, accounting for 69.52%, gross profit margin of 16.56%, milk powder consignment sales revenue of 1.303 billion yuan, accounting for 30.48%, gross profit margin of 23.33%, the average gross profit margin of milk powder for the whole year was 18.62%; diaper distribution achieved sales revenue of 521 million yuan, accounting for 53.80%, gross profit margin of 19.76%. Diaper consignment sales achieved sales revenue of 448 million yuan, accounting for 46.20%, gross profit margin of 22.87%, and gross profit margin of 21.20% for the whole year of the year.
It can be seen that although with the new retail idea, the child king who has embarked on the DTC journey with one foot still has a certain gap with the upstream mature brands in terms of user mental competition. Although The Child King has laid out high-margin cultural and educational intelligence-related projects, considering that it currently accounts for less than 1%, it will take time to become an important source of revenue.
In response to this problem, the foreign retail industry has actually given a solution. The British supermarket chain TESCO and the department store chain Marks & Spencer have their own brands with multi-production lines in their stores, such as TESCO's juice products and Marks & Spencer's clothing products. Compared with distribution or consignment sales, its own brand can extend the industrial chain upstream, thereby thickening the company's profits.
However, considering the speed of store expansion in the past two years, the distribution and consignment sales model may still be its main development direction in the short term. In the future, when the sales network is stable, when the child king can carry out more refined management of the product, the choice of retail or brand, the child king may be more accurate.
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