Youngor, the "alien planet" of the clothing industry

Text | Xinyan, author | Wang Yun, editor| Sang Mingqiang

In the field of clothing, Youngor has always been a special presence.

The public's first impression of it is the veteran players of the clothing track (mainly men's business suits), and, on other tracks, Youngor is also full of experience. Looking at the commercial territory of Youngor, from the beginning of clothing, real estate, foreign trade, textile tourism, investment adjustment to brand clothing, real estate development, equity investment "troika" drive together.

Reviewing Youngor, its development process can be roughly divided into 5 stages:

1. Brand formation period (1979-1992): From the establishment of small workshops to brand strategy, Youngor mainly concentrated: horizontal joint venture (to complete part of the original accumulation of technology and capital) and the introduction of foreign capital (the establishment of the brand 'Youngor'), the introduction of relevant advanced equipment, opened a "high starting point, high investment, high technology" three high brand strategy model;

2. Shareholding system transformation period (1993-1997): Youngor turned to internal mechanism reform, and the company ushered in explosive growth by mobilizing the enthusiasm of producers, operators and investors;

3. Listing operation period (1998-2000): In 1998, Youngor was listed on the A-share market, opening a new stage of international integration;

4. Deep ploughing period of garment industry chain (2001-2006): Youngor International Garment City and Textile Industry City were completed, which built the upstream and downstream industrial chain of garment and accelerated the pace of transition to "international brand";

5. Diversification and expansion period (2007-present): Youngor has formed a pattern of diversified development with textiles and clothing, real estate and international trade as the core, which has increased Youngor's anti-risk ability to a certain extent.

Unlike similar enterprises, Youngor is a good research target in the dimensions of time (enterprise life cycle of more than 40 years) and space (the "troika" mentioned above), and its success is unquestionable, based on this, the new eye of this article will focus on the analysis:

Review Youngor's corporate fundamentals;

Youngor is diverse, right or wrong?

Regarding cross-border, Youngor's thinking and practice.

<h2>"Vertical integration"</h2>

Looking at domestic clothing players, there are few like Youngor, who have a long "vertical industry chain" (more OFEM or OBM).

For China's textile and garment enterprises, 2004 is a special year, this year, there are many variables - raw materials rise, export rebate rate reduction, trade friction restrictions on exports, resulting in a decrease in the average gross profit margin of the industry. At the same time, "SARS" has affected exports to a certain extent (inventory backlog is the fatal crux of enterprises), the popular cycle of clothing is getting shorter and shorter, and enterprises are mainly relying on fabric and style innovation in the market.

In this case, Youngor began to integrate the textile and apparel industry chain.

Specifically, Youngor has expanded its industrial chain one step forward, that is, it has built its own textile city integrating cotton planting, processing and spinning: upstream textile, midstream clothing, and downstream sales.

This step is undoubtedly a success.

First, breaking through the bottleneck of raw materials, self-production can greatly save fabric procurement costs and transportation costs, to know that China's domestic sales of high-end suits, shirts with high-grade fabric self-sufficiency rate is only 60%, export products use imported fabrics the proportion of 40%. The second is to improve the competitive advantage of the main products, the fabric textile base of the garment enterprise concentrates on the production of small batches, multiple varieties, high value-added flower fabrics, and the investment in the design of the suit is more, which can meet the special requirements of the company itself for the fabric in time, and occupy the opportunity in fabric innovation and fashion trends.

After completing the capacity building of garment production, Youngor began to enter the field of commercial marketing, and built a marketing network system covering the whole country, covering six offline channels such as self-operated stores, shopping malls, shopping malls, online stores, franchises, Oleai, group buying, etc. In addition, the company is also testing the water e-commerce business, exploring micro-mall distribution, live broadcasting and other marketing models.

From a practical point of view, too many self-built networks have also caused an increase in actual inventories to a certain extent, and have caused a cost burden on the maintenance and construction of the network. But in the view of Li Rucheng, chairman of Youngor Group:

"Western developed countries have more than two hundred years of industrialization history, their division of labor has been relatively fine, each division of labor is very professional, retail is retail, production is production, and can form the best combination, each link has a reasonable and meager profit existence." But this is not what they are willing to do, but has experienced the market waves, in China is the opposite, the current traditional business began to decline, the new business trend has not yet formed, China's circulation field is facing fierce competition, this competition has not yet begun. This explains why Youngor would later close some small and poorly profitable stores and franchise stores, and carefully build large specialty stores of 1,000 to 2,000 square meters.

<h2>"Diversified Play"</h2>

The "troika" strategy is the root of Youngor's "outliers."

After China's accession to the WTO, many foreign brands (such as Armani, Cavani, Jellia) have entered China, at the same time, after a long period of development in the Chinese men's wear market, a number of very good Chinese local brands have emerged, such as Shanshan, Lilang, Annunciation Bird, Seven Wolves, Prince Dragon, etc., and the competition has become more and more fierce.

In order not to put eggs in the same basket, Youngor began to expand into other markets, such as real estate, investment and so on.

The real advantage of diversification is to find new cash flow business and form the second growth curve of the enterprise, taking the real estate field as an example, according to public data, in 2008, youngor real estate business accounted for 42% of the company's overall revenue, and in 2009, youngor real estate industry contributed as much as 47% to total operating income, showing a year-on-year growth trend.

At the same time, sharing real estate and clothing industry resources, buying stores, and selling clothing has become a new phenomenon in modern business.

In the later performance, the diversification of ideas was further proved: in 2009, the revenue of youngor clothing plate was 1.285 billion, down 21.92% year-on-year, while the real estate business ushered in a sharp rise against the trend, with revenue of 2.609 billion, an increase of 179.84% year-on-year, which was in stark contrast to the dismal performance of clothing.

If you carefully observe Youngor's performance statement, you will find that the proportion of revenue in the clothing field in Youngor's corporate revenue is decreasing year by year. According to the incomplete statistics of New Eyes, from 2007 to the first half of this year, youngor's total revenue was about 170 billion, of which the clothing business contributed 67 billion yuan, accounting for about 40% of the company's revenue, and diversified operation weakened its original operating industries, resulting in dispersion of resources and organizational structure.

This dispersion also makes Youngor not look like a pure clothing company.

<h2>Diversification, or specialization? </h2>

Whether to choose diversification or specialization is a fork in the road that most enterprises will face on the road to development.

Interestingly, when we compare our peer Heilan Home and find that the operating income of Heilan Home in the past three years is higher than that of Youngor, and the two profits are lower than Youngor, on this issue, we need to discuss from two aspects: 1, mature supply chain; 2, diversification mechanism.

Chart: Comparison of revenue and net profit of Youngor and Heilan Home (Source: Financial data of the company's annual report)

In the new consumption era, creating a mature supply chain is the core moat of garment enterprises. In 2018, Youngor opened the O2O model, from online to offline, physical stores became a display platform. In simple terms, consumers can select goods in the store, place orders online to get a more favorable price; they can also place orders when shopping, and then do not have to pick up the goods, continue to watch movies, eat, and when they go home, the clothes have arrived home, and the clothes are delivered by the nearest store.

This way of playing is very similar to the ordering and distribution of the US group, connecting online and offline to solve the inventory problem, accelerate the turnover of goods, and improve marketing efficiency. Compared with the convenience of shopping platforms such as Taobao and JD.com, and the experience of physical stores, Youngor will give full play to the advantages of these two and restore the whole process of shopping for consumers.

In addition to the "online + offline" shopping model, Youngor's diversified playing style is also particularly critical.

At the store level, Youngor is superior to other similar enterprises, that is, Youngor's self-operated model. In the mid-to-late 1990s, Youngor made two decisions, opening a self-operated store + involved in real estate development, only buying stores and not renting stores. For a simple example, in 2004, Youngor had spent 150 million yuan on Nanjing East Road in Shanghai to buy a 3,000-square-meter store, renovating and opening a 'Youngor Home', in Li Rucheng's view, although renting a store can make the financial statements look better, but the company has to pay a rent every year, and if the property is bought, it is equivalent to "the funds are still in the enterprise".