Shulou(Shulou.com)11/24 Report--

The main points of this article

The "star" fell

The disadvantages of vertical e-commerce

The only way out.

As the saying goes, "there is no first in literature, no second in martial arts".

Running an enterprise is no less than a competition, almost all managers want their enterprises to seize the opportunity and become the first place, and there have been many "first shares" in the capital market in history.

However, in order to snatch the time window of "number one", many enterprises often appear on the market hastily before their internal training has been stabilized, prematurely exposing strategic shortcomings, mismanagement, and financial difficulties, and some key executives directly "Ma Fang Nanshan" after "revolutionary success" and live the days of "losing hands and shopkeepers".

As a result, some enterprises failed to recover after a brief rise after listing, and some were surpassed by newcomers, or even ended up miserably; of course, there are some enterprises that have stood the test of time and made great efforts to grow into one of the best companies in the industry.

This paper attempts to review and sort out those "first shares" in the domestic e-commerce industry, and analyze the reasons for their "misfortune".

Striving to be the "first share of e-commerce" with the drastic changes in the external environment, the false fire of consumption has faded, and after the disenchantment of capital, "the first share of e-commerce" has ushered in a different situation.

A typical part of it has to face falling stock prices and investors' withdrawal, while the other part even announces contraction and layoffs directly, and many of them go directly to the embarrassing situation of "running out of ammunition."

In 2010, Jumei's predecessor, Tuan Mei online, Chen ou, a teenager who had failed to start a business twice, was finally blessed by God. In 2011, Jumei's "I speak for myself" series of advertisements came out, Chen and Europe became popular and Jumei became a hit.

Capital followed, Jumei successfully attracted a series of heavyweight VC / PE institutions, Xianfeng Changqing, ZhenFund, Ventech China, Sequoia Capital China successively entered the bureau. In the fourth year of its establishment, Jumei successfully listed in the United States and became the "first share of Chinese cosmetics e-commerce", which can be called one of the major events in China's Internet circle in 2014.

At that time, 31-year-old Chen ou successfully rang the bell, and the combination of young talent and star company made him an idol sought after by countless entrepreneurs. When endorsing yourself became the label of post-80s entrepreneurs, Jumei and Chen ou gained a huge amount of exposure, but also carried unlimited controversy and pressure.

From the beginning of its birth, Jumei, like other e-commerce platforms, could not escape the trouble of fakes. How high-profile it was, how painful it was to fall off the altar, and then Jumei fell into a serious crisis of trust, encountered collective complaints from investors, and the company's share price also fell sharply.

Finally, in April 2020, Jumei announced the completion of privatization and officially delisted from the New York Stock Exchange. The e-commerce company, which once sold IPO at a price of US $22 per share but delisted only US $7, was unacceptable to some shareholders and even seriously affected the brand reputation of Chinese stocks. Zhu Xiaohu directly nicknamed Chen ou as "Chen Qiyuan".

Screenshot of Jumei's advertisement in 2017, Siku was listed on NASDAQ and advertised itself as "the first stock in China's luxury e-commerce". But on the first day of trading, the stock fell below its offering price of $13, and began to fall at the start of trading at $12.1 per share, closing at $10, down 23% from its offering price.

Although Siku is on the market, it is obvious that life is not easy. Siku's share price has been falling since 2018, its market capitalization has shrunk, and its share price has been depressed for a long time. In January 2021, Siku directly announced that it would delist and privatize from NASDAQ. Since then, Siku has not announced its financial results to the public again.

User Ms. Wu recalled that her shopping experience at Shiku was still emotional. She bought Clarins body cream and oil on April 11, 2022, but the product has not been shipped and her application for a refund has not been processed. In October, the order was forcibly cancelled and there was no refund. On November 16, the temple bank sent a text message asking her to change the goods. "it's just buying and selling," she concluded.

Not only are they unable to receive goods for their purchases, but also those users who entrust temples to sell luxury goods do not receive money. User Jin Rou revealed to value Planet that she consigned three items, including shoes and luxury bags, to the temple warehouse in May last year, with a total value of nearly 100000 yuan. In November last year, one of the bags was the first to be sold, but the money has not been received by myself. it has been more than a year since the monastery still failed to refund the money, and the remaining two items want to be returned by themselves, and the application for monastery has not been processed.

"later, I found that there were still many people in my situation," Jin said. "the several rights groups I added alone added up to 300 people, and many people also went to court to sue, but Shiku still did not take any further action."

"the first share of fashion e-commerce" Mogujie has not yet reached the stage of "delisting", but the overall situation is not optimistic.

On April 18, 2020, the media said Mogujie was "laying off staff", accounting for about 10 per cent. Prior to this, the person in charge of live broadcast Mogujie left on March 31, as did Wu Ting and Zeng Xianjie, senior vice president of CFO.

In fact, Mogujie has lost 4.236 billion yuan since he went public in 2018. Mogujie's adjusted net loss from fiscal year 2018 to fiscal year 2022 was 420 million yuan, 240 million yuan, 414 million yuan, 5101.5 yuan and 82.563 million yuan respectively, with a cumulative net loss of more than 1.2 billion yuan over the past five years. Mogujie's adjusted net loss in fiscal year 2022 increased by 61.96% compared with the same period last year, and the loss was further expanded.

As losses widened, Mogujie's share price fell to the floor price, with a market capitalization of just $22.86 million as of December 14, 2022, down more than 98 per cent from $1.33 billion when it went public in 2018.

Before the daily listing of Youxiang, the first share of fresh e-commerce was once a hot "hot cake" in the investment circle. Before and after a total of 12 rounds of financing, the total amount of more than 15 billion yuan, investors in addition to Huachuang Capital, Poly Capital, CICC Capital, Goldman Sachs and other well-known investment institutions, as well as Tencent, Lenovo and other enterprises.

In the early days, Youxian had few competitors on the track of fresh e-commerce, with simple financing and generous spending. In 2019, the company's front positions reached 5000, covering 20 cities. And rely on the lead to be listed on NASDAQ in 2021.

However, a large number of front positions also make the daily excellent fresh cost high. According to the company's annual report, the daily net loss of Youxiang exceeded 8.4 billion yuan in the three years from 2019 to 2021.

On December 5, the listing qualification department of the Nasdaq stock market sent a letter to Daily Youxian, saying that it no longer met the $10 million shareholder equity requirements needed to continue listing on the Nasdaq global market. Under the Nasdaq listing rules, Daily Youxiang has been given 45 days to resubmit a plan that meets that requirement or one of the other listing criteria by January 19, 2023. If daily Youxian fails to restore compliance within any extended period that may be granted, the company's securities will be delisted from Nasdaq.

In April 2019, Ruhan Holdings, behind Zhang Dayi, was listed in the United States, and Zhang Dayi became the first online celebrity to ring the bell on NASDAQ. Ruhan is therefore known as the "first stock of online celebrity e-commerce." However, Ruhan Holdings fell 37.2% on its first day of listing, closing with a market capitalization of just $649 million.

In April 2021, Ruhan Holdings, the first share of online celebrity e-commerce, announced that it had completed privatization and delisted from NASDAQ, ending a short two-year journey of listing, reducing its market value by about 70%.

Cross-border announcement screenshot (part) Xu Jiadong used to be the same. As a top math student at Peking University, he stepped on the dividend of the times and plunged into the blue sea of cross-border e-commerce, resulting in the cross-border communication giant of 10 billion yuan.

Unfortunately, in 2019, cross-border net profit suffered a loss of 2.686 billion yuan that year.

In 2021, Cross-Border was on the verge of delisting. Cross-border 2020 financial report was issued by Zhongxi accounting firm with no opinion, and the company's shares have been delisted risk warning since May 7, 2021. However, in September 2022, the application submitted by Cross-Border to cancel the delisting risk warning was successfully passed and escaped at the delisting gate.

In terms of share price, the share price of Cross-Border has been falling since it reached a peak of 24.68 yuan in 2017. It fell to the lowest level of 1.78 yuan in the middle of last year, with a cumulative decline of more than 90%.

In early December, Cross-Border issued an announcement on the Shenzhen Stock Exchange that Xu Jiadong, the former chairman and general manager of the company (who stepped down in May 2021), had been put on file for investigation by the Wanlin Branch of the Taiyuan Public Security Bureau on suspicion of embezzlement. The specific amount and the people involved have yet to be finally confirmed by the relevant departments.

Losses, delisting, it seems that these "e-commerce first shares" can not escape the fate.

Daring to be the first and striving to be the first stock is originally a positive thing, but in the hands of the pioneers who have lost their original intention to start a business, and in the eyes of the capital who can't wait to mature, one by one once beautiful entrepreneurial stories are finally put into laughter.

In essence, these "first shares" generally lack strong core barriers, mostly through traffic and marketing to drive sales. After the market gives a high valuation, it is more difficult to get a follow-up. In the final analysis, capital values the nature of business, and it is difficult for unprofitable businesses to be "unconditionally supported" by capital.

Small but beautiful VS big and all why these "e-commerce first shares" have fallen?

In the final analysis, it is still not dominant in the three core elements of the "people and goods yard".

In terms of expansion, first of all, the category of goods affects the user's profile, which in turn determines the user's ceiling and the upper limit of the number of active buyers.

The above e-commerce platforms mostly focus on one or two commodity races, and the degree of satisfaction for the needs of users is relatively low, so the ceiling of the number of users is lower. In contrast, integrated e-commerce can meet the diversified commodity needs of users, so the user ceiling is higher, so the number of active buyers of the platform will be higher under the same conversion rate.

For example, the number of active buyers of Ali and pinduoduo is obviously in the first echelon; with the expansion of the category of JD.com, which used to specialize in 3C products, the number of users is increasing year by year, but there is still a gap compared with the first two integrated e-commerce companies; there is a significant gap between the number of active buyers of vertical e-commerce such as Dangdang and VIPSHOP and the top three platforms in magnitude.

Secondly, the richness of goods is positively related to the purchase frequency of consumers, which affects the realization of the transformation from users to buyers.

The more goods sold on the platform, the more obvious the feeling of "online shopping", which makes it easier to form order transactions. The higher the purchase frequency of users, the more conducive to the formation of user habits and stickiness, and promote the retention of traffic more efficiently and transform into buyers of the platform.

In contrast, if the quantity of goods is too small, there will not be a higher frequency of user purchases, users will be difficult to develop habits, retention and conversion will be poor.

Finally, from the perspective of categories, the unit prices of different categories are quite different, so the unit prices of customers on different e-commerce platforms are different.

Among the platforms that start with a single variety, JD.com, who is mainly engaged in 3C categories, has the highest unit price, followed by VIPSHOP, who is mainly engaged in brand clothing. Under the same gross profit margin, the higher the customer unit price, the greater the gross profit margin. Under the same purchase frequency, proprietary e-commerce has stronger profitability, while platform e-commerce can also get higher GMV, which means higher income, thus better able to pay for the capital expenditure of supply chain and logistics construction.

Based on the dialectical relationship between goods and users, those e-commerce platforms that fall or die basically fall on the balance of "flow, category and capital".

Of course, vertical e-commerce companies are also well aware of the pros and cons and intend to make changes.

Earlier, VIPSHOP expanded products in order to get more users, but also extended his tentacles to the logistics and financial fields, but eventually returned to the "special sale". From online ecommerce to offline experience, from luxury goods to agriculture to travel, from wedding customization to 48Hrs's "04:00 private banquet" weekend vacation, Siku used bizarre tricks, but failed to bring the building down.

Xiao Miao, an analyst at the research institution, believes that the consumption behavior of most consumers will be concentrated on several comprehensive platforms, which will not only choose rich platforms to meet most of the needs of eating, drinking and playing, but also realize personalized push through big data and algorithms. hold on to everyone's wallet. Merchants are also willing to spend money to promote the launch on large platforms, one is that the flow pool is big enough and there are enough consumers, and the other is that when different brands compete with each other, they can also help enterprises to iterate their products or adjust the price range to better cater to consumers.

"in contrast, vertical e-commerce has a small volume, low flow, a single category, and a limited number of businesses that can attract, so it does not have an advantage when competing with integrated e-commerce." Xiao Miao concluded.

From the point of view of the industry, the advantage of vertical e-commerce lies in focus and professionalism, it can provide specific types of products that are more in line with the crowd, meet the needs of a certain field, and it is easier to deepen user trust and customer impressions. it is also conducive to brand communication.

But "vertical" also means delineating yourself early and inadvertently losing more users; with fewer users and a low number of users, you need a high enough unit price to maintain the normal operation of the platform, but the high price aggravates the loss of users. so fall into a vicious circle.

Winner-take-all logic compared with comprehensive e-commerce, vertical e-commerce is doomed to be the phased product of e-commerce in a specific historical environment.

Liu Nan, founder and CEO of Honey Sprout, said bluntly that vertical e-commerce is a phased product, and it has played a lot of roles in the development of China's e-commerce industry, such as supply chain construction, consumer mental education, and product integration. Vertical e-commerce has brought a lot of positive value to the industry. What defeats vertical e-commerce is not integrated e-commerce, but the algorithmic ability of integrated e-commerce, which allows vertical people to see vertical content on integrated e-commerce platforms. Therefore, whether it is integrated content platform or integrated e-commerce platform, after obtaining the ability of thousands of people through algorithms, the era of vertical e-commerce will also come to an end.

As early as 2015, Bi Sheng, chairman of the necessary Mall and founder of Letou, threw out the "theory of vertical e-commerce scam". He also gave a set of data: one-way logistics 10% + warehousing 10% + reverse logistics 3% + customer service 1% + technical 4% + managers 10% + market promotion 10% + collection fee 2% + packaging 1% 50%, but there are very few products in the e-commerce industry that can exceed 50% gross profit. Taking into account the price war, subsidies and so on, the gross profit is only 10%.

According to the financial report, 10% gross profit is also an extravagant hope. In 2021, the daily gross profit margin is 11.8%, the gross profit margin of Shiku is 3.77%, and the net profit rates of the two companies are-55.38% and-18.07%, respectively. Mogujie's net profit rate is as low as-190.35%.

For the vast majority of platforms, best-selling categories come together to form a "head", while other relatively personalized, niche and fragmented requirements constitute a "tail". When the tail is long enough, the superimposed trading volume may even exceed the head.

Take Amazon, a well-known global e-commerce company, as an example. in the early days of its establishment, Amazon mainly sold books. at that time, the company's strategy was to compete for customers with bestsellers below market prices and traditional bookstores, and then to make profits with unpopular books and minority books above market prices.

Even though more than a million products are sold on Amazon every day by 2019, this strategy continues in the book sector. According to a set of third-party data, 1% of Amazon's head books contributed about 60% of sales in 2019, while the remaining 99% contributed 40% of sales. Head books and long-tail books have basically become two parts that can be divided into two parts, both of which are indispensable.

This is completely different from the traditional "28 rule". It is right to choose only 20% of the head products, but they do not necessarily generate 80% of the income. Under the guidance of the "long tail effect", the bigger and longer the tail, the easier the market and the greater the stickiness of users, and the barriers will naturally be built.

Xiao Miao believes that due to the existence of this long tail effect, integrated e-commerce is easier to realize, and the overall profitability is also more considerable. But vertical e-commerce does not have the upper hand in the competition, and the limitations of goods limit the value of long tails.

Moreover, the integrated e-commerce platform will quickly cut in when it sees a profitable subdivision. After all, others are not allowed to sleep soundly on the side of the bed. In the luxury sector, Taobao launched Tmall luxury products; JD.com launched the TOPLIFE luxury service platform in 2017; in fresh fruits and vegetables, Alibaba launched sub-brand box Ma Xiansheng and launched Amoy Xianda online; JD.com also launched 7Fresh, and online JD.com to home, claiming "one hour."

The giant is coming, and the vertical e-commerce platform is almost defenseless.

A brokerage researcher said that vertical ecommerce is often compared with integrated ecommerce. On the face of it, vertical ecommerce is more professional in a particular segment and seems to have an advantage. But this means that vertical e-commerce can only address the needs of users in a segment, not economies of scale.

"the greatest value and advantage of the integrated e-commerce platform is that it has formed complete ecological barriers and occupied the competitive highland by virtue of supply chain, after-sale, logistics, payment and other links, while with the intensification of the Matthew effect, integrated e-commerce is continuing to attack the city and dominate the territory. keep squeezing the living space of vertical e-commerce."

Back to the opening question, these "first shares of e-commerce" we have counted have had proud resumes, and they can also be called heroes fighting out of the "sea of blood". But why did they open high and low after listing and walk awkwardly frequently? in the final analysis, they still won Liu Nan's phrase "phased products", and they did not make changes in time.

In today's Internet e-commerce world, moving towards "big and comprehensive" seems to be the only way out. A simple truth is that if different businesses are compared to saplings, a sapling can easily be blown down by the wind, and if there is a sapling, it will be much more resistant to risk.

Reference:

[1] China Electronic Commerce report, Ministry of Commerce

[2] China New E-commerce Development report 2022

[3] "in-depth report on fresh e-commerce industry", Oriental Securities

[4] "Red and Black of E-commerce: long Slope and thick Snow, confrontation between the New and the Old-- three Angles, 91 pages Comparative Analysis Framework", Guohai Securities

[5] "if 130 billion yuan is consumed in ten years, vertical e-commerce will eventually enter the dust of history." Snow Leopard Financial Agency

* this article is based on public information, is for information exchange only, and does not constitute any investment advice.

This article is from the official Wechat account: value Planet Planet (ID:ValuePlanet), author: Tang Fei, Editor: Lin Billy

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