What are the reasons behind the 362 hometown Madonna?

Last Thursday, Chi Ling's elder sister endorsed China's underwear brand, City Beauty, to announce its 2017 annual results announcement.

Three sets of data in the financial summary at the beginning of the announcement are very interesting: in 2017, urban beauty registered a revenue of RMB 4.542 billion, a slight increase of 0.7% year-on-year; operating profit margin was 9.2%; but the urban beauty's operating profit was 37.4 in 2017. The increase of % reached 420 million yuan.

According to the most basic financial formula "profit = income - expenses", there is only one reason for the slight increase in income and soaring profits, that is, the urban beauty has substantially reduced its expenses in 2017. The consolidated statement of profit and loss shows that in 2017, City Beauty reduced spending of $97 million and $51 million on sales and marketing expenses, general and administrative expenses. In this regard, the interpretation of urban beauty is due to the active adjustment of sales and distribution channels during the year, the closure of a number of loss-making stores, negotiating lower store rental and reducing unnecessary human resources expenses.

Crazy to shut the store, why?

Close shop insurance profit? It sounds a bit embarrassing, not to mention the speed of the city's closeness in 2017 is really scary. Closed 362 stores a year, almost every day! The closing shop is so "quick" that it is hard to avoid doubting whether there is any hidden feeling behind it. Is it related to the gambling agreement signed last year with Fosun?

Last year, Fosun's wholly-owned subsidiary made a premium on the city's beauty, demanding that City Beauty's revenue growth in 2017 should be no less than 3% in the same period of last year, no less than 6% in 2018, or no less than 9.18% in revenue in 2018 compared to 2016. %. There are similar requirements in terms of profits, requiring that the year-on-year increase in 2017 and 2018 be no less than 20% or 15%, or that the profit growth in 2016 from 2018 should be no less than 38%. If the gambling requirement cannot be met, the urban beauty will have to pay 100 million Hong Kong dollars to Fosun. So is the urban beauty large-scale closure of the shop in order to avoid paying off the expedient?

One fact that cannot be ignored is that although the income generated by urban beauty sales and retail sales to franchisees has declined, the revenue generated by e-commerce platforms has increased by 73.5% year-on-year. Last year, the urban beauty also reached in-depth cooperation with JD. Jingdong promised to use omni-channel propaganda resources and use platform big data to select target customers for urban beauty. Jingdong Logistics will also take charge of the distribution and distribution of some stores. In other words, the urban beauty is taking the initiative to develop the e-commerce business.

Not to mention that the gambling agreement between Fosun and the City Beauty does not absolutely require an increase in revenue of 3% in 2017. If the revenue growth in 2018 exceeds 9.18% compared to 2016, it will be regarded as an achievement for urban beauty. Therefore, urban beauty is now No compensation pressure. Based on the above two points, a large-scale store closure should only be a simple business adjustment, and make appropriate resources for the e-commerce business. This created a new problem: selling underwear online, reliable?

Online selling underwear, fly it?

From the survey results of the First Financial Business Data Center, it's pretty reliable! The data shows that due to the backwardness of domestic lingerie consumption habits, the per capita consumption of domestic personal clothing is only about half of that in Europe and the United States. In recent years, the overall sales scale of the domestic personal clothing industry has maintained a growth rate of more than double digits, showing that there is huge room for growth in the domestic intimate clothing market. And it was the time.

The female underwear market accounts for more than 30% of the domestic personal clothing market, and it also faces enormous business opportunities. Regrettably, with the gradual saturation of offline channels in the first and second tier regions, the development of the women's underwear offline market is facing bottlenecks. At the same time, the online female underwear market has developed steadily.

Take Taobao Tmall as an example. From 2011 to 2015, the scale of women's underwear on the platform has grown steadily, and underwear companies such as An Lifang and Huijie Group have begun to expand their e-commerce channels as early as 2014.

For the lingerie brand of young women who are seeking a cost-effective young woman in the urban beauty industry, turning online is not only in line with the industry trend, but also an objective requirement for development.

The pursuit of cost-effectiveness by urban beauty's targeted customer base means that it will give up on other factors that affect the purchase, such as whether it can be tried on and whether it is stylish enough. It also means that the urban beauty is relatively weak in profitability, relying mainly on small profits and quick turnover. Therefore, the urban beauty will have a higher risk of expanding offline stores in third-tier and fourth-tier cities. The use of e-commerce channels to transfer sales to e-commerce platforms with relatively low sales costs will help reduce the business risks and uncertainties of urban beauty.

Despite this, the gambling agreement signed between the urban beauty and Fosun is still a sword that hangs overhead and cannot be ignored. Whether or not the urban beauty can meet the gambling agreement after one year let us wait and see.