Shangpin home with high gross profit and low net profit directly to the store to bring high costs

Behind the nearly 2 billion yuan in revenue, the net profit of Shangpin's home delivery is only 130 million yuan, and the net profit margin is far lower than that of Sophoya, Haolaike, Qumei and other peer companies. Behind the "high gross profit, low net profit" is the high cost of sales and management costs of Shangpin.

According to the data disclosed in the prospectus, Shangpin's home use adopts the “double brand” strategy, and its “Shangpin Home Match” and “Weiyi Customization” respectively invite Zhou Xun and Li Bingbing to act as advertising spokespersons. In 2014, the company’s advertising and publicity expenses were nearly 130 million. , equivalent to the company's net profit.

Nearly 50% of gross profit margin behind the direct mode

Shangpin Home is equipped with a customized home operation mode. They will send designers to the door for free measuring and design. After the furniture is customized, they will be delivered to the door for on-site installation. According to the introduction of the prospectus, Shangpin House is equipped with a set of “flexible production process”, which intelligentizes the processing equipment into an automated machine manufacturing system that changes according to the processing object. In the specific process, all orders will be broken into non-standard parts. Even each component has a two-dimensional code, and the machine completes the assembly and customization by recognizing the two-dimensional code. At present, Shangpin home is still working on O2O.

Compared with traditional finished furniture, custom furniture has a large competitive advantage in meeting the individualized needs of consumers. Several domestic custom furniture companies have achieved high-speed growth of 30%-50% in recent years, significantly exceeding the furniture industry. The overall growth rate of 10%-15%.

In 2009, the company had received investment from Dachen Venture Capital, and Dachen Cinxin and Tianjin Dachen, two companies under the company, held a 15% stake in Shangpin.

Fu Zhonghong, the general manager of Dachen Ventures Shanghai Branch, who led the investment, told the media that Dachen had studied the company for two years and was very optimistic about its business model because it solved the low cost problem of furniture customization. .

Li Lianzhu, the chairman of Shangpin Home Furnishing, was a lecturer at South China University of Technology and co-founded Yuanfang Software with his classmate Zhou Shuyi to provide design software and information-based solutions for home furnishing enterprises. It is the advantage of information technology that allows Shangpin's home to solve the problem of how to make customized furniture can be mass-produced earlier.

The gross profit margin of the Shangpin housing disclosed in the prospectus surprised many capitalists. The furniture company's gross profit margin is close to 50%, and it is 10% to 15% higher than its peers.

From 2012 to 2014, the gross profit margin of the comprehensive business of Shangpin Home Furnishings was 50.96%, 47.01% and 44.82% respectively. In contrast, Sofia, Qumei, Haolaike and Europa Group have been in the past few years. The average gross profit margins were 34.58%, 35.98%, and 37.06%, respectively.

The reason why there is such a high gross profit, an important reason is the "direct store" mode of Shangpin.

According to the company's strategy, Beijing, Shanghai, Guangzhou, Nanjing, Foshan and other key cities are almost all adopting direct sales strategies to strengthen their control over sales channels. In the second, third and fourth tier cities, they will join. mode.

The biggest advantage of the direct store is that, because the sales of the customer directly to the terminal are sold, the sales price of the Shangpin home is relatively high, and the gross profit margin is better than the dealer model and the engineering customer model.

The number of direct stores in the company reached 68 at the end of 2014, and 901 franchise stores. The sales revenue of the company's direct stores in 2014 reached 787 million yuan, accounting for 43.15% of the current operating income of custom furniture and supporting household products.

In other words, nearly half of the furniture sales in Shangpin is from a direct sales store. The company "has one-handed production, one-handed sales", and the model is much heavier than its peers. In contrast, the counterparts of Shangpin’s homes seem to rely more on “joining” and the mode is relatively “lighter”.

According to the main competitors disclosed in the prospectus, the European Group has 3,555 stores, of which only 19 are direct stores; Haola has 842 dealers and 15 direct stores, and Qumei Furniture owns stores 624. There are only 8 homes and direct stores; in addition, Sofia is even a dealership store.

In the future, the number of directly operated stores in Shangpin will continue to expand.

According to the prospectus, in the next three years, the company will implement the “flagship store expansion plan” and “standard direct store expansion plan” to add or create “flagship stores” in large cities such as Guangzhou, Beijing, Shanghai, Nanjing, Wuhan and Chengdu. 10 companies have added more than 70 “standard direct sales stores”.

The proportion of direct sales stores is large, and it also brings some burden to Shangpin.

"Direct store" brings high costs

Behind the peers' gross profit margin, the net profit performance of Shangpin's home delivery is not satisfactory. In 2014, the company's revenue was 1.912 billion yuan. Under the revenue of nearly 2 billion, the net profit was only 130 million yuan and the net profit margin was 6.8%.

This kind of profitability is much lower than that of several listed companies mentioned in the prospectus. At present, the furniture companies listed on the A-share market include Sophia, Haolaike and Qumei Holding. The net profit margins in 2014 were 13.9%, 15.9% and 9.14% respectively.

Compared with the peers, Shangpin's home is equipped with high gross profit margin and low net interest rate. The main problem is that it has a high sales expense rate and management expense ratio.

From 2012 to 2014, the sales expense ratio of Shangpin's home delivery was 25.26%, 23.19% and 25.59%, which means that for every 10,000 yuan of furniture sold, about 2,500 yuan was spent on marketing and other expenses. In contrast, the average sales rate of the four peers of Sophia, Qumei, Haolaike and Oupai Group is 11% to 12%, and the sales rate of Shangpin is doubled.

Also high is the administrative expense rate. In the past three years, the company's management expense ratio is between 10% and 12%, while the average peer management fee rate is between 6% and 7%.

The reason, an important factor is the direct store model. It can be said that the success or failure of Xiaohe, the direct store has brought high gross profit, but also brought high expense.

According to the prospectus, the number of direct-operated stores in the report period increased from 23 in the beginning of 2012 to 68 in the end of 2014, and direct-operated stores leased and operated stores, resulting in large rental expenses. At the same time, the increase in the renovation fee, sample fee and related sales staff, designer's salary and benefits, etc. brought by the company's new direct sales stores is much higher than that of the same industry.

The proportion of direct-operated stores is large, which also makes it necessary to send more management personnel to the direct-sale stores, so that the management expense ratio is also significantly higher than that of the peers.

Double brands fight each other, marketing costs are high

Another reason for the high expense rate is "dual brand operation."

Shangpin's home is equipped with the dual brand strategy of “Shangpin Home Match” and “Weiyi Custom”, and these two brands invited Zhou Xun and Li Bingbing as brand spokespersons respectively. In 2014, the advertising expenses for Shangpin's home delivery totaled 129 million yuan, which was almost the same as the net profit of Shangpin's home delivery.

The company also attaches importance to brand building work. With the enhancement of the company's overall strength, it has increased its brand promotion efforts and hired image spokespersons to promote brand concepts through mainstream media such as Sina, Baidu, and Tencent.

But in fact, the products of the two brands “Shangpin Home Match” and “Weiyi Custom” are all custom-made furniture. As of the end of 2014, the company's “Shangpin Home Delivery” brand has opened 604 chain stores, and the “Weiyi Customized” brand has opened 365 chain stores, of which 52 and 16 are directly operated.

The prospectus did not announce the proportion of sales revenue of the two brand stores. “Weiyi Customization” was operated by Foshan Weishang, a wholly-owned subsidiary of Shangpin Home Furnishing. In addition to the operation of “Weiyi Customization”, Foshan Weishang was also responsible for the entire product. Furniture production for home delivery. In 2014, Foshan Weishang's revenue was 1.32 billion yuan, and its net profit was 59.22 million yuan, accounting for half of the Shangpin home.

For the "dual brand" strategy, Chairman of the Board of Directors of Shangpin, Li Lianzhu once said that the "double brand" was the earliest design consideration. "I think it is good now, joining and distributing can do two, so a city can have a lot of distribution. And the two competitions are very good, very competitive and competitive."

However, for Shangpin's home delivery, is it necessary to have two brands in parallel? Under the circumstances of high expense ratio, is it possible to integrate in the future? On July 3, the securities department of Shangpin Home Delivery Company told the Beijing News reporter. All responses are subject to the prospectus.

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