Less than 4 months after listing, the "hot-selling trader" issued a profit warning!

Some say that the era of cross-border expansion is over.

For Chinese sellers, the cross-border circle after 2021 has encountered a series of "obstacles" in its development. First, there was a wave of account closures, and then inflation eroded consumers' desire to shop. In the market fluctuations caused by various crises such as supply, sellers also have to deal with the frequent increases in platform fees. Sellers exclaimed: How can I describe the hardship!

The order volume is " as stable as Mount Tai ". In this regard, veteran sellers said that their mentality should be as stable as the order volume.

At the beginning of the year, many cross-border sellers reported poor performance forecasts, and losses were not surprising. Zi Buyu, the "first cross-border footwear stock" that went public on " Double 11" last year, also recently issued a profit warning announcement.

Less than 4 months after listing , "hot-selling trader" Zi Buyu issued a profit warning

Not long ago , Zibuyu Group Co., Ltd. (hereinafter referred to as "Zibuyu"), a large cross-border retailer in East China , issued a profit warning announcement, predicting that its annual net profit in 2022 will be approximately 40% to 50% lower than that in 2021 ( the net profit for the whole year of 2021 was approximately 201 million yuan ) .

Zibuyu also explained in the announcement why the net profit fell so much, saying that there were five main influencing factors :

1. Due to the slowdown of economic activities in the United States and the continued rise in inflation, consumers' spending power and purchasing habits have been negatively affected, and consumer behavior has tended to be conservative. The total sales return rate of Zibuyu through third-party e-commerce platforms has increased;

2. Increase in marketing and advertising expenses;

3. Increase in sales expenses and distribution costs related to third-party e-commerce platforms;

4. The increase in employee benefit expenses was mainly due to the increase in the number of employees required due to business development and the reserve of talents for future business expansion;

5. One-time listing expenses incurred in 2022.

It seems that Zi Buyu was ultimately unable to withstand the impact of the 2022 market downturn.

Although its product categories include clothing , shoes , electronic equipment, stationery and sporting goods , Zibuyu mainly focuses on shoes and clothing. Therefore, after its listing, it naturally became the "first cross-border footwear and clothing stock."

Unlike other big sellers, Zi Buyu is very good at incubating brands and creating hits, so it is also called a "hit-making machine" by people in the industry.

ZiBuYu's prospectus shows that to date, ZiBuYu has created more than 300 brands, 87 of which are best-selling products, and the annual sales of each brand exceeds 10 million yuan . As of June 30, 2022, the company has designed and sold 6,473 best-selling products.

The sales volume of sweater brand Emily Bela increased by 36.1% from 2018 to 2021 , and the annual GMV increased by 41.8%. In the first half of 2022 alone, Emily Bela's sales volume exceeded 210,000 pieces , and its half-year GMV exceeded RMB 3.61 million .

The first ski suit from sportswear brand Aurgelmir became one of the top 5 best-selling products of its kind on Amazon as soon as it was launched, and several women's yoga pants have been best-selling products on Amazon for two consecutive years.

The cotton and linen shirt series of Runcati, a casual menswear brand , has achieved cumulative sales of 410,000 pieces as of the first half of 2022. A men's shirt once achieved a seven-fold increase in monthly GMV to 2.5 million yuan, firmly occupying the top 3 of the best-selling list of similar products on Amazon .

The waffle fabric autumn and winter tops of women's clothing brand Dellytop have sold over 110,000 pieces, and some of the tops were once the top 2 on Amazon's best-selling list of similar products .

The annual GMV of women's clothing brand Cicy Bell in 2021 exceeded 80 million yuan, and its cumulative sales reached 470,000 units as of the first half of 2022. Its products also became the top-selling products on Amazon .

Not only has the clothing brand repeatedly become a hit on Amazon, Zibuyu's footwear products have also become increasingly popular among consumers. The revenue share of this category has also increased from 17.9% in 2018 to 20.2% in the first half of this year.

The prospectus shows that Jolimall, a shoe brand under Zibuyu, has been online for about three years, with cumulative sales reaching 2.3 million pairs and annual GMV exceeding 270 million yuan.

As a trader of hit products, Zi Buyu’s revenue-generating capabilities should not be underestimated. But why did it issue a profit warning before its first annual report after its listing?

The platform and market are too single, and Zibuyu's operating risks are increasing

Zi Buyu also gave a corresponding explanation for the profit warning, but the bottom line is that it was because the platform and market were too concentrated, which made it impossible to diversify risks and ultimately affected net profit.

According to statistics, as of the first half of last year, Zi Buyu had registered 696 online stores on major third-party e-commerce platforms such as Amazon, Wish, eBay, and AliExpress .

According to its prospectus, Zi Buyu 's " dependence on third-party e-commerce platforms " is very serious . In the past three and a half years, sales on third-party e-commerce platforms accounted for 91.9%, 79.3%, 87.4% and 94% of its total revenue respectively .

Among the platforms, Zibuyu mainly relies on Amazon. From 2019 to 2021, the proportion of its Amazon channel in its total revenue was 31.5%, 32.4%, and 71.3% , respectively. This proportion even reached a peak of 90.6% in the first half of 2022. The increasing "Amazon dependence" has brought potential operating risks to Zibuyu, which is also one of the main reasons for its profit decline last year.

As we all know, the return rate of clothing has always been high. Since the year before last, Amazon's return policy has become more and more relaxed, lowering return requirements and extending the return period. Consumers who are already cautious about spending will return the goods immediately if they are dissatisfied, which has led to a continuous increase in Zibuyu's return rate in the past two years.

In addition, in the past two years, Amazon's various service fees have become increasingly expensive, with commissions, FBA logistics costs, advertising fees, etc. continuing to rise, bringing huge cost expenditures to Zi Buyu.

Obviously, if Amazon's rules change, Zibuyu's operating risks will increase, and the most direct consequence is that its revenue will suffer a heavy blow.

Although Zibuyu has also started to develop its own website in the past two years, financial data shows that this business has achieved little success, and there is even a subtle trend of declining revenue and market share.

It's not just that the platform is too single, ZiBuYu's preference in market selection is also very obvious.

Due to its deep reliance on Amazon, the United States is bound to become Zibuyu's top market. In the past few years , Zibuyu's business focus has gradually shifted to the United States , with the revenue share of the US market rising from 58.8% in 2019 to 85.5% in 2021, and soaring to 95 % in the first half of 2022 .

However, in the past year or so, the US has been under great inflationary pressure, prices have continued to hover at high levels, and consumption has become more sluggish than before. The high reliance on the US market became another reason for the decline in Zibuyu's net profit last year.

Regarding the fact that it is heavily dependent on the U.S. market , Zi Buyu also admitted in its prospectus that if the company is unable to continue to provide services to the U.S. market effectively, or if the U.S. macroeconomic situation changes adversely , its business and financial condition may be adversely affected.

Although the U.S. market has always been a battleground for cross-border e-commerce , the risks of over-reliance are unpredictable.

In the future, the over-concentration of platforms and markets may become a time bomb on Zibuyu's development path. At present, Zibuyu may also need to focus on the layout of multiple platforms and markets like other big sellers, and should not "put all eggs in one basket."

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