Dominating Amazon BSR! Home furnishing products have a positive review rate of over 90%

As a leading seller in cross-border e-commerce in central China, Zhiou's development has attracted much attention from the industry. With the expansion of its market scale and the strengthening of its R&D capabilities, Zhiou's capitalization path has entered the "fast lane".

Recently, in its reply to the Shenzhen Stock Exchange’s third round of review inquiry letter, Zhiou revealed the latest developments in its development.

Three major factors led to a decline in performance, and the market share in Europe and the United States increased

As a well-known home furnishing seller in the industry, Zhiou has been ranked prominently in overseas markets in recent years. Data shows that as of May 31, September 30, 2021 and February 28, 2022, the company ranked 19th , 55th and 48th in the Amazon US market, and 25th, 35th and 27th in the Amazon UK market. At the same time, the company's market size and market share in Europe and the United States have also increased simultaneously, but the growth rate is slightly different.

Judging from the data, Zhiou's market size and market share in Europe have increased significantly. In Germany, France and the UK, the market size increased from 1.04 billion yuan, 571 million yuan and 479 million yuan to 1.628 billion yuan, 870 million yuan and 608 million yuan respectively, and the market share increased by 0.83%, 2.07% and 0.12% year-on-year respectively.

In contrast, the market size in the United States is slightly lower than its average growth rate in the European market. Its market size in the United States is 2.244 billion yuan, compared with 1.568 billion yuan in the previous year, and its market share increased by 0.26% year-on-year. At the same time, Zhiou's omni-channel market share also increased from 0.13% in 2019 to 0.31% in 2021, and its e-commerce channel market share increased from 1.08% to 1.53%. The growth of multiple data has promoted the layout of this home furnishing giant in overseas markets.

However, it is worth noting that external factors have had an adverse impact on the company's profitability. In 2021, the company's revenue was 5.967 billion yuan, a year-on-year increase of 50.27%, but its net profit declined significantly. The net profit attributable to the parent company's shareholders was 240 million yuan, a year-on-year decrease of 36.93%. If non-recurring gains and losses are deducted, its net profit will decline by more than 50%.

In response to this, Zhiou also explained that the sharp increase in shipping costs, large exchange losses caused by exchange rate fluctuations, and asset impairment losses are all important influencing factors.

Judging from its exchange loss situation, due to the exchange rate fluctuations between the euro and the US dollar at the end of last year, the exchange losses recognized by Europe in 2021 totaled 71.7521 million yuan, an increase of 67.6098 million yuan from 2020, accounting for 24.03% of the total profit for the current period.

The increase in shipping costs is the main reason for the decline in its gross profit margin and operating performance . In 2021, the increase in shipping costs caused its gross profit to drop by 282 million yuan year-on-year. In addition, due to the increase in the amount of inventory impairment provision it made, the loss of asset inventory impairment in Europe reached 87.0537 million yuan.

However, with the decline in shipping prices and the gradual stabilization of the foreign exchange market, Zhiou's net profit in the first quarter of 2022 showed a significant increase month-on-month.

It is not difficult to find that Zhiou’s performance decline last year was mainly affected by external factors, while its own growth remained relatively stable, and its advantages in product research and development and updates and iterations became more prominent.

Product advantages are prominent: 257 subcategories and more than 3,000 product SPUs

As sellers know, most sellers on Amazon are large distributors with tens of thousands of products. However, with the intensification of competition and direct sales by brands, private label sellers have replaced large distributors. In 2021, only 12% of the top sellers have more than 1,000 products to sell. In 2016, this figure was 33%, and the proportion has been declining year by year.

Relevant data further shows that it has become particularly important to establish a brand or own an independent brand, and Zhiou naturally understands this well.

Zhiou 's three own brands , SONGMICS, VASAGLE and FEANDREA, are well-known overseas due to their long history and good product quality. They are also present on many mainstream e-commerce platforms such as Amazon and eBay .

In 2021, the proportion of its online sales through the Amazon platform was close to 90%. In recent years, many of its products have entered the Amazon Best Seller list, and the cumulative product ratings of popular products have remained at 4.3 points or above; except for some newly established sites, the store feedback rate at each site on the Amazon platform in the past 12 months has been above 90%, and the number of feedbacks obtained by Amazon sites since their establishment has reached 640,000.

Behind Zhiou’s high growth figures, its product research and development and the construction of its own brand have made an indelible contribution.

Public information shows that as of December 31, 2021, Zhiou has a total of 54 product designers at home and abroad , but its products have involved 257 sub-categories and the number of product SPUs exceeds 3,000. The high market sensitivity has also enabled Zhiou to increase its investment in design resources in key categories and strengthen the competitive advantage of its own brand .

In 2021, the sales revenue of its independently developed products was close to 1.7 billion yuan, a year-on-year increase of 62%. In terms of R&D investment, the compound annual growth rate of Zhiou's R&D expenses reached 53.30% from 2019 to 2021. Although from the relevant data, the revenue of Zhiou's independently developed products is not as high as the revenue from cooperative development and product selection, its proportion has increased more than the latter two. It can be seen that increasing independent research and development and strengthening the construction of its own brand have become the company's key development strategies.

Raised 1.486 billion yuan and started the three-location joint model

As a leading seller in cross-border e-commerce in central China, Zhiou has started acceleration mode in Dongguan and Shenzhen while expanding its headquarters in Zhengzhou.

It is understood that Zhiou stated that the 1.486 billion yuan of funds raised this time will be mainly used for multiple projects such as the construction of R&D and design centers, expansion of warehousing and logistics systems, construction of Zhengzhou headquarters operation and management center, and replenishment of working capital.

The company revealed that of the funds raised this time, the amount of site investment for its R&D and design center project is 109 million yuan, of which 95.3 million yuan is planned to be invested in purchasing a site in Dongguan, 14.4 million yuan is planned to be invested in leasing an office space in Shenzhen, and 74.4 million yuan is planned to be invested in purchasing a site in the Zhengzhou headquarters operation and management center construction project.

The investment in the R&D center project is one of the key points of this project. Currently, the project accounts for 6.04%, which is 1.4% higher than the construction project of its headquarters operation and management center. As the total planned investment amount is 318 million yuan, it can be seen that Zhiou will continue to increase its investment in the future.

In fact, Zhiou’s initial office space was obtained through leasing. With the increase in its employee base and new plans, the existing location can no longer meet its actual development needs. However, several projects currently being planned have become a “good medicine” to solve existing problems.

At the same time, this series of measures will also strengthen its advantage in attracting talent. It is understood that at present, the total number of employees of Zhiou in Zhengzhou and Dongguan has exceeded 950, with Zhengzhou employees accounting for more than 90%. After the implementation of its fundraising and investment projects, the number of new employees in the two locations will increase by 686, and the total number will exceed 1,600.

In recent years, Zhiou has also leveraged overseas social media, KOL celebrity marketing, etc. to establish social influence among young main consumer groups. In 2021, it cooperated with more than 1,500 overseas celebrities and built its own KOL resource library. This year, Zhiou has begun to try Tik Tok short video marketing to seize the traffic depression.

A series of measures have continuously strengthened the differentiation and competitiveness of Zhiou’s products in overseas markets, providing greater impetus for it to expand its overseas market scale.