With a revenue of 1.05 billion in 9 months, wig giant Rebecca continues to focus on online

Xuchang, Henan Province, is known as the "Wig Capital". It is said that one-third of the local population is engaged in wigs or related industries. The business has its own business philosophy, and this business also supports nearly 200,000 local people. Now, riding on the momentum of cross-border e-commerce, Rebecca and other companies have further opened up online sales channels and sold wigs all over the world.

Online sales account for 10%, Rebecca continues to focus on online sales

About 80% of the world 's wigs are produced in China, which means that for every 10 wigs bought by foreigners , 8 are "Made in China".

China's wig industry is mainly concentrated in four regions, namely Xuchang, Henan, Guangzhou, Guangdong, Qingdao, Heze, Shandong, and Taihe, Anhui. Among them, wigs in Xuchang, Henan account for about 60% of the global hair product production and export volume.

The largest local wig company , wig giant Rebecca, was listed on the Shanghai Stock Exchange in 2003, becoming the first hair product stock in China. With the change of consumer demand, domestic wig companies such as Rebecca have also shifted from OEM and OEM production for other brands to building their own brands.

At present, Rebecca focuses on the research and development, design, production and sales of hair products. Its main products include six categories: craft springs, chemical fiber springs, human hair wigs, chemical fiber wigs, training heads, and composite fiber materials. It has its own brands such as "Rebecca", "Sleek", "NOBLE", "JOEDIR", "Magic", and "QVR" around the world . Its products are mainly sold to North America, Africa, Europe, Asia and other regions. The company's export revenue accounts for about 80%.

In recent years, wig companies have begun to explore more new sales models and channels. Zheng Wenqing, chairman of Rebecca, said that especially after 2015 and 2016, many traders opened up e-commerce channels, and some of them did very well.

In 2017, Rebecca also began to expand its online sales channels. As many consumer demands are overseas, its main business is cross-border e-commerce. Currently, the company has already laid out its presence on mainstream platforms such as AliExpress and Amazon.

In the first three quarters of this year, Rebecca achieved a total operating income of 1.05 billion yuan, a year-on-year increase of 24.39%; and realized a net profit attributable to the parent of 45 million yuan, a year-on-year increase of 366.07%. Zheng Wenqing said that in 2021, the company's online channel sales are expected to account for about 10% of the company's total revenue. The online channel is currently growing, but it will take some time. In the future, the sales share of this channel will gradually expand, and its proportion should be between 20% and 25%.

In addition to Rebecca, other domestic wig companies are also planning online sales, exporting wig products to all parts of the world through channels such as Amazon, AliExpress, and self-built independent websites. AliExpress data shows that on average, a wig is bought every two seconds. Among them, the annual growth rate of wig sales in the European and American markets is about 50%, and the African market will have a growth rate of 100%-300%.

The shift from offline to online did not happen overnight. Wig giant Rebecca also encountered some pitfalls. Zheng Wenqing joked that "we have some failed experiences."

Rebecca faces constant challenges in opening up online channels

As a traditional hair products company, Rebecca faced many difficulties in opening up online channels. However, after going through various adjustments, Rebecca now has a dedicated cross-border e-commerce team to operate its online business, and its development is relatively stable.

Ms. Zhang, the person in charge of Rebecca's own brand, introduced that specifically, the difficulties faced by the company mainly include two major aspects : channels and products.

The difficulties in channels can be traced back to the production stage. Rebecca has always been using the traditional supply model. Previously, the product was shipped in large quantities at a time, which was basically a large-in and large-out model. However, online e-commerce is actually a small-batch, multi-batch model, which is exactly the opposite of the previous model. In addition, the consumer groups in online channels have a more obvious demand for differentiation, and the market reacts quickly. In the early days of focusing on online channels, the company made adjustments in many aspects, but the adjustments took time, and this process took some detours.

When opening up online channels, the company also provided strong support and opened a green channel for the e-commerce team. Later, in order to adapt to the personalized needs online, a professional production line was also opened.

The difficulties in product development are relatively complex. According to Ms. Zhang , they mainly include the following three points:

1. Adapt to changes in the B-end and C-end. Taking human hair as an example, Rebecca does more OEM, especially in Europe and the United States. The types of products online and offline are different. Previously, traditional offline supply was directly to suppliers. In order to maintain profits, suppliers did not pursue products with better quality. However, in the online channel, Rebecca directly faces consumers. For the same human hair products, the colors and amplitudes online and offline are completely different. From the B-end to the C-end, the positioning of the product in terms of quality and standards is completely different.

"In the early stage, we made great adjustments based on the changes in the C-end, and we also took many detours in terms of products. Compared with offline channels, the quality and standards of online products are not the same, so we have to adapt to the new demands of online consumers again." said Ms. Zhang, head of Rebecca's independent brand.

After taking some detours, Rebecca continued to grow through trial and error. Based on new market changes, it adjusted its products over a period of one or two years before it differentiated between online and offline products.

2. The speed and quality of online product supply do not meet the requirements . Online product supply requires faster speed, and it is difficult for traditional factories to achieve fast turnover. In addition, due to different quality requirements, the products made by the factory often do not meet the requirements.

3. Imperfect communication and connection . Traditional enterprises are different from systematic and information-based companies. In e-commerce channel sales, there will be some problems in communication and connection. Rebecca’s communication and connection system for online product production is imperfect.

Rebecca has been stumbling along the way, facing various channel and product problems. Ms. Zhang said that there may be problems along the way, and when we see the problems, the company will actively help to improve them, which is how the online channel expansion was achieved.

As the company's helmsman, Zheng Wenqing also attaches great importance to online sales channels. She said that if we want to do this channel, we must first set up a special team, find professional personnel, and then cooperate to select good products. In terms of products, we must pay special attention to quality. In fact, a large part of the reason why consumers switch from offline to online is because the quality of offline products has become uneven. Some consumers hope to find better products, but at present, some inferior products have also flooded into the online channels, and some products are inferior, which disrupts the development order of the industry.

Regarding the expansion of online channels for hair product companies, Zheng Wenqing suggested that everyone should enter the market with the belief of protecting their own feathers and provide high-quality products. Because through e-commerce platforms, manufacturers can directly contact consumers, so everyone must cherish consumers and live up to the trust of the platform and consumers. Only with this attitude can businesses give consumers a better experience and go long-term.

Thanks to the unremitting efforts of the e-commerce team, Rebecca's sales have grown at a rate of more than 50% in recent years .

But since the outbreak of the epidemic, the entire cross-border e-commerce ecosystem has changed abruptly. Rebecca is in it and has also felt the ups and downs of online sales.

Amid the pandemic, online sales of wigs are slowing down

Wigs are a popular product for Chinese cross-border e-commerce exports. On average, a wig is sold every 2 seconds, ranking first among overseas sales products.

Rebecca has also laid out this hot channel. At present, the company's sales on e-commerce platforms such as Amazon and AliExpress are considerable. Ms. Lu, the head of the company's e-commerce team , said that in terms of online channels, the company's sales on the Amazon platform account for a large proportion, and wigs belong to a small category under a secondary category on the platform, so the volume of wigs as a whole is not particularly large on Amazon. The company's advantageous products on the Amazon platform are not expensive wigs, but relatively low-priced headgear products, especially synthetic headgear products, which are still relatively popular.

After the outbreak of the epidemic, wig sales encountered considerable challenges on e-commerce platforms due to changes in the supply chain and overseas demand.

Affected by the epidemic, many Europeans and Americans have lost their jobs and their spending power has declined. As spending power decreases, many people use their only savings to buy daily necessities.

When demand changes, low-value products are relatively popular to a certain extent. Taking Amazon as an example, many merchants reported that platform consumers began to compare prices and choose cheap products to buy. Many consumers even approached merchants to ask if they could exchange good reviews for free or low-priced products.

On the one hand, consumer demand has decreased, and on the other hand, sellers' operating costs have increased sharply. This is due to the superposition of multiple factors, mainly including: 1. Logistics channels are blocked, cross-border logistics costs have risen again and again, and freight rates remain high. The logistics costs of many cross-border merchants have increased by more than 3 times; 2. Competition among merchants on e-commerce platforms such as Amazon has intensified, and advertising costs have continued to rise; 3. The exchange rate has fallen. The exchange rates of the US dollar and the euro have fallen again and again this year, and merchants have suffered considerable losses in exchange.

Merchants' operating costs have increased, and product sales have also encountered certain bottlenecks. This is a common pain point for cross-border merchants. Rebecca's online sales channels have felt the major changes that have taken place in the cross-border e-commerce market this year.

Ms. Lu analyzed that the cost increase this year is reflected in the internal and external environments. The internal environment is that the costs of various marketing have increased significantly. For example, on the Amazon platform, all forms of advertising, storage costs, operating costs, etc. are increasing, and the costs of other platforms are also rising. The external environment is mainly logistics costs and labor costs. This year, the logistics costs have increased significantly, and the costs have been increasing. In addition, the labor costs in the supply chain production link are also rising. In general, the costs of various online channels are increasing this year.

According to Rebecca 's 2020 annual report, the company achieved annual revenue of 1.33 billion yuan, a year-on-year decrease of 26.92%, and summarized the reasons into several points: First, due to the impact of the new crown epidemic, the global economy has experienced a recession and market demand is insufficient; second, normal business and social activities in many countries around the world have been restricted due to epidemic prevention and control, logistics are not smooth, and order delivery cycles are extended, affecting product sales; third, the product sales mix has been adjusted, and consumers have turned to low-value products.

In the environment of rising costs and consumption downgrade, Rebecca made adjustments based on its own situation, and the adjustment measures were mainly reflected in two aspects.

1. Stable supply of high-quality products. The epidemic has blocked overseas logistics, and many sellers are out of stock. Rebecca pays more attention to the stable supply of consumers, and has been steadily supplying high-quality products to improve the overall service to customers.

"For overseas consumers, if they want to buy a wig product on Amazon, we want them to be able to buy it not only today, but always, and always buy products of the same quality. We have a relatively strong advantage in product supply, so we can ensure the stability of supply. For us, the stability of the supply of important products, including the stability of quality, has always been the most important thing." said Ms. Lu.

Second, conduct marketing education for consumers. Rebecca has done a lot of offline education, such as cooperating with Internet celebrities in the sales destination countries and promoting through some websites, etc., to educate consumers, improve product sales and enhance the brand influence. In this way, the product value of Rebecca continues to increase.

After making relevant adjustments, facing the price war crisis in the cross-border e-commerce industry, Rebecca did not cut prices like other merchants to ensure sales and product rankings at the expense of profits. Instead, it appropriately raised product prices based on the increase in costs, which consumers were able to accept and recognize.

Continue to be optimistic about online, independent stations become the focus of work

The epidemic has lasted for two years. Zheng Wenqing believes that, overall, the impact of the epidemic on e-commerce is multi-layered, not just positive. Although consumers have been staying at home longer and online shopping has increased, the epidemic has also had a huge impact on the global logistics system, and the logistics costs of overseas merchants have been greatly increased. At the same time, the supply chains of many industries have been disrupted, and the impact of shortages has penetrated into all walks of life.

"We also experienced some challenges in the supply chain. Some high-quality products had some problems in the supply business. So e-commerce is not getting better because of the epidemic. It has led to a very complicated situation."

In terms of consumer demand, Zheng Wenqing said that the demand for wigs will not show a downward trend. Currently, overseas consumers basically need to replace a wig every two or three weeks. This frequency and consumer demand have not shown any sign of declining.

Although the product is strong, Rebecca also has shortcomings, such as the understanding of the market. "It is a difficult challenge for any company to get consumers to spend the most money on a product. I think our company's capabilities in production, manufacturing, R&D and layout are OK, but the relatively weak part of the overall capabilities is the ability to understand the market, which is the goal that every brand must pursue unremittingly, and it is also the challenge hidden behind the economic indicators for our team."

Only by understanding the market and consumers can merchants understand the products provided by other competitors and how their own products are differentiated from them. Ultimately, they can make consumers willing to spend $100 instead of just $50 to buy their products. This is the difficulty and also the ability that Rebecca's team needs to improve.

In China, traditional manufacturing is facing some challenges. As the number of overseas factories continues to increase, last year Rebecca planned to activate the production of overseas factories through overseas distributors and increase production to meet market demand. They hope that overseas factories can play a better role.

Previously, Rebecca positioned its overseas factories to meet its own sales needs, but 30%-40% of the sales of these factories still came from American customers who owned the brand, which was different from expectations. At present, Rebecca's international e-commerce products are mainly manufactured domestically. Zheng Wenqing hopes that in the future, the production and manufacturing capabilities of overseas factories will be able to meet 60%-70% of overseas market demand, get closer to the local market, reflect the market more quickly, and provide more popular products. Under such content division, the domestic market can focus more on the research and development and production of higher quality and value products.

Cross-border e-commerce is developing rapidly, and Rebecca continues to be optimistic about online channels.

Ms. Lu, the person in charge of its e-commerce platform, said that in October, Rebecca carried out a three-year plan, hoping to achieve healthy and common development of OEM and independent brands by 2024. As for independent brands, the company hopes to achieve the ultimate goal of dividing the world equally between online and offline. Among them, online channels directly contact end consumers, and the requirements for products and operations are more diversified. The importance of independent stations is self-evident. The company's requirement in this regard is that the sales volume of independent stations can reach 25%-30% in three years .

Conclusion

Like many domestic manufacturing industries, wig OEM has supported many factories. Although the profits from OEM orders are not very lucrative, they are enough for these factories to accumulate a certain amount of capital and live a relatively comfortable life. Therefore, when the cross-border e-commerce model rushed into the wig industry, most companies with OEM advantages chose to sit on the sidelines. The reason is that on the one hand, they have adapted to the simple and large-scale OEM model, and on the other hand, they want to avoid competing with dealers for customers, which may cause them to lose the OEM orders they rely on for survival.

Therefore, in the cross-border e-commerce track, the first to rush in are wig companies that do not have OEM advantages. They set up stores on platforms such as AliExpress and Amazon, directly reaching end consumers, and attracted a large number of buyers through the price and product advantages of the e-commerce side. As a result, the OEM orders of some wig products have shrunk or even disappeared. With the help of the e-commerce sales channel as a springboard, some unknown sellers have achieved overtaking, and the original pattern of the wig industry has also changed.

As the market changes, more manufacturing companies are beginning to test the waters online. As Zheng Wenqing said, around 2016, many traders opened up e-commerce channels, and Rebecca also accelerated its layout in cross-border e-commerce and brand terminal retail models.

After several years, Rebecca's online sales accounted for about 10%, but Chairman Zheng Wenqing believes that the ideal ratio should be 20%-25%. After the transformation from a traditional manufacturing enterprise, despite twists and turns, this wig giant continues to be optimistic about online channels and insists on strengthening its e-commerce path.

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E-commerce

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