Zebao dragged down the parent company's annual loss of more than 200 million

Zebao, once known as the "Amazon Three" together with Anker Innovations and Paton, is no longer glorious and is still losing money in 2024. Its parent company, Starbright Holdings, wanted to use it to enter the Internet e-commerce market, but it did not make any money and was dragged down.

Xinghui shares expects losses of more than 200 million in 2024

On January 20, Zebao's parent company, Xinghui Co., Ltd., released its 2024 performance forecast, predicting that annual losses will continue.

Xinghui Co., Ltd. expects the net profit attributable to shareholders of the listed company in 2024 to be a loss of 270 million to 210 million yuan, compared with a loss of 76.0925 million yuan in the same period last year, an increase in losses year-on-year; the net profit after deducting non-recurring gains and losses will be a loss of 220 million to 160 million yuan, compared with a loss of 33.4145 million yuan in the same period last year.

The main reasons for Xinghui's losses are the provision of goodwill impairment losses of 170 million yuan and estimated liabilities of approximately 69 million yuan in 2024; sales of e-commerce business declined and operations remained at a loss; the company's hardware business developed well, with operating income expected to increase by approximately 21.85% year-on-year and total profits expected to increase by approximately 21.25% year-on-year.

It is estimated that the impact of non-recurring gains and losses on the company's net profit in 2024 will be approximately RMB -49,000,000, an increase of approximately RMB 6,322,000 from the loss of RMB -42,678,000 in the same period last year, mainly due to the increase in estimated liabilities for pending litigation in 2024.

Apart from the impairment of goodwill and non-recurring gains and losses, there is no problem with Xinghui Co., Ltd.'s hardware business, which means that the loss is dragged down by the e-commerce business. Zebao's performance in 2024 is still unsatisfactory.

In the first half of 2024, Xinghui's total operating revenue was 801 million yuan, a year-on-year decrease of 5.62%. Its core product slide rail contributed 417 million yuan in operating revenue, a year-on-year increase of 35.02%, and the operating revenue of cross-border e-commerce business was 302 million yuan, a year-on-year decrease of 34.47%.

Xinghui Co., Ltd.'s cross-border e-commerce layout began in 2018. In May of that year , Xinghui Co., Ltd., which was seeking to transform into "Internet +", set its sights on Zebao. In May of that year, Xinghui Co., Ltd. acquired 100% of Zebao's equity from 27 shareholders including Sun Caijin and Zhu Jiajia , with the transaction price set at 1.53 billion yuan.

Xinghui Co., Ltd. hopes to use Internet e-commerce to open up a second growth curve, and has successively established a cross-border e-commerce export business product line mainly composed of four major categories: smart small appliances, power supplies, computer and mobile phone peripherals, and furniture.

At that time, Zebao was in the limelight and signed a performance betting agreement with Xinghui Shares, promising that Zebao's net profit target would be no less than 108 million yuan in 2018, no less than 145 million yuan in 2019, and no less than 190 million yuan in 2020. From 2018 to 2020, Zebao exceeded its performance commitments.

In 2021, Zebao's account was blocked by Amazon, and its revenue and net profit hit rock bottom. That year, Zebao lost approximately 809 million yuan, and Xinghui shares' goodwill was impaired by 680 million yuan.

Since the account blocking crisis, Zebao has been stuck in a quagmire. Taking the Amazon platform, its largest sales channel, as an example, in 2022 and 2023, Xinghui Co., Ltd.'s sales on the Amazon platform fell by 69.53% and 28.60% year-on-year respectively.

In the first half of 2024, Xinghui Co., Ltd.'s revenue on Amazon was 117 million yuan, which was still the largest contribution among all online channels. It decreased by 55.28% compared with 262 million yuan in the same period last year, and its share in cross-border e-commerce business revenue also dropped from 56.90% to 38.82%.

After being blocked by Amazon, Zebao urgently accelerated the implementation of the "multi-platform, multi-channel" business strategy, expanding third-party platforms such as Walmart, Rakuten, Newegg, independent websites and offline channels. However, the revenue of these channels is not ideal.

In 2024, the revenue of Xinghui Co., Ltd.'s self-operated platform decreased to 16 million yuan, a decrease of 40.41%. The revenue of the Walmart channel was less than 23.7 million yuan, a year-on-year decrease of 2.13%.

Zebao has changed drastically

A large part of the reason behind Zebao's losses is the hidden dangers of the distribution model. Distribution promotes Amazon sellers to quickly increase their sales, but as the industry gradually becomes standardized, the extensive gameplay of traffic is king is no longer allowed by the platform. When Amazon's account ban wave broke out, Zebao, which adopted the distribution model and lacked brand protection, was the first to be hit.

Cross-border e-commerce business suffered setbacks. In March 2022, Xinghui Co., Ltd. sued Sun Caijin and nine others on the grounds that the fault of the nine performance betting parties led to the reduction of the value of Zebao's equity, and asked the court to order the company to reduce the transaction price to all defendants by 480 million yuan and return it by all defendants. In June of that year, Xinghui Co., Ltd. changed the consideration to a reduction of 1.096 billion yuan, which was returned by all defendants.

In May 2024 , Xinghui Co., Ltd. revealed that the amount of the lawsuit in the dispute case was changed from 1.043 billion yuan to 950 million yuan. In September, the court of first instance dismissed all the company's claims.

In fact, long before the performance turned around in 2021, many of Zebao’s management had already left, and Zebao has undergone a drastic change.

In 2020, Sun Caijin left Zebao, and in November of that year he founded Shenzhen Huyi Technology Co., Ltd. At that time, Sun Caijin no longer took the route of distributing goods, but turned to branding. The new brand "Typhur" is still in the small appliance track.

Sun Caijin's second venture was very low-key and was not known to the public until April 2024. It is understood that Huyi Technology's brand positioning is in the mid-to-high-end market, focusing on home cooking. At the end of 2024, it had more than 100 employees, nearly 60% of whom focused on product research and development. The core team members came from DJI, Dyson, etc., and it has dual R&D centers in China and the United States. The products developed by the company have won multiple design awards such as the Red Dot Award, the Good Design Award, and the iF Award.

In September 2020, Wei Lihu, one of the partners of Zebao, registered and established Shenzhen Hesheng Innovation Technology Co., Ltd. and launched the home appliance brand Dreo, whose products cover small kitchen appliances, humidifiers, heaters and various fans. Within one year of its launch, Dreo's revenue exceeded 300 million yuan.

At the end of 2020, the original core executive team of Zebao resigned one after another. The entrepreneurial projects of Zebao executives after their resignation almost all focused on the home appliance category, and most of them entered the brand track. This also proves that the era of distribution is a thing of the past.

Not only that, Zebao is also embroiled in lawsuits, which is a hidden worry. After Xinghui Holdings purchased 100% of Zebao’s shares, all the past businesses of Zebao’s subsidiaries were transferred to Xinghui Holdings, which was also the beginning of the hidden worry.

In January 2024, SKL, a subsidiary of Xinghui Holdings, received a tax payment notice from the Italian tax authorities. The tax years involved were from 2017 to 2021. The specific tax-related matters involved the period before the merger and acquisition closing and the performance betting period.

SKL is a subsidiary of Zebao and a key player in its tax debts . The taxes and fines involved between 2017 and 2021 totaled 6.4245 million euros (equivalent to approximately RMB 49.56 million ).

Another Zebao subsidiary, STK , also had problems, with taxes and fines totaling US$2.3784 million (approximately RMB 17 million) from 2016 to 2021 .

The two subsidiaries of Zebao paid a total of more than 60 million yuan in taxes in Italy and the United States , all of which fell on Xinghui Shares .

Xinghui shares have repeatedly stated that more than 80% of the above taxes and fines are taxes and corresponding fines that were not fully paid before 2018, and asked Sun Caijin and other relevant responsible parties to bear them. Xinghui shares also planned to wait for Sun Caijin and other parties to compensate for the tax before fulfilling their tax payment obligations. However, the courts have repeatedly ruled against Xinghui shares.

Today, Zebao has lost its former glory, and Xinghui’s ambition in Internet e-commerce is difficult to achieve.

Zebao

Xinghui Shares