Cross-border giants are transforming and no longer selling goods?

“Did you make money in 2023?”

This is a questionnaire sent out by a cross-border seller on social media. More than 70% of the sellers said no. Some cannot pay wages, some reduce their teams, some reduce platforms, and some cut product lines...

These are the epitome of cross-border survival in 2023. It is not just small and medium-sized sellers who feel that the market has become "smaller". The financial data of many listed big sellers also show how difficult it was to cross borders last year.

In such a difficult situation, the sellers who can make money must be the best in the industry, such as Anker, Huakai Yibai, and Lechuang, a cross-border seller jokingly called "impure" by buyers. Yien.com noticed that Lechuang has made new developments in its cross-border layout recently.

No longer selling goods? Selling heavily and wanting to be a warehouse owner?

On December 21, when accepting institutional research, the cross-border home furnishing giant Lejia announced a series of business arrangements for 2024, but the focus was not on its home furnishing products, but on its overseas warehouse business.

According to the investor research reception record, Lechuang said that the company currently operates 12 overseas warehouses around the world, covering an area of ​​more than 280,000 square meters. In 2024, it will rent another 100,000-150,000 square meters of new warehouses according to business development needs, and will also start construction of two warehouses in the east and west of the United States, which are expected to be put into operation in 2025 .

In fact, as early as the first half of last year ( June 2023), Lechuang stated that it would raise 500 million yuan, of which 400 million yuan would be used for the overseas warehouse project in Elllabell, Georgia, USA, and 100 million yuan would be used to supplement working capital .

At the end of November 2023, the Shenzhen Stock Exchange reviewed and approved Lechuang’s fundraising application, believing that it met the issuance conditions, listing conditions and information disclosure requirements.

In other words, Lechuang can raise 500 million yuan through issuing stocks to build overseas warehouses, of which the company's actual controller Xiang Lehong will have to pay at least 30 million yuan out of his own pocket.

At the same time , more than 580 customers have cooperated with Leckey in overseas warehouse business. It said that over time, it will continue to improve its overseas warehouse operation capabilities and launch value-added services such as supply chain finance to enhance customer stickiness.

Obviously, Leckey attaches great importance to its overseas warehouse business and is investing heavily in it.

Buying land and building warehouses, "rich" is not soft

In 2013, Leckey established its first overseas warehouse in Silicon Valley, San Francisco, USA, and subsequently added overseas warehouses in Memphis and Houston, but at that time it was to serve its own products.

By 2019, cross-border e-commerce had become an increasingly major trend. Leckey realized the market demand for overseas warehouses, so it began to plan for this business and started to fully promote it in 2020.

It is obvious from the announcement that Leckey’s investment in overseas warehouse business is not conservative.

In 2020, as soon as it decided to expand its overseas warehouse business, Leger bought a warehouse in California , USA, with an area of ​​approximately 360,000 square feet (approximately 33,400 square meters) , which was its largest warehouse in the western United States at the time.

After that, he spent a lot of money on buying land and building larger warehouses.

In August 2022 , Lechuang announced that its wholly-owned subsidiary would purchase land to build overseas warehouses. This time, Lechuang no longer purchased a ready-made warehouse, but directly purchased land. Two months later ( October 2022), the part of the land purchased by Lechuang was delivered.

At that time, the purchase cost Lechuang US$17.61 million , which was equivalent to about RMB 126 million at the exchange rate at that time . The announcement showed that the purchased land was still located in California, USA, with a land area of ​​59.88 acres (about 242,300 square meters) .

Last year ( 2023), Lejia spent US$11.4 million and US$23.01 million to buy two plots of land with an area of ​​436 acres and 76.712 acres respectively .

At the same time, due to business growth, Lechuang’s previous “small warehouse” could no longer meet demand, so the warehouse in the same area purchased by Lechuang in 2020 was sold for US$120 million, and it also made a profit of US $77 million.

As of September 2023, 4 of Legg's 10 public warehouses in the United States were purchased, covering the West, Central, South, and East U.S.

In addition, as of the end of September 2023, Leckey has overseas warehouses in the United States, Germany, Japan, the United Kingdom and other places, with a total of 13 warehouses worldwide, covering an area of ​​288,200 square meters.

According to official information from Leckey, today ( January 1, 2024), its Tracy warehouse in the western United States officially opened for operation. The warehouse covers an area of ​​200,000 square feet .

If the above-mentioned project of raising 500 million yuan to build overseas warehouses reaches full production, the area of ​​its public overseas warehouses in the United States will reach approximately 339,300 square meters, including two warehouses in California in the west of the United States with a total area of ​​213,400 square meters, and two warehouses in Georgia and Florida in the east of the United States with a total area of ​​125,900 square meters. The cargo handling volume will reach more than 7 million pieces per year .

In terms of performance, the project is expected to bring Lechuang annual revenue of 658 million yuan and profits of over 70 million yuan.

In general, in 2021, 2022 and the first nine months of 2023, the overseas warehouse business has brought Lechuang revenues of 171 million yuan, 488 million yuan and 586 million yuan respectively.

As it gradually uses the more than 800 acres of reserved land to build overseas warehouses to replace leased warehouses in the future, the gross profit and net profit levels of this business segment will continue to increase.

Products may still be Lechuang's confidence

So will Lechuang still sell its own products? In the long run, the answer is unknown, but Ennet believes that at least in the short term, products will still be its main focus.

After all, judging from the existing financial report data, although the proportion of overseas warehouse business revenue is increasing and the profit contribution is also increasing, products still account for more than 70% of the overall revenue .

Data from the first half of 2023 showed that the revenue of Leckey's ergonomic workstation series products reached 1.051 billion yuan, and the sales revenue of its own-brand products accounted for 71.29% of the main business revenue (excluding overseas warehouse revenue).

Just the core product - linear drive lifting system products sold more than 620,000 sets in the first half of last year, bringing Lechuang 924 million yuan in revenue .

The achievements in research and development also prove that it has not given up on its products. In the first half of last year, Loctek added 22 invention patents. As of the first half of 2023, Loctek has 1,291 valid patent technologies , of which 136 have been authorized, including 90 Chinese invention patents, 27 US invention patents, and 26 invention patents in other regions such as Asia, Europe, and Oceania.

It is precisely because of such R&D efforts that Leckey's products have become leading both at home and abroad.

Overseas , FlexiSpot, a brand under Loctek, ranks first in sales of height adjustable tables on e-commerce platforms such as Amazon, Home Depot, Walmart, Rakuten, and Yahoo !; its independent site sales also increased by 8.48% year-on-year in the first half of last year , and its website traffic also surpassed its competitors to take first place.

In China , Lechuang products also maintain the top market share on Tmall and JD platforms .

In 2021 and 2022, FlexiSpot was twice selected for the "Kantar BrandZ Top 50 Chinese Global Brands" ranking jointly released by Kantar and Google, and won the Special Award for New Global Brands.

For all the reasons mentioned above, even if Leckey wants to shift its focus to overseas warehouse business, it is unlikely to be realized in the short term, as its products still rely on its revenue.

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