When it comes to the track with the strongest ability to create wealth, the Internet industry is undoubtedly one of them, in which e-commerce is like a pearl in the crown, creating countless business myths. There are not only established e-commerce giants such as BABA and JD.com, but also dark horses like Pinduoduo, and upstarts like Douyin and Kuaishou Technology who make use of their endowments to cross the border.

However, as the saying goes, "the reason why we can't know the true face of Lushan Mountain is because we are in these towering mountains." when we focus too much on how "A Jing Qiu Kui" can create a new high in performance, it is easy to overlook a trillion-level subdivision of e-commerce track-cross-border e-commerce. Cross-border e-commerce services are often foreign consumers, not familiar to the domestic market, so many players are "making a fortune", but this low-key operation does not affect the popularity of the track.

You can get a glimpse of the popularity of cross-border e-commerce from the primary market. According to data from the online Economic and Social Electronic Commerce Research Center, China launched 33 cross-border e-commerce financing events in 2020, with a total amount of more than 7 billion yuan. Especially after giants with a financing valuation of more than 100 billion yuan have emerged on this track, investors are more frantically looking for the next potential opportunity.

The enthusiasm of the primary market also extends to the secondary market. Recently, a cross-border e-commerce company submitted a listing application to the Hong Kong Stock Exchange. With the halo of "the first share of B2C clothing cross-border e-commerce", what is the quality of Zi Buyu?

"High ceiling + High growth" Golden track

Following the market law of "big water raises big fish", we might as well take a look at whether Zibuyu's cross-border e-commerce track is a wide enough track.

With the continuous development of Internet technology and the online transfer of consumer habits, global online consumption continues to develop, while China, as the hub of the world manufacturing industry, has a global leading supply chain advantage, and the cross-border e-commerce industry has developed rapidly. Superimposed by the global spread of the COVID-19 epidemic in 2020, the online economy has been further catalysed, and cross-border e-commerce has ushered in a period of rapid development. According to statistics from the General Administration of Customs, China's cross-border e-commerce imports and exports totaled 1.69 trillion yuan in 2020, an increase of 31.1 percent, of which exports totaled 1.12 trillion yuan, up 40.1 percent. In the first quarter, China's cross-border e-commerce imports and exports totaled 419.5 billion yuan, up 46.5 percent from the same period last year. Of this total, exports totaled 280.8 billion yuan, up 69.3%. It is not difficult to see that cross-border e-commerce has become an important force in the growth of China's foreign trade.

In view of this, policies continue to be introduced, and the executive meeting of the State Council on the 22nd of last month even proposed to speed up the development of a new model of foreign trade new business type and improve cross-border e-commerce development support policies. Prior to this, there were calls for the development of cross-border e-commerce and other new business type models in government work reports for seven consecutive years.

In terms of subdivision, Zibuyu is located in the cross-border e-commerce export clothing and footwear track, benefiting not only from the dividends of the industry as a whole, but also from consumers' increasingly diversified, fashionable and fashionable consumption of clothing and footwear, which has improved the corresponding purchase frequency and customer unit price, and the industry has achieved rapid development in recent years. From 2016 to 2020, China's cross-border e-commerce exports of clothing and footwear GMV increased from 100.4 billion yuan to 576.3 billion yuan, with a compound growth rate of 54.8 percent, and is expected to grow at a compound growth rate of 18.9 percent to 1.37 trillion yuan in the next five years, according to Frost Sullivan data.

(source: prospectus)

It is worth mentioning that Zibuyu occupies a leading position in this subdivision track. According to Frost Sullivan data, the company ranks first among all the platform sellers of China's cross-border e-commerce export B2C clothing and footwear market in terms of GMV in the North American market in 2020, and the company ranks third in terms of the GMV generated through third-party platforms in China's cross-border B2C e-commerce clothing and footwear market in 2020.

Cross-border e-commerce track is undoubtedly a trillions-class golden track. With the continuous development and standardization of the industry, higher and higher requirements have been put forward for players' abilities in brand, channel, product, supply chain, operation and so on. Thus, a higher entry barrier is formed for the newcomers. At the same time, under the further catalysis of the network effect, the overall concentration of the industry will be concentrated to the head, and the mature enterprises with core competitiveness represented by Zi Muyu will benefit the most.

Data-driven design, flywheel accelerated rotation

The building of core competence is long-term, dynamic and multi-dimensional. If Zi Buyu can grow into today's vertical category cross-border e-commerce leader, he must have done something right at a critical time.

Back in 2009, Hua Bingru, then a sophomore, was acutely aware of the great potential of e-commerce and began to use Taobao to start a clothing and footwear business. in two years, he had reached the top three in Taobao. However, the essence of the model is still a general middleman. Hua Bingru realized that it is difficult to go further and began to change to the mode of "independent design + factory OEM". By the end of 2020, more than 90% of the company's products are self-designed. As stated in the prospectus, we are committed to becoming an internationally renowned operator of fashion clothing and footwear products. The company believes that products are always the core element to promote the development of the company.

It is a key change in the development of "independent design" that gives Zibuyu an advantage of differentiation compared with most players in the same industry, and independent design gives Zibuyu the gene to incubate the brand. let it complete the evolution from "second dealer" to "brand merchant". According to the prospectus, by the end of 2020, the company had cultivated 20 popular brands with annual sales of more than 10 million yuan and more than 2500 hot-selling products with sales exceeding 2000.

The consumption of clothing and footwear has obvious characteristics of fluidization and fast food, especially women's clothing. Zi Buyu can establish the current competitive strength in this field, which depends on the company's strong design team. By the end of 2020, the company had a design team of 227 people. However, in the field of fast fashion, the size of the design team is not the most critical factor in determining the strength of design ability, and the database behind it is the focus of the company's ability to perceive the change of "wind direction".

The database of the design team includes user information and preferences, various product styles, fashion elements, fabric accessories and other design data. by the end of last year, the product design database has accumulated about 41796 clothing and footwear and 51801 samples of surface accessories. The establishment of such a database is also the result of the company's operation over the years.

Relying on the huge database as the bottom support, the design team can quickly produce the first sample trial production by virtue of rich experience and market research, and the time from the first sample production to the launch of the first batch of products can be shortened to 7 days. the speed of innovation is even faster than some international first-class fast fashion brands. Not only help the company continue to occupy the minds of consumers, but also help to improve business efficiency and reduce inventory risk. As of the end of last year, inventories with an age of less than one year accounted for about 92.7 per cent of the total inventory.

The huge amount of data precipitation helps Zi to make product decisions that are more in line with the future trend, and products that are more in line with consumer preferences promote the company's product sales and thus precipitate more data. this positive cycle promotes the acceleration of flywheel rotation.

Walk on two legs to consolidate the channel moat

More than a decade after its establishment, Zibuyu has become one of the largest cross-border e-commerce companies in China, but it is still growing rapidly. According to the prospectus, from 2018 to 2020, the company's revenue increased from 1.318 billion yuan to 1.898 billion yuan, a compound growth rate of 20%; in the same period, net profit increased from 80.01 million yuan to 114 million yuan, a compound growth rate of 19.37%. It is worth mentioning that the company's profitability has also continued to rise, with gross profit margin rising from 66.47% in 2018 to 72.59% in 2020.

(source: prospectus)

(source: prospectus)

The growth of the company can be fully reflected, in addition to the above data-driven brand development factors, its deep ploughing of the channel is also a key point that can not be ignored, for this reason, the company has constructed a "third-party platform + self-supporting platform" two-legged walking model.

Zibuyu began to focus on strengthening cooperation with third-party e-commerce platforms in 2014, including Amazon.Com Inc and wish. The mature third-party e-commerce platform enables Zibuyu to accelerate its penetration in the overseas market at a lower cost and increase the exposure of its brand. It is worth mentioning that Amazon.Com Inc has a leading position in the global e-commerce platform and has huge platform opportunities, so the company has been strengthening its investment in this channel in recent years. From 2018 to 2020, the proportion of revenue from Amazon.Com Inc channel has increased from 23.6% to 32.4%, which is of positive significance for the company to achieve long-term performance growth.

In addition, with the rapid increase in the number of entrants to the cross-border e-commerce industry, the competition among players for the traffic of third-party e-commerce platforms has become more and more fierce. advertising costs and purchase costs are gradually increasing, which makes it difficult for this model to rely solely on third-party traffic to promote the growth of the company in the long term, and the construction of self-supporting platform will become the development trend of cross-border e-commerce in the future.

Zi Buyu has a keen sense of the changing trend of the industry, and has been increasing efforts to build a self-supporting platform in recent years. According to the prospectus, the sales revenue of the company's proprietary website has grown rapidly at a compound growth rate of more than 300% in the past three years, from 22.05 million yuan in 2018 to 363 million yuan in 2020, accounting for 19.1% of the company's total revenue in the same period.

(source: prospectus)

Building a self-supporting platform is a difficult and correct way, and it undoubtedly requires a lot of resource investment, but on the one hand, it can form a higher barrier to open the gap with the newcomers, and more importantly, it can improve the company's control over the channel. it is more conducive to the cultivation and incubation of its own brand.

Conclusion

In essence, the cross-border e-commerce of B2C mode is also a retail business, which is inseparable from the three elements of "human goods yard". With a keen sense of business, Zi Buyu taps the vast overseas market at a time of fierce competition among domestic clothing e-commerce companies, and gives full play to the advantage of long-term accumulated data to strengthen their own products. and through the vigorous investment in Amazon.Com Inc and other third-party platforms with extremely high consumption power and strong localization service ability to actively carry out sales, while supplemented by the continuous development of self-supporting platform, constantly expand and consolidate the brand matrix. It has built a deep moat for long-term development.

Taking advantage of the east wind of cross-border e-commerce industry, Zi silent if the successful listing will bring more long-term positive significance to the company. Sufficient funds can further improve the R & D and design capacity and the construction of self-supporting platform, continue to expand the leading advantages of products and channels, and enhance their long-term value. Looking forward to the future, Zi Buyu after listing is more worthy of expectation.