In recent years, against the backdrop of insufficient effective domestic demand, going overseas has become a consensus for many companies to seek incremental opportunities, and cross-border e-commerce has ushered in a period of accelerated development.
In 2023, China's cross-border e-commerce imports and exports reached RMB 2.38 trillion, an increase of 15.6%. The growth rate was much higher than the national import and export growth rate. As a result, the share of cross-border e-commerce in China's goods trade imports and exports is also increasing, from 1% in 2015 to 5.7% in 2023. This year's government work report also clearly mentions that it is necessary to promote the healthy development of new business formats such as cross-border e-commerce, bringing a more relaxed environment for the development of the cross-border e-commerce industry.
The rise of the cross-border e-commerce industry has spawned a number of top sellers. In their respective tracks, they are not only in a leading position domestically, but also in the leading position globally. For example, in the field of furniture and home furnishing, Aoji Technology is fifth in the world and number one in China in terms of GMV.
In April of this year, it submitted a prospectus to the Hong Kong Stock Exchange. There are mixed reviews and comments on this. How can we correctly view this Chinese home furnishing cross-border e-commerce B2C biggest seller?
1. Use data to break down doubts and return to the upward channel
For companies engaged in cross-border e-commerce, Amazon is almost the only way to go. It is not only the main battleground for Aoji Technology, but also the market's main concern about its future development.
The trigger was the Amazon “wave of store closures” three years ago. In 2021, Amazon restricted the sales activities of online sellers that did not officially promote ratings or reviews, and generally “blocked” platform sellers for a period of more than half a year. According to reports, more than 600 Chinese brands and 3,000 Chinese seller accounts have been blocked, causing market concerns.
Aoji Technology's departmental stores were also closed down, but after the incident occurred, Aoji Technology adopted the establishment of a risk control department, training system, and employment of Amazon platform employees to improve the level of internal control and strengthen its own business compliance. At the same time, optimize the layout of online stores, strategically focus on furniture and household products, cultivate diversified and evolving brands and product portfolios, and further develop sales on other e-commerce platforms such as Walmart and Wayfair.
Judging from the latest data, Optotech has already escaped the impact of this incident.
In 2023, Aoji Technology achieved revenue of 8.68 billion yuan, a year-on-year increase of 22%; during the same period, the company's net profit surged 143% to reach 530 million yuan.
Moreover, thanks to the recovery in business scale, the gross margin of Aogee Technology's product sales business increased sharply from 20.8% in 2021 to 39.2% in 2023.
Judging from this, the sales and inventory pressure brought about by Amazon's “wave of store closures” has basically been exhausted during the trough period of the previous two years, and Aoji Technology's performance has returned to a positive growth channel.
It is undeniable that Amazon still has a significant impact on its revenue, but in the past three years, the company has consciously diversified sales channels to reduce the impact of a single channel on its own business development. Currently, Walmart, Wayfair, and other channels have increased their share of revenue from 11% in 2021 to 27% in 2023.
Overall, the negative impact of the Amazon incident is a thing of the past; the future prospects and advantages of Aoji Technology's core business, which is moving forward lightly, are the focus of attention now.
2. Cross-border B2C with big water and fish, multiple advantages to build a moat
Looking at the breakdown, Aoji Technology mainly relies on the two major business segments of product sales and logistics services to drive growth.
Among them, product sales revenue reached 7.03 billion yuan in 2023, accounting for 81.0% of the company's overall revenue, which is undoubtedly the core of Aoji Technology.
Looking further, as Aoji Technology's product sales focus has shifted from 3C to furniture and home furnishings in recent years, sales of furniture and household products have become the company's largest source of revenue. The company's furniture and household product sales revenue increased from 293 million yuan in 2016 to 5.337 billion yuan in 2023, with a CAGR of 51.4%.
The shift in business focus comes from the company's keen judgment on the broad prospects of the overseas furniture and home furnishing market.
Compared to the domestic market, overseas markets represented by Europe and the US regard furniture and household products more as FMCG products and are replaced more frequently, and the perfect domestic light industry chain can provide highly cost-effective furniture and household products to be exported overseas. Combined with e-commerce channels and the increasing improvement of the global logistics system, overseas demand for furniture and household products continues to grow.
According to the prospectus, the GMV for B2C overseas e-commerce in the furniture and household products market based on Chinese sellers increased from RMB 158.2 billion in 2018 to RMB 773.8 billion in 2023. The CAGR is 37.4%, and it is expected to break through the trillion dollar scale in 2025.
Being able to lay out this segmented track ahead of time is inseparable from management's keen sense of business. Lu Haichuan, founder of Aoji Technology, was born in Wenzhou, a city with a strong business atmosphere. He showed commercial talent in his youth. While studying for his master's degree in Germany, Lu Haichuan began selling domestic furniture to overseas markets, and was once in the front row of eBay Germany.
Judging from this, there seems to be some kind of inevitability that Aoji Technology can now firmly choose furniture and home as the main battleground.
Judging from the market pattern, although the global B2C e-commerce market for furniture and home furnishings is scattered, Aoji Technology is already the absolute leader in the industry.
Aiming at a huge market such as furniture and home furnishings, Aoji Technology uses a brand matrix approach. Its ALLEWIE, IRONCK, LIKIMIO, SHA CERLIN, HOSTACK, and FOTOSOK are all well recognized worldwide. In 2023, the GMV of the company's 11 brands all exceeded 100 million yuan.
Why can Optotech do this?
The first thing is, of course, that the company's products are excellent.
Since Aoji Technology has broken into many categories in the furniture and home furnishing circuit, it needs a wider range of high-quality suppliers to achieve sufficient supply. As of December 31, 2023, Optotech has worked closely with more than 810 production partners.
At the same time, through the company's digital supply chain management system, we ensure that all suppliers achieve standardized production under strict quality control to fully guarantee product quality. In 2023, Aoji Technology's average return rate on all third-party e-commerce platforms was below 3.5%, which is in the lowest range in the industry.
Furthermore, excellent logistics capabilities are also a top priority.
Generally speaking, cross-border e-commerce has extremely strict requirements for logistics systems. In particular, for large-size products such as furniture and home furnishings, sellers will have higher quality requirements for services throughout the supply chain.
By the end of 2023, the company operated 27 overseas storage facilities in the European and American markets, with a total construction area of more than 5 million square feet (460,000 square meters).
Thanks to the establishment of a global multi-level warehousing and logistics network, Aoji Technology has ultra-high efficiency. In 2023, more than 95% of medium to large products can be delivered to last-end fulfillment service providers within 24 hours of placing an order; at the same time, medium and large logistics warehousing prices are 30% lower than Amazon FBA.
An excellent logistics system not only fully empowers the product sales business, but also expands the new growth curve of logistics services.
As of 2023, the company has provided logistics solutions to more than 700 e-commerce companies, and fulfilled more than 3 million, 4 million and 6 million orders in 2021, 2022 and 2023, respectively. The logistics service business increased its share of revenue from 5.40% in 2021 to 19.03% in 2023.
Aoji Technology, which walks on two legs, is undoubtedly more stable.
III. Concluding Remarks
In today's increasingly globalized business environment, cross-border e-commerce is not only an innovation and transformation of business models, but also the epitome of profound industrial upgrading.
The rise and challenges faced by Aoji Technology are not only the story of one company, but also reflect the vitality of the Chinese manufacturing industry and the limitless possibilities of the global market.
Facing the future, we should recognize that the development of cross-border e-commerce requires not only the dual drive of technology and the market, but also a deep understanding and adaptation to international rules. This is not only a test of enterprise strategy, but also a comprehensive test of the international competitiveness of Chinese enterprises.
Focusing on enterprises, Aoji Technology, which broke out of the trough and entered the upward channel and sprinted to the Hong Kong Stock Exchange, is worth looking forward to in the future.