On April 2, 2021, the baby-friendly room disclosed its 2020 financial report, saying, “Due to the outbreak of the epidemic that year, the company’s offline stores were greatly impacted. At the beginning of the epidemic, many of the company’s stores were forced to close. Influence, store performance is under pressure. ‘
To this end, Baby-friendly Room built a retail platform around omni-channels that year, enriching its own e-commerce platforms, and also developed projects such as WeChat Mall Mini Programs and Baby-Friendly Room Home Mini Programs, and started operating private domain traffic. On the other hand, quickly set up an e-commerce marketing team and settled on a third-party e-commerce platform to fully obtain public domain traffic. During the period, e-commerce platform sales reached 116 million yuan, accounting for 5.16% of revenue, a year-on-year increase of 53.47%.
At the same time, Baby-Friendly Room began to adjust the strategy of rights and interests members. In that year, the consumption of all paid members in the Baby-Friendly Room accounted for 37% of the total consumption of members. In the future, the Baby-Friendly Room will attract more consumer members to become the company’s rights and interests paying members.
Although the baby-friendly room is active in action, this cannot change the result of the double decline in earnings in 2020: revenue fell 8.29% year-on-year to 2.256 billion yuan, and net profit attributable to mothers fell 24.43% year-on-year to 117 million yuan.
From a competitive point of view, this result may be inevitable. Due to the structural advantage, the baby room cannot obtain the proportion of accounts payable and bills payable like Kidswant. Therefore, from the result, Kidswant won in 2020. Both profit growth: revenue increased by 1.37% year-on-year to 8.355 billion yuan, and net profit attributable to the parent increased by 3.71% year-on-year to 391 million yuan.
If the ipo advances smoothly, Kidswant is expected to expand its competitive advantage over its competitors through the advancement of fund-raising projects. This advantage will further compress the growth space of small companies such as baby-friendly rooms.
The above is the investment background of Kidswant who is going to be listed on the GEM.
Kid king
Kidswant is a retailer of maternal, infant and child products and related value-added service providers. As of the end of 2020, Kidswant has 434 large-scale digital entities directly operated stores in 20 provinces (cities) and 131 cities across the country, serving more than 42 million Member families, the number of service members in 2017 was only 11.54 million.
Maternal, infant and child products are the core source of income for Kidswant. Kidswant sells food (milk powder, snack food supplements, nutrition and health care), clothing items (underwear, home textiles, children’s shoes for outer wear), consumables (diapers, toiletries), to target user groups through offline stores and online channels. Durable goods (toys, cultural and educational intelligence, lathes and chairs) and other categories, with more than 10,000 products.
In the product revenue structure, milk powder is the first and absolutely dominant source of income: from 2018 to 2020, milk powder revenue accounted for 50.32%, 53.99%, and 57.86% respectively, which is not much different from the performance of its peers. In the same period, baby-friendly rooms Milk powder revenue accounted for 46.04%, 46.99%, and 49.6%, respectively.
Obviously, in this level of competition, Kidswant will obtain lower milk powder procurement costs with a larger procurement scale due to the advantages of the scale of revenue. Among the fund-raising projects, the “omni-channel retail terminal construction project” is expected to build 300 digital direct-sale stores and the corresponding “omni-channel logistics center construction project” in the next three years, which will further consolidate this advantage.
In the construction of 300 directly-operated stores, it is expected to open 100 stores every year. On the one hand, Kidswant will continue to strengthen its expansion in key areas such as Jiangsu, Anhui, Zhejiang, Sichuan, and Chongqing, and sink to third- and fourth-tier cities, increase the density of outlets, and strengthen its dominant position in East China and Southwest China; on the other hand, Kids Wang will significantly increase the number of stores in economically developed regions such as Guangdong, Shanghai, Henan, or populated provinces to build brand awareness; In addition, Kid Wang will further expand to Yunnan, Shanxi, and Beijing based on the existing regions. Market coverage, consolidate and enhance the company’s competitive advantage.
The logistics project will solve the problem that Kidswant’s current warehousing layout is relatively scattered and the short-distance storage capacity is limited. The commodity allocation needs of most stores are still met by cross-regional warehousing, and long-distance transportation makes the allocation time longer, which directly affects consumers The problem of consumer experience in the store.
The gradual resolution of this problem will further reduce the proportion of Kidswant’s operating costs. As Pat Dorsey said, “Although the establishment and operation of a distribution network is a huge expense for the basic service industry, trucks The incremental profit for each additional shipment is also considerable. Once the fixed costs are recovered, the profit margin of sending additional goods along the regular route will be very amazing, because the variable cost of sending additional goods is almost equal to zero. ‘
In addition to maternal and child products, Kidswant also provides value-added services such as membership development for suppliers (brands), naming of interactive activities, product online and offline promotion, advertising, etc., as well as amusement services for maternal and child customers And childcare services, although this income does not account for a high proportion, it subtly enhances the value of the intangible assets of Kidswant.
For children’s amusement services, customers can purchase single-time amusement cards or stored-value amusement cards for consumption through online or offline channels; parent-child interaction activities mainly refer to KidW’s offline physical stores, including New Mother Academy, climbing competitions, etc. All kinds of interactive activities, enhance customer stickiness, and income event entrance fees.
As of the signing date of the prospectus, Kidswant has nearly 4,700 childcare consultants who hold the national nursery professional qualifications. They can simultaneously assume multiple roles such as nutritionists, mothers and infants nurses, and child growth trainers. Such staff can be equipped Provides a variety of value-added services for mothers, infants and children, such as lactation, baby touching, baby haircut, and pediatric massage. Customers can purchase a single service according to their needs, or purchase multiple services through prepayment. After the purchase is completed, the customer can directly make an appointment through the phone, the Kidswant app, etc., for in-store service or to apply for professional technician on-site service.
Compared with its peers, Kidswant has a certain scale advantage, but still faces the impact of the decline in the number of newborns: From 2010 to 2016, the number of newborns in my country has shown an overall upward trend, especially in 2016 under the “comprehensive two-child” policy. After the formal implementation, the birth rate reached 12.95‰, and the number of births reached 17.86 million, the highest peak since 2000. However, with the full release of the policy dividend, the birth rate of my country’s newborns has been declining continuously from 2017 to 10.48‰ in 2019, and the demographic dividend has gradually declined. In the future, for example, the birth rate of our country will continue to decline.
Although Kidswant still has a lot of room for growth in terms of industry concentration, the downward trend in the number of newborns will suppress market valuation for a long time.
to sum up
Generally speaking, based on the characteristics of the market, Kidswant will record a higher initial valuation after the GEM ipo in the future, and as the sentiment declines and the value begins to appear, it is a good choice to invest against the trend at that time.
By Zhou Zhiwei
Author|Zhou Zhiwei
Edit | lala
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