The 23-year-old national lingerie brand Urban Beauty is experiencing new growth changes. Since the departure of the company's former CEO Xiao Jiale at the end of November and the return of founder Zheng Yaonan, Urban Beauty has recently begun to build a full industry chain system with rapid response. At the same time, Urban Beauty issued a profit warning announcement, and it is expected to lose no less than 450 million yuan in 2021. In this regard, Zheng Yaonan, chairman and ceo of Urban Beauty, said in an interview that the annual profit warning is "one of the reasons why the company's former CEO left and I re-took over Urban Beauty", which is a combing of the results of previous internal operations, in preparation for being able to lighten up in 2022. At the same time, he also said that urban beauty needs doers, and the company will focus on the development of digitalization, products, brands and talents.
From nearly HK$20 billion to about HK$1 billion, the market value of Urban Beauty has shrunk significantly
In 1998, Zheng Yaonan, who came from security, founded Urban Beauty, focusing on the underwear track, and after more than ten years of layout and hard work, Urban Beauty knocked on the door of the Hong Kong Stock Exchange in 2014 and became the "first stock of Chinese mainland underwear". 2015 was the highlight year of Urban Beauty, with a net profit of 540 million yuan, a market value of nearly HK$20 billion, and a total of 8,058 retail stores.
Photo/ Courtesy of Urban Beauty
Since 2016, the rapid expansion method of urban beauty "staking" has rebounded, and the company's net profit has declined for the first time in this year, and the problem of inventory backlog has become prominent. Although from 2017 to 2018, Urban Beauty recovered its net profit through discount promotions, store closures, and the introduction of strategic partners, in 2019, under the multiple squeezes of the emergence of cutting-edge underwear brands, intensified market competition and internal difficulties, Urban Beauty handed over its first annual report on losses after listing, with a loss of 1.298 billion yuan for the whole year and a reduction in retail stores to 5970.
In order to reverse the downward trend of performance, Urban Beauty has focused on transformation since the second half of 2019, introducing Xiao Jiale, former senior vice president of Adidas Greater China, as the chief executive officer, responsible for planning the company's strategic development and other work, and Urban Beauty calls itself "secondary entrepreneurship".
From the first half of 2020 to the first half of 2021 to continue to make profits, the "secondary entrepreneurship" of Urban Beauty from products, channels, supply chains and other aspects seems to have worked. However, on the evening of December 16, a profit warning issued by Urban Beauty showed that in the past 3 years, Urban Beauty still has an "undercurrent" under the seemingly improved results, and it is expected to lose 450 million yuan in 2021. As of December 21, The Market Capitalization of Urban Beauty was about HK$1 billion, a 90% reduction from the highlight period of 2015.
In addition to the repeated epidemics, rising raw material prices, increased provision for used goods and asset provision for use rights, the Board of Directors of Urban Beauty pointed out in the announcement that in order to improve revenue in 2021, the company has significantly increased various expenses, such as improving incentive programs for franchisees and employees, launching extensive promotional activities, and increasing the cost of multiple executives and consulting. These expenditures did not yield results as planned, but instead affected operations.
The Beijing News Shell financial reporter learned that in the "increase in a number of executives and consulting expenses" pointed out in the announcement, the executive expenses include Xiao Jiale, the former CEO of the company who left at the end of November this year, and the salaries of some of the management team members when he took office.
As for the reasons why the former CEO left his post before his term of office, Zheng Yaonan said in an interview: "As a senior executive from a large international company, Xiao always has its own advantages. On the one hand, his departure is due to the needs of personal career development, on the other hand, there are also some characteristic reasons for the development of private enterprises. At the same time, he also pointed out that the profit warning for 2021 is one of the reasons for the company's original CE0 departure, and it is also "one of the reasons why I re-took over the city beauty." The annual profit warning is a review of the results of previous internal operations and also prepares for the ability to go light in 2022.
The founder returned to the front line of operation and personally grasped the "secondary entrepreneurship"
Returning to the management of Urban Beauty and re-serving as CEO, Zheng Yaonan will personally focus on the business development and overall operation of the "secondary entrepreneurship" strategic change. Although the announcement of the executive change has only been announced for more than 20 days, Zheng Yaonan's preparations have begun as early as July this year.
Zheng Yaonan, who likes to read "Sun Tzu's Art of War", is ready to return to the front line of operation, leaving the underwear market for several years has been investing in the development of other industries, starting from July, on the one hand, going deep into the city beauty store for more than half a month, directly communicating with consumers and understanding the needs. On the other hand, through the analysis and research of the company's online and offline products, praise and bad reviews, we understand the shortcomings of our own products. In addition, Zheng Yaonan also visited a number of traditional domestic brands to learn from transformation experience and ideas.
In the above preparation process, Zheng Yaonan sorted out the advantages and problems of the current development of urban beauties. Zheng Yaonan believes that urban beauties with a solid product foundation, 5,000 offline stores, and 60 million members have gaps in marketing and digitalization compared with cutting-edge underwear brands, and in the later development, the layout gap in first-tier cities and online channels have no strong explosive products, which also leads to urban beauties staying away from the market and consumers. In response to the above problems, Zheng Yaonan said that the "second entrepreneurship" of urban beauty after he took over will focus on digitalization, products, brands and talents.
In terms of talent creation, Zheng Yaonan pointed out that urban beauties need doers, and they must put the right talents in the right positions in order to really play a role. The Beijing News Shell financial reporter noted that after Zheng Yaonan's return, most of the members of the leadership team were composed of two parts: the founding team of the return and the internal promotion. Zhang Shengfeng, the major shareholder of Urban Beauty whom Zheng Yaonan met when he was wholesale underwear, also returned to Urban Beauty this time as vice chairman and vice president, responsible for research and development and supply chain. Sin Shun-hsiang, who was in charge of retail operations at Urban Beauty from 2011 to 2016, served as co-owner of Urban Beauty, responsible for the direct sales center, franchise sales center, channel development center and other work. In addition, Xiao Wei and Li Xiang, who are specifically responsible for the company's supply chain and company branding, were promoted from within.
Zheng Yaonan said that in the next few years, the talent strategy of urban beauty is mainly through internal promotion and training, and it is not excluded that for some very urgent or missing positions, choose to recruit from the outside. For example, talents in digital algorithms may need to be recruited from outside for the current internal situation of urban beauty.
Launch a "strategic alliance" in the supply chain, and Urban Beauty will focus on the creation of "explosive products" next year
Products are one of the focuses of the two CEOs before and after Urban Beauty in the "second venture". Zheng Yaonan, who has been the CEO for half a month, quickly made a move in the creation of product innovation, announcing the signing of strategic alliance cooperation agreements with various target suppliers to form a supply chain strategic alliance.
Among the suppliers of fabric yarn, lace, shoulder straps, weaving and other suppliers that have been cooperated, Urban Beauty has selected 20 suppliers in the first batch and reached strategic cooperation through holding or shareholding. In the early stage of product development, the members of the strategic alliance will share information, deep integration and joint development in commodity planning, new material research and development, fashion trends and product design to enhance the product development capabilities and market competitiveness of Urban Beauty and target suppliers, while reducing the overall cost of Urban Beauty product development; in terms of supply chain management, strategic alliance members in lean production, production and marketing synergy, order distribution and rapid response to improve cost-effectiveness and reduce the overall procurement cost of Urban Beauty.
Zhang Shengfeng said that he hopes that the supply chain strategic alliance will increase efficiency by 15%-20% through lean production, reduce costs and increase efficiency, and reduce inventory. The Beijing News shell financial reporter saw in the underwear workshop of Shantou Chaonan Fengde Factory that under the transformation of some intelligent production equipment and lean production introduced, a series of links such as receiving orders, feeding, sewing lace to packaging and so on only take 25 minutes. Xiao Wei, head of supply chain of Urban Beauty, said that through lean production, a batch of products that take 3 to 4 days to complete on a traditional production line now only takes 8 to 12 hours. Supply chain strategic alliances can quickly respond to market demand and compress the time and speed of new products such as home wear, underwear, and underwear.
The Board of Directors of Urban Beauty believes that the conclusion of a strategic alliance cooperation agreement will help integrate the ability of suppliers to develop new products and materials on the one hand, thereby shortening the development and production cycle of new materials and products and improving rapid response capabilities; on the other hand, it will help strengthen the ability to control the quality of suppliers, improve the self-sufficiency rate of high-quality products, and ensure sufficient high-quality production capacity.
Xiao Wei revealed that in the past year, Urban Beauty has invested 180 million yuan in the supply chain strategic alliance, and the first batch of cooperative suppliers has a total of 20. There are about 30 partner suppliers targeted by Urban Beauty, and more than 100 million yuan will be invested in the future. He also said that the strategic alliance cooperation of Urban Beauty is open, the company will adopt a step-by-step management method, the suppliers who stand out in the follow-up inspection will join the strategic alliance through upgrading and transformation, and the cooperative suppliers who do not meet the standards of product development or continuous improvement will also adopt a elimination mechanism.
Zheng Yaonan said that in recent years, urban beauties are building a product base. In the future, in addition to continuing to polish products and build strategic alliances, digital transformation and member operation will be the key direction of change, and a special team will be set up to study the creation of explosive products. He revealed in an interview that the new products that Urban Beauty will launch from March to April 2022 will become super explosives, and this new product has the four key characteristics of "comfortable, stylish, cost-effective and beautiful" that explosive products have.
In an interview with the media, the management team of Urban Beauty represented by Zheng Yaonan has optimistic expectations for the company's new stage of "secondary entrepreneurship". Zheng Yaonan hopes that the management team after the return of a group of "elders" can bring good returns to urban beauties and investors. Whether the new products of urban beauties can become super hits next spring and summer, and whether the "secondary entrepreneurship" of urban beauties in the future can be successful, it still needs time to verify, and Beijing News Shell Finance will continue to pay attention.
Beijing News shell financial reporter Wang Zhenzhen
Edited by Li Zheng Proofreader Liu Jun
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