Independent scarcity penetrates
Lao Ji is determined to be thousands of miles away
Author: Yi Ran
Edit: End of time
Style: George
Source: Rhodium Finance - Rhodium Finance Research Institute
"The era of high gross margins in the retail industry is over, and we now need to satisfy consumers through small profits and quick turnover, and we need to focus on large-scale operations to bring stable income."
On May 30, Zhang Wenzhong, who rarely appears in public, appeared at the 30th anniversary celebration of Wumart Group. In an interview with the media, he said that on June 2, he would have a dialogue with Yu Donglai, the founder of Fat Donglai, and planned to accelerate the development of multi-point DMALL's technology and business coverage.
For the multi-point IPO of World War III, this should be a booster. On April 30, 2024, Multipoint Intelligence Co., Ltd. (hereinafter referred to as "Multipoint") submitted a prospectus to the Hong Kong Stock Exchange, with UBS Group, CMB International and China Merchants Securities International as joint sponsors. The previous two sprints were invalidated because they did not pass the hearing within 6 months.
Three times to the Hong Kong Stock Exchange in two years, why are more points so urgent? What new story does this rematch bring?
01
The birth of multipoint
LEE
According to public information, Duodian was founded in 2015 and is a one-stop omni-channel digital retail solution service provider, providing end-to-end business SaaS solutions. Through Dmall Technology, we provide a one-stop solution for retail joint cloud to help retailers and brands go digital.
The essence of business is unchanged, and good goods and services must be the core. According to Yicai, Zhang Wenzhong revealed that METRO's digitalization process is very comprehensive, and at present, METRO's online sales in the private domain account for about 30%, and the online sales business is profitable. Multi-point DMALL has empowered more than 700 retail enterprises, including Fat Donglai.
In a certain sense, Zhang Wenzhong has the confidence to empower. As early as the 90s of the last century, after returning from studying in the United States, he founded a computer company with his classmates and developed a set of information systems MIS and POS to improve the management level of supermarkets, which can be recorded "one by one (transaction)" "POS machine is the front end, and the back end has a software system to support it, and try to promote it to the outside world."
Unfortunately, computers were still a luxury item in China at the time, let alone such a software. As a result, Zhang Wenzhong opened the first standardized modern supermarket in Beijing, Wumart Comprehensive Supermarket Cuiwei Store, and applied this system to it. In 2003, the title of "the first private share" landed on the Hong Kong Stock Exchange, and Zhang Wenzhong was known as the "father of Wal-Mart in China" and "the father of China's supermarket".
However, life is always full of surprises. In 2008, Zhang Wenzhong was prosecuted on suspicion of bribery and misappropriation of funds, and was eventually sentenced to 12 years in prison. (Note: In 2018, the original judgment was revoked and Zhang Wenzhong was acquitted)
After the early release in 2013, Zhang Wenzhong had a keen insight that with the tide of modern information technology and the Internet, the offline retail landscape has undergone great changes. According to Nanfang Daily, the mainland's e-commerce transaction volume reached 8.1 trillion yuan in 2012, a growth rate of about 4.1 times the GDP growth rate of that year. In particular, the transaction scale of the online retail market reached 1.3 trillion yuan, with a growth rate of about 4.7 times that of the total retail sales of consumer goods in the same period.
Based on this, Zhang Wenzhong, who regained his freedom, "returned to his old business" and took "business digitalization" as a new goal for re-entrepreneurship and re-starting. In 2014, he led the acquisition of B&Q, and in 2015, he founded an e-commerce platform - Dmall.
In terms of offline, although Wumart was privatized and delisted in 2015, it did not stop expanding, acquiring all the stores of South Korea's Lotte in North China in 2018, and strategically investing in Chongqing Trading Company in 2019. In April 2020, the company purchased an 80% stake in METRO's China business for EUR 2 billion.
So far, Zhang Wenzhong has two trump cards of Wumart and multi-point online and offline, and has become a heavyweight in retail digitalization.
02
More than half of the revenue depends on Wumart Group
Related-party transactions are questioned
LEE
For many points, Zhang Wenzhong, who "started a second business", put a lot of effort into it.
At the beginning of its establishment, the company received $100 million in angel round financing from IDG Capital. According to the prospectus, the company has completed three rounds of financing so far, with a cumulative financing amount of more than 700 million yuan, and there are many star institutions such as Tencent, Kingdee, and Industrial Bank among investors. After closing a $51.8 million Series C+ funding round in November 2022, the valuation reached about $3.052 billion. As of the end of 2023, the multi-point has been connected to multiple platforms of Wumart, providing services to 677 customers.
Rapid growth and capital are popular, but it does not mean that there are no hidden worries.
From 2021 to 2023, the company's net income retention rate will be 208%, 140% and 114%, which will continue to decline significantly. Industry insiders point out that the net revenue retention rate is a measure of a company's ability to retain and expand its existing customer base over a period of time, and indicates the level of customer loyalty and their willingness to continue to pay for the company's products.
In this regard, DMALL said that the O2O platform service fee was reduced mainly due to the fact that several customers chose to operate their own O2O e-commerce business; a decrease in the total amount of merchandise transactions processed and the number of delivery orders placed for certain retailer customers through the Company's O2O platform; and advertisers to reduce ad deployment.
At one point, the "largest customers" mainly Wumart Group, METRO China entity, Chongqing Department Store Group, Yinchuan Xinhua Group and B&Q entity contributed huge revenue and continued to grow in proportion.
From 2021 to 2023, Duodian will achieve revenue of 1.045 billion yuan, 1.501 billion yuan, and 1.75 billion yuan respectively. The revenue from the above customers was 709 million yuan, 1.069 billion yuan and 1.311 billion yuan respectively, accounting for 67.9%, 71.3% and 74.9% of the revenue. Among them, Wumart Group contributed 473 million yuan, 661 million yuan and 927 million yuan, accounting for 45.3%, 44.4% and 53%.
With such a high proportion and high dependence, it is inevitable that the outside world will have doubts: how much independence is more than 9 years old? What is the core competitiveness and development stability of the market? Are a large number of related-party transactions fair and equitable? Once you leave the "Wumart Department", what will happen to the feeding performance?
In May 2023, the China Securities Regulatory Commission (CSRC) mainly mentioned the independence of related entities in terms of business, assets, personnel, institutions, finance, etc., as well as the authenticity, fairness and substitutability of related party transactions.
According to media statistics, more than 300 times "Wumart" appeared in the latest hearing materials disclosed by DMALL. From 2021 to 2023, the revenue from affiliated customers increased from 709 million to 1.31 billion, accounting for 74.9% of revenue.
In addition, Multipoint has increased the average commission rate of the operating system, from 0.3% in 2021 to 0.4% in 2023.
The prospectus also admits that "our current customer base is relatively concentrated, and the number of major customers is limited. The loss of one or more key customers, failure to renew agreements with one or more key customers, or failure to expand our customer base can have a negative impact on our results of operations and our ability to market our services. ”
It is worth mentioning that, according to the 21st Century Business Herald, since March 9, 2024, Chongqing Department Store Group is no longer an affiliated entity of Multipoint Intelligence.
03
The annual operating cost exceeds 1 billion yuan, and it is mired in losses
LEE
Even with the help of many parties, it is still difficult for Duodian to get out of the quagmire of losses.
From 2021 to 2023, the net profit of multi-point DMALL will be 1.825 billion, 841 million and 655 million respectively, and the adjusted loss will be about 959 million, 296 million and 140 million yuan. As of the end of the reporting period, the cumulative losses were about 5.199 billion, 6.008 billion and 6.602 billion yuan.
As of the end of 2023, the company's cash and cash equivalents were 533 million yuan, compared with 1.135 billion yuan in 2020. The short-term loan and long-term loan maturity part is 202 million yuan, and the long-term loan is 321 million yuan, so it is necessary to be vigilant against debt repayment pressure.
The business segment is mainly composed of three major sectors: retail core service cloud, e-commerce service cloud and marketing and advertising service cloud.
Among them, the retail core service cloud is the core main force, with revenue of 438 million yuan in 2021 and 1.298 billion yuan in 2023, accounting for 74.3% of revenue; The e-commerce service cloud will decrease from 409 million yuan in 2021 to 300 million yuan in 2023, and the proportion of revenue will drop to less than 20%. Marketing and advertising services cloud revenue decreased from 196 million yuan to 150 million yuan, accounting for less than 10%.
According to Blue Whale Finance, in 2019, e-commerce service cloud was still the core business of multi-point, accounting for more than 60% of revenue. However, the gross profit margin of the business was very low at -101.1%, and the retail core services was as high as 47.3%. In view of this, the company began to focus on the retail core service cloud.
At present, the retail core service cloud is the main source of revenue, but the gross profit margin has decreased from 59.3% in 2021 to 41.7% in 2023, and the gross profit per customer has decreased from 1.1 million yuan in 2022 to 1 million yuan in 2023. Talking about the reason, the prospectus said that it was the launch of additional AIoT solutions, and its gross profit margin was lower than that of the rest of the retail core service cloud.
It is worth noting that in order to improve profitability and reduce losses, Duodian DMALL has opened a money-saving mode and slowed down R&D and marketing investment. The company's R&D expenditure decreased from 614 million yuan in 2021 to 551 million yuan in 2023, accounting for 58.8% to 31.5% of total revenue. Sales and marketing expenses decreased from $608 million to $180 million, accounting for 58.2% to 10.3% of total revenue.
However, the operating cost has increased rapidly, from 687 million yuan in 2021 to 1.037 billion yuan in 2023, an increase of 51% in two years. Among them, outsourcing and other labor costs were the main force of the increase, from 5.073 million yuan to 465 million yuan.
Combined with the weak self-hematopoietic ability, the operating cash flow outflow in the same period was 1.275 billion yuan, 206 million yuan and 179 million yuan respectively, with a cumulative total outflow of 1.66 billion yuan, and the continuous loss is reasonable. Therefore, it is not difficult to understand the reason for the decision to IPO in two more years and three times to the Hong Kong Stock Exchange.
04
The story of going to sea is ambitious
How much worse is the high quality and good service?
LEE
Looking at the digital retail service market, it is dominated by three types of players: Internet giants (such as A, JD.com, Meituan, etc.); third-party digital retail service providers (e.g., multi-point); A self-operated platform for a super-large chain enterprise.
The first type of advantage is a large online user base and strong channel integration. The weakness is that it is relatively lacking in the genes and in-depth understanding of the traditional retail industry, resulting in its retail foundation not being as solid as other competitors;
The second type starts from the retail business, digs deep into the needs of consumers and retail enterprises, and continues to optimize the service experience in detail to provide differentiated services; The third type is to establish its own service platform, although it may not be as good as the Internet giants in terms of traffic and resource integration, but focus on the retail field and strive to provide professional and personalized services.
Industry analyst Sun Yewen said that on the whole, in the short term, Internet giants have unrivaled advantages in traffic acquisition, channel development and resource integration. However, the scale of the retail market is huge, and it is impossible for the giants to penetrate into various industries and fields, which gives the growth opportunities of professional retail SaaS such as multi-point, and if it wants to succeed in the battle, it is necessary to give full play to its own industry experience and characteristic advantages, and optimize the user experience and efficiency to the extreme.
Focusing on the purpose of this fundraising, Duodian said: it is mainly used to develop new applications and new service modules, and seek strategic cooperation, investment and acquisition with complementary growth strategies.
Among them, in order to penetrate the global market that has not yet set foot in the company, the company plans to further strengthen its local marketing efforts and technical capabilities. In addition, we have developed an English version of Dmall OS system, and are developing an overseas business development team with local market knowledge.
For example, based on the close cooperation between the company and METRO's Chinese entities, the company has partnered with METRO Group to expand its business into the European market. As of December 31, 2023, 10 METRO Group stores in Poland have enabled the company's system. In August 2023, entered into a new contract with a leading Asian conglomerate in the Philippines for the provision of a retail core services cloud.
In addition, the company plans to use the company's project with DFI Retail Group as a showcase case to continue to develop its business in the Southeast Asian market.
Going to sea, this story is undoubtedly tempting. As of 2023, the multi-point Chinese mainland market will contribute 93% of revenue, while the overseas market will account for only 7%. If we can successfully explore the global market, the increase in performance will inevitably be huge.
To this end, Dmall plans to use the funds raised to recruit about 500 R&D personnel with international industry backgrounds to develop new modules, which will help the company deepen its development in Southeast Asia, Europe, the Middle East and Africa.
However, it is still the same sentence, the big market is more competitive, and while entering the overseas market brings more growth space and more value expectations, it also brings more competing products, more cost expenditures, more quality control and risk control, specialization, and characteristic requirements, and more tests the basic skills of the company's products and services and the control of the industrial chain.
"High quality, low price, good service", this is the advertising slogan of the opening screen in the multi-point Dmall mobile APP. However, as of May 31, 2024, browsing the Black Cat complaints, there are a total of 1,893 multi-point related complaints, involving questions such as non-timely delivery and shoddy products.
(The above complaints have been reviewed by the platform)
It is true that there are thousands of users, and it is not realistic for everyone to be satisfied, and the above complaints may be biased and one-sided. But don't forget, product experience and user reputation are also the cornerstones of enterprise development. After all, the market is highly iterative and competitive, and users have no shortage of choices. Moreover, many points are still in the sensitive period of IPO, and there is nothing wrong with checking and filling in the spotlight more.
05
Write at the end
Difficulties are temporary, and businesses will be better
LEE
Before running, the chassis is rammed, and the iron needs to be hard! I think Zhang Wenzhong, who has experienced the ups and downs of life and "second entrepreneurship", should have a lot of experience.
The so-called sea sailing depends on the helmsman, mentioning Zhang Wenzhong, is undoubtedly a respectable entrepreneur, who once said: We must firmly believe that difficulties are temporary, and enterprises will be better. "Satisfying consumers' pursuit of a better life is my original intention as an entrepreneur; It is my mission and pursuit to use digitalization to promote the transformation of the retail industry. When there is spring in the heart, life is full of sunshine. I set off again. ”。
On May 30, Zhang Wenzhong once again emphasized that "we will accelerate the development of multi-point DMALL business in the future, make good use of digitalization, comprehensive digitalization and return to the essence of business." ”
After careful consideration of the words and ups and downs, he is still an optimist. As the saying goes, Lao Ji is determined to be thousands of miles, although the road is far away, it is coming, whether the more points of the IPO of the three wars can impress the market and go ashore as desired, you might as well let the "bullet" fly a little longer.