Orchid Pavilion Set potential low-key play to foreign trade dealers: channels bring high gross margin

April 18, foreign trade exports to the U.S. Securities and Exchange Commission (SEC) to submit a prospectus, to be listed on the New York Stock Exchange (NYSE), the largest public offering size (financing limit) of 86.25 million U.S. dollars.

The news, such as the huge stone cast Tam, aroused the electricity business industry surprised wave. The prospectus, which was set up in 2007, was a net revenue of $200 million in 2012. With 5 years to achieve the leap-forward development of the Orchid Pavilion is now open the process of listing, causing numerous concerns.

In the field of domestic foreign trade, such as the Orchid Pavilion set to implement M2C (factory to consumer) model of similar enterprises, has dozens of, they are considered to be a "stuffy sound rich" group. How does this group play to the foreign trade retail? And how to build cross-border sales channels? "China Business newspaper (blog, Weibo)" reporter conducted in-depth interview analysis.

Reduce supply chain to profit

Profit maximization can only be achieved if the goods are sent directly from Chinese factories to the hands of foreign consumers.

The founder of the Orchid Pavilion is called Guo to disease, he in the beginning of 2007 years of entrepreneurship, mainly using a variety of Chinese-made "shanzhai" electronic products and cheap wedding dresses, knocking open the overseas E-commerce market, "the tip of the iceberg."

In 2012, the number of users of the Orchid Pavilion was over 2.47 million, with a total revenue of $200 million, with an average of about 81 dollars per user on the Orchid Pavilion. It can be said that the low price drive is an overseas user in the Orchid Pavilion is the main factor of consumption. Take the wedding dress for example, according to the wedding report. In 2011, the average price of each wedding dress in the United States was $1166, while the average price for the Orchid Pavilion was just 209 dollars, the INC survey surveyed.

The key of multinational retail management lies in supply chain management, and Orchid Pavilion set up a more efficient supply chain management mechanism, which can not only ensure the order processing, but also realize the customized production process.

Romin, CEO of the Quartet Technology Group, who provides Cross-border logistics solutions for foreign trade dealers, told reporters M2C's industrial chain is very complex, involving marketing, production, shipping, warehousing management and other links, in addition to the need for all relevant industry professionals to operate, but also must have a strong IT system to carry out efficient management. And it development, is precisely Guo to disease advantage.

Liu Zhiyong, founder of the Shenzhen Sea Trade Conference, believes that the general foreign trade mainly includes 6 parts: A is a Chinese factory; b is a Chinese exporter; C is a foreign importer; d is a foreign wholesaler; E is a foreign retailer and F is a foreign consumer. In the field of foreign trade, Alibaba completes the link from B to C, the Dunhuang net completes is from a to D link, and the Orchid Pavilion set potential to achieve from a to f all links.

In Liu Zhiyong's view, real high profits are generated in the D to f link, which is one of the reasons why Chinese manufacturing is cheap and profitable. Obviously, the profit maximization can only be achieved if the goods are sent directly from Chinese factories to foreign consumers. In this respect, the main front of the pavilion is mainly through Google, Twitter, Facebook and other ways to push the goods to the U.S. consumer, with PayPal for trading, and then through UPS, DHL and other international logistics products directly delivered to their hands.

The unique feature of the Orchid Pavilion is that it shortens the supply chain of foreign trade. Up, the Orchid Pavilion set potential to bypass the layer of intermediate trade links, at present, its 70% of goods are directly from the factory purchase, so as to achieve the purpose of saving the purchase cost, and downward, they directly to the price of these low-cost Chinese products in overseas markets to sell the price of the C-end customers, so as to achieve high gross margin.

Channel value brings high gross margin

"Orchid Pavilion can be favored by investors, the most central factor is the value of the company's channel to the Chinese small and medium-sized enterprises to sell a certain type of products quickly to the world." ”

"If you can quickly send my 1000 Tablet PC to a world-wide demand, you might be able to sell it even if you change it directly into dollars," he said. "Shenzhen Kai Yi Tatsu Electronics Co., Ltd. Marketing Director Daiju This evaluation of overseas markets."

Daiju has been engaged in electronic products sales for many years, the price gap between the domestic and overseas tablet computers is very clear. Although this huge price difference contains huge profits, but he still reluctantly said: the reality of export trade is not much profit, which is also Kai Italy to the domestic, and launched its own brand "I still" the main reason.

At the same time, Kaile also put some products on some overseas retail websites for sale, which is a good way to circumvent international buyers, but the marketing performance is often not very good. Because big overseas buyers control powerful channels, global retailers, including Wal-Mart, have firmly controlled the global supply chain, which is called "channel value".

Orchid Pavilion also has such "channel value". As a foreign trade electric business enterprise, the Orchid Pavilion collection potential has the considerable gross profit margin, this also is the important reason which receives the attention. According to the prospectus, the 2010 gross profit margin of the pavilion was 22.12%, rising to 41.77% in 2012. In the same year, the Amazon gross profit margin of 24.8%, only goods will be 22.3%, Dangdang for 13.9%. Obviously, the margin of the Orchid Pavilion is far higher than the overall level of the electricity quotient.

The high margin of the Orchid Pavilion is based on the short supply chain and cheap cost advantage of production. Orchid Pavilion Set Potential commodity price is not high, a 100 yuan of "Chinese manufactured goods", even if the price units directly into dollars, for a part of overseas "cock Silk" group, the price is still very attractive.

"Orchid Pavilion can be favored by investors, the most central factor is the value of the company's channel to the Chinese small and medium-sized enterprises to sell a certain type of products quickly to the world." "This is the value of a powerful channel," Liu Zhiyong said.

According to Liu Zhiyong, at home, the business model and Orchid Pavilion is basically similar to the company's hundreds of, of which the annual sales of more than 10 million U.S. dollars in the foreign trade of the retail enterprises have nearly hundred, these enterprises are mostly very low-key, usually do not participate in electric business exhibitions and forums, so most enterprises are not known.

Reporter learned: in the retail business of foreign trade, the group of millions of the existing DX (Chinese name is Hong Kong Yi Bao Technology), Tomtop (Chinese name Kangmai technology), and so on, the former year's sales of up to 200 million U.S. dollars, and the latter was a few years ago in Hong Kong borrowed shell listing. They and the Orchid Pavilion model is different, in addition to their own site, but also Taobao platform, Amazon and other platforms to sell products.

However, the scenery of the market is not all winners. In fact, it is not easy to build a m2c platform. Global markets, such as business-to-business, have tried to build channels for overseas m2c, but the project ended in nowhere.

Reporter observation

Operational costs face high risk

Orchid Pavilion Set on the road to the IPO, it seems to prove the foreign trade and retail electric business enterprises behind the huge business opportunities. However, this may not be the case.

"From the Orchid Pavilion set potential to open the report, it also continued to lose 4 years, not outside the foreign trade is said to make a lot of electricity business, but not what profiteering industry." As with the domestic electricity business, the foreign trade is also a very hard and low profits of the work, only some of the supply chain and it technology to grasp a better business, the day a little better. Liu Zhiyong, founder of Shenzhen Sea Trade conference, said bluntly.

From the factory directly to consumers, although the Orchid Pavilion set potential in the supply chain to save a lot of intermediate links, but omitted these links and the risk is to be borne by the Orchid Pavilion set. Therefore, although the margin of the Orchid Pavilion is more than 40%, but the net interest rate is only 1%, which also shows that the overall operating cost of its business model is very high.

There is also a data note: The 2011 Orchid Pavilion Collection Potential accounts payable turnover rate is about 11, the turnover days of accounts payable is 33 days, the turnover days of accounts payable are not quite the same as that of the inventory turnover days, which means: The Orchid Pavilion set is not like the General Electric dealer or the retailer pressure supplier's money, the payment is more timely. However, on the other hand, the Orchid Pavilion will prefer to send high interest rate of the convertible bonds, also do not press the supplier's money, so that their cash flow in a less saturated, which is one of the risks.

In addition, the marketing cost also brings the huge operation risk to the Orchid Pavilion collection potential. It is understood that the Orchid Pavilion set potential customers mainly from Britain, France and the United States, payment system with PayPal, publicity media is Google and Facebook, logistics with UPS, DHL and FedEx, technology platform with Amazon's AWS. Among them, the Orchid Pavilion set potential in Google, Twitter, Facebook, the cost of marketing is huge, now Google is one of China's largest customers. It is reported that the Orchid Pavilion also has a large number of foreign staff, their work is in different languages, in the above-mentioned community marketing. Guangzhou Jia Yue Fei Network Technology Co., Ltd. President Lin Yazhi is in Japan through precision marketing to do the business of foreign trade manufacturers started. He told reporters: "How to let overseas consumers through Google search your products, this is very valuable marketing skills." It takes a lot of labor to do it well. He also said that people who understand the retailing of foreign trade must also know the precise network marketing technique, otherwise they may be eliminated by the market or even quit the industry.

In fact, despite the imminent listing of the Orchid Pavilion, it is facing a cost-management crisis: Its cash flow has been on the back of the fast-growing performance. According to its F1 earnings report, December 31, 2011, the annual sales amounted to 100 million U.S. dollars, the Blue Pavilion on the cash balance only 6.78 million U.S. dollars. Based on capital constraints, the company had to borrow in the form of convertible bonds to VC in March 2012, 1.5 of the loan period, the average annual interest rate reached 12%~15%. As of December 31, 2012, the Blue Pavilion set potential annual sales reached 200 million U.S. dollars, its cash balance of only 17 million U.S. dollars. A little careless, the company's capital chain may be caught in tension. In the field of foreign trade, many experienced early profiteering enterprises, it is because they can not adhere to their own integrity, after a period of golden period after the fall behind the exit. Liu Zhiyong that the public on the foreign trade may be misunderstood, today's foreign trade in the field of electricity has been very competitive, and there is no outside the legend has been muffled to make a lot of money.