Can Adidass largest domestic distributor turn over from the old shoe king on the market

 Can Adidass largest domestic distributor turn over from the old shoe king on the market

Two years after privatization and delisting, Baili has made a comeback?

In 2017, Baili International, once known as the shoe king of the generation, announced its privatization and delisting. Its annual report shows that as of February 28, 2017, Baili Groups net profit was 2.403 billion yuan, down 18.1% year-on-year. As early as 2007, Baili Groups net profit rose 102.66%, while its revenue increased 87.09%. The company believes that Bailis profit decline is mainly due to higher profit footwear business income, profit shrinking substantially.

After the privatization of Baili International, Gaolu Capital holds 57.6% of the companys equity and becomes its controlling shareholder; Dinghui Investment holds 11.9% of the companys equity. In an interview with the media, Zhang Lei, CEO of Gaolu Capital, mentioned that with the industrialization of innovation in the field and the acceleration of the integration of traditional industries and new technologies, Gaolu Capital will use the power of science and technology to help Baili transform.

At present, the market value of Tuoluo has exceeded HK$53.1 billion at the time of Baili International Privatization. According to the prospectus, Taobao Internationals revenue in 2016, 2017 and 2018 were 21.69 billion yuan, 26.555 billion yuan and 32.564 billion yuan, respectively; it occupied 15.9% of the Chinese sports shoes Market in 2018, ranking first in the industry.

According to a report by consulting firm Frost Sullivan, Chinas total consumption of sports-related goods and services increased from 277.7 billion yuan in 2014 to 405 billion yuan in 2018, with a compound annual growth rate of 9.9%, and is expected to reach 610.1 billion yuan in 2023, with a compound annual growth rate of 8.5% from 2018. According to the analysis report, the sports consumption market in China is expected to reach 1.5 trillion yuan in 2020.

However, as to whether the international listing of Taobao can help Baili make a comeback, there is an industry view that the listing of sports sector can not change Bailis own situation, so whether Baili itself can turn around magnificently has little to do with it.

Highly dependent on Nike Adi, the number of stores closed is equal to the number of stores opened.

According to the prospectus, as of February 28, 2019, Taobao International had 8343 Direct stores and 1880 franchise stores run by downstream retailers in 268 cities. Taobo international has been cooperating with Nike for 20 years, which is the second largest retail partner and customer of Nike in the world. It has been cooperating with adidas for 15 years, which is the largest partner and customer in the world.

Photo by Zhao jiaran, a new editor in Adidas store

As of 2017, 2018, February 28, 2019 and May 31, 2019, Nike and Adidas accounted for 90.0%, 89.4%, 87.4% and 88.8% of the total sales revenue respectively. According to Frost Sullivans analysis, Taobao International has become the largest sportswear retailer in China as a sports sector business of Baili International in terms of retail sales in 2018.

However, the high dependence on Nike and Adidas also poses risks. Although the cooperative brands include Puma, Converse, Fans and Sketch, their revenue mainly depends on Nike and Adidas.

In the prospectus, Taobao International said that relying on a few brand partners to provide sales products, once failed to maintain good relations with them or renew the retail agreement, it would have a significant negative impact on the profitability and business prospects of the company. Some opinions are that agents are usually only responsible for the sales link, and their bargaining power with international brands is weak, and they are more limited. If there are uncontrollable situations such as the decline of word-of-mouth in cooperative brands, it will bring a blow to the agents.

It is worth noting that although the number of stores owned by Taobao International is huge, the number of its stores in recent years is almost the same as the number of stores opened. According to the prospectus, as of February 28, 2019, there were 1415 new stores in Taobao International, while 1374 stores were closed.

As for the future development prospects, Anxin International analysis said that at present, Taobao has cooperated with Nike for 20 years, and is the largest retail partner and customer of Adidas in the world. Maintaining good relationships with brand partners or failing to renew retail agreements in the future will have a significant impact on performance.

Industry analysts said that for Taobao, how to grasp the location of the store, the profit of the single store, and the loss caused by the closure are potential risks that need to be taken seriously by Taobao International. In addition, as an agent, inventory digestion of Taobao International is restricted by the relationship between upstream and downstream customers, and the stability of customer relationship directly affects the companys profits.

Source: Responsible Editor of CNN: Yang Zeyu_NF6036