Reduce costs and increase efficiency, continuously improve efficiency, and achieve profitability in the rapid growth of KK Group

  "Benefiting from a number of policy supports in expanding domestic demand and promoting consumption, the consumer market continues to improve." Recently, media reported that 21 brokerages are optimistic about big consumption. Not long ago, Industrial Securities overseas consumer industry research analysts released an industry tracking report "KK Group: A Trend Retail Group Winning with Products + Stores + Digitalization", which has attracted much attention from the market. Data show that since KK Group submitted its prospectus, many brokerages have released industry research reports. 

  The above report believes that China’s trend retail market will grow at a compound growth rate of 19.5% from 2020 to 2025, and the market size is expected to reach 475 billion yuan in 2025. With its advanced digital information technology system, KK Group has effectively realized the improvement of operational efficiency by optimizing location selection, product selection, logistics chain management, inventory management and other supply chain links, thus driving the steady growth of the company’s performance. 

  The report shows that the compound annual growth rate of GMV of KK Group in 2018-2020 is 246.2%, and the GMV of its main brand KKV in the first half of 2019, 2020 and 2021 is 97 million yuan, 1.156 billion yuan and 1.367 billion yuan respectively. 

  Trend retail, as a popular track of new retail, has been favored by capital in recent years, but the industry is facing challenges under the influence of the epidemic, and some companies have lowered their performance expectations. Can KK Group withstand the test of the epidemic and achieve steady improvement in performance in the face of adversity? Under the test of the epidemic, KK Group, which has impacted the "trendy retail leading" of Hong Kong stocks, has conveyed to the market and investors what kind of efficiency improvement methods? 

  Optimize the supply chain to continuously reduce costs and achieve "zero supply and consumption" three wins 

  Trend retail refers to a new retail model characterized by the unique concept and style of products, creative and fashionable entertainment functions in design, and immersive shopping experience. 

  As a representative of the rapid rise of the industry, KK Group has created the ultimate aesthetic space design with the insight of the current Generation Z consumer’s main force on the appearance and social needs, opened up the self-communication of KK Group’s brands on social media, and "open source" for the company’s performance growth. At the same time, KK Group also achieved effective "throttling" by effectively managing the supply chain system. According to public data, KK Group’s management fees continued to decline from 2018 to 2020, reaching 29.9%, 24.2%, and 17.1% respectively. In the first half of 2021, the management fee was only 8.4%, a year-on-year decrease of 13.1 percentage points. 

  KK Group said in the prospectus that the company has simplified the layers of the supply chain through a supply chain management system and manufactured its own-brand goods by sourcing directly from third-party brand partners or hiring OEM and ODM contractors to reduce supply-side costs. 

  From the prospectus data, KK Group’s own brand products have seen significant growth in recent years. The proportion of the company’s revenue from purchasing its own brand products from OEM and ODM contractors has increased from 1.4% in 2018 to 13.4% in 2021. 

  On the other hand, KK Group’s control of supply-side costs includes innovative mechanisms such as "buyout system, 0 mid-platform fees, and shortening account period". 

  The "buyout system" refers to the direct purchase of products from brand suppliers by way of buyout for a certain product. For KK Group, this move can not only ensure the supply of products, but also reduce the operating costs of suppliers stably, allowing consumers to buy high-quality and cheap products. 

  The "0 mid-platform fee" means that in the process of product selection, listing, and sales, suppliers do not need to pay entry fees, stacking fees, listing fees, promotion fees, and new product fees to KK Group, which allows suppliers to have more security in terms of capital flow, better investment in new product research and development, and effectively guarantees the SKU update frequency of KK Group. 

  In addition, unlike the long account period of traditional supermarkets, the buyout system adopted by KK Group is mainly based on monthly accounts and has a short account period, which further relieves the financial pressure on suppliers. The results show that this new "zero supply" relationship can motivate suppliers to cooperate more actively with KK Group and provide more advantageous cooperation conditions. In addition, due to the joint efforts of KKV, THE COLORIST colorist, and X11 brands under KK Group, more and more brands are willing to launch new products, limited editions, or joint models in KK Group’s stores, which also attracts more brand loyalists and young consumers to pay, thus forming a virtuous circle in the new retail era. 

  Industry insiders believe that KK Group’s optimization of supply chain management is a "win-win" model for the company itself and its suppliers, and this "win-win" zero-supply relationship will ultimately benefit consumers, truly achieving a "zero-supply-consumption" three-win. 

  Technology deeply empowers and improves operational efficiency 

  In order to further enhance operational efficiency, KK Group has also integrated technology and digitalization into the optimization and upgrade of the company’s supply chain management system. 

  Since its establishment, KK Group has attached great importance to the bottom-level driving role of technology. Whether it is KK Pavilion, KKV, THE COLORIST colorist or X11, since the establishment of these brands, the company has made a strategic layout with technology to meet the trendy retail needs of young people "love beauty, love play and love life". 

  In the supply chain system, KK Group has independently developed a number of new "sharp tools" that empower retail consumption by technology, such as the KPOS system that provides services for every key scene of store operation, the KVCM system that visualizes shelf display management, and the WMS system that provides warehouse operation management. Leading technology not only supports the company to analyze a large amount of product sales data, but also effectively assists it to effectively apply digital and intelligent methods in daily operations, thus effectively enhancing every operation link. 

  At the product selection end, KK Group adheres to the "digital product selection mechanism", that is, the listing and removal of products are determined by big data, and the technical team behind it provides all-round support and guarantee for each single product, avoiding human intervention caused by subjective preferences and interests that may occur in the procurement process. On this basis, KK Group is able to achieve accurate selection and efficient update iteration of high-quality products. 

  It is understood that KK Group adopts the "last elimination system" for its products, and the product update rate is as high as 30% -50%. The limited physical space continues to generate infinite vitality, and consumers can also have a better shopping experience, which brings about higher conversions. It is not difficult to see that KK Group’s early strategic investment in IT systems has begun to bear fruit, and the scale effect of KK Group is gradually emerging. 

  With cost reduction and efficiency increase, the company’s profitability continues to improve 

  For retail companies, maintaining optimum inventory levels is crucial to company stability, and KK Group cannot escape this. Thanks to the efficient supply chain system and logistics system, KK Group’s inventory turnover days have been significantly optimized. 

  According to the data disclosed in the prospectus, as of June 30, 2021, the total inventory of KK Group reached 985 million yuan. This seemingly huge number is expected to be turned around in a few months through the company’s efficient supply chain system. 

  At present, the company’s inventory turnover days have dropped from 301 days in 2019 to 150 days in the first half of 2021. At the same time, the proportion of the company’s inventory to the total value of current assets has also dropped from 52.0% in 2019 to 34.6% in the first half of 2021. Among them, the increase in supply chain cost reduction has brought about an improvement in inventory turnover. 

  It is worth mentioning that some people in the consumer retail industry believe that, in light of KK Group’s emphasis on product display and space aesthetics, the company’s large inventory may be scattered among major stores, rather than centralized storage in warehouses. 

  As of the end of October 2021, KK Group has 680 stores. According to this simple calculation, the inventory value scattered in each store is less than 1.50 million yuan, which is normal for offline stores with more than 20,000 SKUs. 

  In fact, the benefits of an optimized supply chain management system are obvious to all. 

  Its prospectus shows that in 2018-2020, KK Group’s GMV was 188 million yuan, 652 million yuan, 2.254 billion yuan, and the growth trend was obvious, while the GMV in the first half of 2021 almost caught up with the whole year of 2020, achieving 2.213 billion yuan; in addition, in 2020, KK Group adjusted ebitda to positive, achieving 68 million yuan in 2020 and 216 million yuan in the first half of 2021. 

  It is worth noting that KK Group’s gross profit margin has also improved significantly, from 27.1% in 2019 to 30.4% in 2020, and further to 35.9% in the first half of 2021. 

  In terms of sub-brands, since the successful incubation of KKV and THE COLORIST colorists in 2019, the operating profit and EBITDA have always been positive. Among them, KKV has performed well. In the first half of 2021, KKV achieved an operating profit of 140 million yuan, EBITDA reached 235.70 million yuan, and the EBITDA rate rose to 22.5% from 18.2% in the same period last year. These are mainly due to KK’s continuous optimization of the procurement process. Some third-party institutions believe that the GMV of KK Group is expected to reach 4.50 billion in 2021. 

  In the opinion of industry experts, after the overall expansion of KK Group in recent years, its performance has not been dragged down, but has instead shown a healthy development trend. Regarding the IPO progress that the media has paid more attention to, Hong Kong capital markets professionals believe that due to the current semi-annual report data statistics node, the update of KK Group’s prospectus has been delayed. However, on the basis of the company’s stable performance growth, the continued optimism of the large consumer track, and the gradual recovery of the Hong Kong stock market in the second half of this year, I believe that KK Group will update the prospectus as soon as possible and continue its journey to listing.

Literature after 00 | Silent Watch (Novel)

Widowed (dialect, widowed is dumb), this is what the villagers call him. He is a poor old man, an old man who was dumb because he had a fever and took too much bezoar in his childhood, and an old man who only had three or five sheep. Widowed ancestor is what I call him, because he is two generations older than me.
I vaguely remember that I met my widowed ancestors several times during the summer vacation in primary school. I have never forgotten this scene.
When the morning sun climbs to the blue tile on the roof along the earth wall, the sheep are also waiting for their owner, the widowed bodhi old zu. Although it is hot, he always wears a Lei Feng hat that has been blackened by smoke, a black double-breasted cotton coat, a pot helmet in his arms that can never be eaten, and a kettle, leading the sheep to wander along the winding path in the field, hanging on the sheep’s neck all the way. No one knows his age, but everyone knows that his legs and feet are still vigorous, and he walks agile and steady on the almost vertical loess road mixed with gravel, just like the sheep behind him. His destination is the top of the mountain. Because the mountainside is mostly farmland, a yellow mud road is inserted horizontally, and there are still several paths lengthwise, but they are all covered by tall corn stalks. Widowed ancestors can only drive the sheep through this "forbidden land" as soon as possible-destroying crops will lose the "pass" of this land. I finally walked through the fields, and the sun really came out. At this time, the sheep can indulge in grazing, and the widowed ancestor will lean against the shade or chew the helmet with white water or take a nap.
I claim to be a "wild child", and several hills near my home are my playgrounds, so it is inevitable to meet him. When I saw those sheep grazing leisurely, I knew that my widowed bodhi old zu was nearby, but he always seemed to predict my arrival in advance. As soon as I saw it, I wanted to keep me by shouting, with my mouth wide open and my Adam’s apple wriggling sharply, and waved my arms to beckon me over. Then I used his hands as rough as an old walnut shell to hold a full "mountain products"-sweet and sour Schisandra chinensis.
The widowed ancestor is enthusiastic and diligent, and he works hard in the village, whether it’s weddings, funerals, or the anniversary of the burial. He swung his axe like the wind, and every time he fell, he split the firewood properly, and the sawdust scattered. Then, he turned to the triviality of boiling water and shochu; He added fuel to the fire, adjusted the fire, sometimes bowed his head and blew air to make the flames dance, and sometimes gently stirred the soju in the pot, making the water waves slightly overflow, and the fragrance of wine gradually diffused in this leisurely action; With the progress of the banquet, I saw the widowed bodhi old zu holding the tray firmly in his left hand and the dishes lightly in his right hand, with steady steps like flowing water, shuttling between the fire and the guests, and silently conveying his blessings and respect every time he bowed his head and smiled. The figure of the widowed ancestor, shuttling between the boiling of the villagers, is particularly diligent. In the last round of the banquet, he ate with the people who helped cook for his family, mostly the women in the village. A woman often jokes: "Seeing a widowed child is diligent, capable and able to eat. If you find a woman, you should be happy!" When he said this, he gave all the meat on the table to the widowed bodhi old zu. "Just eat, you are afraid that you can’t eat meat a few times a year!" Shame that he turned straight behind, repeatedly motioning with his hand, "ahhh ….." That’s enough.
During the three years since I finished junior high school, the life of my widowed ancestors seems to be so day after day, year after year. Or maybe I studied in the town and went back to my hometown less often and didn’t notice it. Until the spring of the second year of high school, I didn’t hear the long bell ringing on the sheep’s neck in the early morning of my hometown, only the sound of "praising and praising" with a hoe was endless. Later, I learned from my mother that the widowed ancestor had already sold all his sheep. I asked my mother why, and only then did I know that my widowed ancestor was accidentally caught in a wild boar when he was herding sheep in the mountains in the summer years ago. Fortunately, he was found by the villagers in time and was sent to the hospital at the first time without leaving his disability. Although he is not disabled, he can only walk on crutches, and he can’t herd sheep. With the money earned by selling sheep, plus the subsidies for the disabled and the five guarantees, it is said that the widowed ancestors should live a few days at leisure, at least until the injury is almost healed. But he couldn’t spare time, so he opened another piece of land to grow wheat at the vegetable field in front of his house. I walked on crutches, carried benches and hoes to hoe the ground, and when I was tired, I sat down and dug. This is what I witnessed with my own eyes.
Unconsciously, the wheat seedlings have grown to the knee height, and all the trees are full of green, swaying in the wind. Perhaps the widowed ancestor knew that they were growing sturdily, so he did not have to work hard in the fields, and the sound of "boasting and boasting" became more and more sparse, just like those weeds he had dug up; But it’s getting more and more boring, like cicadas in the hot summer.
Until the widowed ancestor did not greet his harvest in the wheat field, until the villagers learned that he had died on his couch for many days.
This wheat field without its owner is still full of vitality.
Wheat seedlings bear the brunt of the wind and rain, bearing ears of wheat, and finally spreading seeds on the land where they were born with the wind.
Source: China Youth Daily client
Reporting/feedback

The picture of "sad grandpa with unsalable fruit" was abused, and the official accused it of inaccurate marketing.

  Recently, a statement issued by Linyi County Government of Shanxi Province on the improper marketing method of "Linyi Apple is unsalable" has aroused concern. According to the statement, a number of e-commerce companies released the marketing plan of "Linyi Apple is unsalable" and used the "sad card" to market Linyi Apple, which had a serious impact on the brand image of the local fruit industry, and the marketing content was exaggerated and inaccurate.

  Beijing Youth Daily reporter saw that in WeChat official account and e-commerce platforms, there are still merchants who sell apples by slow sales as a marketing propaganda method. In addition to Linyi apples, there are also many businesses selling goods on the grounds of "apples are unsalable", "fresh bamboo shoots are unsalable" and "pineapples are unsalable", all of which use photos of the same old man as propaganda maps. In this regard, e-commerce customer service said that merchants may be suspected of infringing portrait rights, and the platform will also supervise the sales behavior of merchants.

  event

  "Linyi apples are unsalable"? Local claims exaggerate the facts.

  On May 7th, Linyi County Government of Yuncheng, Shanxi Province issued a statement on the improper marketing method of "Linyi Apple is unsalable". According to the statement, recently, several e-commerce platforms released the marketing plan of "Linyi Apple is unsalable", and used the "sad card" to market Linyi Apple, which had a serious impact on the overall brand image of Yuncheng Fruit Industry. After comprehensive and in-depth verification, there are many exaggerations and inaccuracies in this information.

  According to the investigation of Linyi county government, the videos and pictures selected for the report were all taken before 2016, and some of them also used the "posing" method to deliberately create a poor image of fruit farmers. In addition, in order to win the sympathy of consumers to the greatest extent, e-commerce deliberately creates the ugly characteristics of Linyi apples, and the apples presented are all inferior fruits with rust scars, pockmarks, black spots and cracks. These apples are the residual apples left after merchants screen and purchase high-quality apples, accounting for only a small proportion.

  Linyi county government also said in the statement that some platforms have obtained materials with official seals of local townships, villages and fruit industry departments by improper means, and the contents of the statement are seriously inconsistent with the facts; Most platforms deliberately exaggerate the severity of slow sales of fruits, resulting in unreasonable fluctuations in apple prices.

  According to the survey, the main sad brand is a common marketing method, and agricultural products such as pineapple in Xuwen, Guangdong Province and tangerine in Anhui Province have also been marketed in this way. The purpose is to attract people’s attention and gain consumers’ sympathy, which is convenient for fruit farmers to sell their fruits in a short-term and partial way, but it will damage the overall brand image and the overall interests of all fruit farmers in the long run.

  Yesterday, the reporter of Beiqing Daily searched on an e-commerce platform and found that there are still many businesses selling Linyi apples in the name of "caring for farmers" and "40 million kilograms of apples are unsalable in Shanxi". One of the merchants who claimed to sell unsalable apples in Linyi sold 8.5 kg of apples at a price of 28.7 yuan, while the place of delivery was Shenzhen, Guangdong. On its publicity page, an old man wiped his eyes with his arm, holding several banknotes from 10 yuan and 5 yuan in his hand. In other pictures, there are a lot of moldy or damaged apples piled on the ground, and some elderly farmers are standing in the village with apples in their hands. There are many words in the propaganda, such as "fruit farmers are in a hurry" and "want to cry without tears". Commodity reviews show that many buyers are buying for the promotion of helping farmers. The seller admitted to the reporter of Beiqing Daily that the store address was in Shenzhen, but claimed that the photo was taken by "friends who arranged for employees to go to the place of origin".

  survey

  Abused "slow-moving grandfather"

  The reporter of Beiqing Daily learned that in addition to "Linyi apples are unsalable", there are many businesses selling goods by "promoting unsalable", including pineapple, fresh bamboo shoots and other foods, as well as blankets and other supplies. Surprisingly, many businesses use photos of the same old man, and this old man is also named "unsalable grandfather" on the Internet.

  In one of the shops selling apples, the publicity picture shows the old man on the left, a large number of apples on the right and the words "Apples for sale, love and help" in the lower right corner. The price of apples is 27.9 yuan for 10 Jin, and the freight is 20 yuan.

  Merchants said in the propaganda, "The local natural environment is only suitable for growing apples, and the economic income is very limited. The blocked traffic makes the fruit harvested every year rotten and can’t be sold. " Merchants are also equipped with photos of local fruit farmers, simple houses and a large number of apples.

  In the publicity, the merchant said that the unsalable apples were produced in Yucheng County, Shangqiu, Henan Province, and the delivery place was Dashahe Town, Fengxian County, Xuzhou.

  In this regard, the reporter of Beiqing Daily contacted the Yucheng county government. The government staff said that there are indeed many apples planted in the local area, but this year I have not heard of slow sales. "This is a marketing method, which exaggerates marketing." The staff of Dashahe Town Government said that there was unsalable agricultural products last year, but the inventory should have been processed by now. Even if there are still apples left, it is not recommended to buy them. At the same time, there is no traffic jam in Dashahe Town.

  Another store selling "wild bamboo shoots" also used photos of "slow-moving grandfathers". The image of the old man in the propaganda picture remains the same, except that the picture on the right side is replaced by bamboo shoots, which are also accompanied by the words "seeking help".

  The store told the reporter of Beiqing Daily that bamboo shoots came from Lingui District, Guilin, and he didn’t know the "slow-moving grandfather". He used this photo only because "he is good at pulling business", and many different businesses are also using the photos of the grandfather to attract customers. The store also said that because this kind of "wild bamboo shoots" only has a one-month listing period, it really helps the sales after using the photos of "slow-moving grandfather". "Fruits and rice noodles are used a lot, and we are not a family."

  Later, the reporter of Beiqing Daily called the Lingui District Government of Guilin City. A staff member said that it was past the bamboo shoot digging season and had never heard of unsalable agricultural products. "Bamboo shoots are generally dug around Qingming, and now they are very old, and the local planting bases are not so large. Most of them are wild and it is impossible to produce unsalable products."

  Through the image recognition search, after the reporter of Beiqing Daily entered the head photo of "slow-moving grandfather", he identified more than ten kinds of goods, and the types and origins of goods were different. In addition to apples and bamboo shoots, there were lemons, melons, loquats and other foods, even including rose seedlings, lamps and other commodities. The words "seek help" or "help us" were written on the lower right of the publicity map.

  respond

  The platform called "slow-moving grandfather" photos or suspected infringement.

  Yesterday, the reporter of Beiqing Daily contacted the customer service of the online e-commerce platform. For the merchants to sell goods in the name of "slow sales", the customer service said that users can make complaints if they find that the situation is inconsistent, and the staff will handle it.

  In addition, the company also has a large database, which will supervise the merchants. In addition, after seeing the photo of "slow-moving grandfather", the customer service staff said that many shops have used the photo of this grandfather as propaganda, which has been suspected of infringing on the right to portrait. "The shop owner has the right to protect his rights and interests if he finds it. The platform will definitely be responsible for him."

  lawyer

  Shops should bear corresponding administrative responsibilities for false propaganda.

  Lawyer Han Xiao of Beijing Kangda Law Firm said that the store sells Linyi apples and other commodities in the name of unsalable sales, and the statement is seriously inconsistent with the facts, deliberately exaggerating the severity of unsalable fruit, which has been suspected of false propaganda as stipulated in the People’s Republic of China (PRC) Anti-Unfair Competition Law. According to relevant regulations, the operator may be fined more than 200,000 yuan and less than 1 million yuan; If the circumstances are serious, a fine of not less than 1 million yuan but not more than 2 million yuan may be imposed, and the business license may be revoked.

  Regarding the issue of consumer rights protection, Han Xiao introduced that the false propaganda behavior of online stores violated consumers’ right to know. Apple and other commodities do not belong to the category of "seven days without reason to return", but consumers and stores can ask for a refund after consultation.

  In addition, based on the intention of fraud, the store has carried out fraudulent acts of false propaganda, which has caused consumers to have a wrong understanding and bought their fruits based on the wrong understanding. If it has caused losses to consumers’ property (for example, consumers spend a high price to buy back inferior fruits with scars, pits and cracks), their actions are suspected of fraud.

  Text/reporter Guo Linlin Intern Zhang Yaolin