The company focuses on the operation of trendy retail stores and provides unique products to end consumers through DTC mode. The products span 18 main categories of main core daily necessities such as beauty, fashion play, food and beverage, household daily use and stationery, and the trend single product SKU exceeds 20000. In the past few years, the group’s brand matrix has been continuously expanded. At present, it mainly operates four trend retail brands, “KK Pavilion”, “KKV”, “the colorist” and “X11”, aiming to meet the different market needs of Chinese consumers.
In terms of financial data, the group’s brand matrix has been continuously expanded and its sustainable profitability has been gradually highlighted. The revenue increased from 155 million yuan in 2018 to 1.646 billion yuan in 2020, with a CAGR of + 225.5%, which far exceeded the growth rate of the trend retail industry and ranked among the “three trend retailers in China” in 2020. The profitability of the company is outstanding. Excluding the book loss caused by accounting treatment problems in Hong Kong stock listing, the adjusted EBITDA in 2020 is 68 million yuan, turning loss into profit. Among them, the growth rate of KK pavilion has slowed down, KKV has become the company’s chassis, the proportion of revenue and profit contribution has gradually increased, and the cutting-edge brands tcolorist and X11 have quickly broken the circle, contributing to the marginal increment of the company.
The new business ecology has taken shape, and the scale of fashion retail industry has expanded rapidly. According to the Gmv caliber, the scale of fashion retail market increased from 129.8 billion yuan in 2016 to 195.2 billion yuan, cagr10.5 billion yuan 7%。 Specifically, boutique collective retail accounts for the largest proportion in the segment market, about 46.7% in 2020. The growth rate of tide play retail industry was cagr26 5%, much higher than the overall growth rate of fashion retail market. The compound growth rate of beauty and boutique collection retail is basically the same as that of the industry, about 10%. The core driving forces of the concentrated influx of subdivided track companies to open stores are: 1) the impact of the epidemic has put pressure on offline retail. Although the overall consumption is weak, the national demand for quality of life and spiritual level is steadily increasing, and 2) the efficiency upgrading achieved by relying on the reconstruction of people’s and freight yards. 3) Target specific consumption circles, take market demand as the starting point, accurately match goods and improve transformation.
The unique franchisee mechanism solves the problem of high trial and error cost of offline stores. KK Group signed an agreement with franchisees to form a strong binding relationship through equity participation, so as to achieve rapid regional expansion and penetration and reduce business risks. Achieve a win-win situation. By the end of June 2021, the franchise stores with equity investment arrangements of the group accounted for 78.69% of the total number of franchise stores; At the same time, provide financial support to franchisees to ensure that franchisees have sufficient motivation to open stores; Reserve the right to transfer equity and repurchase at an appropriate time. The risk of opening a store is limited, the upper limit of income is liberalized, and the relatively high management efficiency of the direct mode and the utilization of franchisee resources are achieved. In terms of operation mode, the company invests in a number of pilot plans according to the observation of changing consumer preferences to explore the expected opportunities, uses a highly standardized operation mode, quickly replicates store operations, realizes rapid expansion in different regions, and continues to optimize to produce synergy effect.
KKV large store mode card position offline collective retail neutral, energy gathering offline to improve floor efficiency. Different from the shopping behavior of “search” that only occurs when needed, “shopping” can occur at any time, and consumers’ shopping mood is very different when shopping. In the era of stock game in the offline retail market, KKV provides the possibility of “being seen” and “selected” for commodities by providing experiential consumption scenarios and prolonging the stay time of consumers in front stores. Combined with the digital based offline channel user operation strategy, minimize the impact of human decision-making factors, realize the intellectualization of business decision-making, and pay attention to the consumer reputation based on quality and experience. Since its establishment, the brand has always implemented 0 middle office fee and buyout operation mode, which not only shortens the accounting cycle of the brand and reduces the possible corruption in the procurement process, but also the offline channel is no longer only the flow channel of the brand, which is easier to form a good deep cooperation.
The founding team has a deep understanding of generation Z of the new group, locked in the segmentation needs of the customer group, incubated the corresponding brand matrix, built a core competitive advantage with rapid market response and embracing changes, and consolidated the leading position of fashion retail. Online grass planting marketing has released the consumption potential of “online new economy”. Although the conversion efficiency of high potential energy flow to offline is lower than online, it has higher joint purchase.
Investment suggestion: as the leading company in the fashion retail industry, KK Group continues to make efforts on the subdivided tracks such as boutique collection retail, beauty collection retail and fashion play, and continuously improves its business efficiency and pressure resistance by relying on the unique franchisee mechanism, the rapidly copied store operation mode, the user thinking under the new marketing mode and the diversified and complementary brand matrix. Under the background of the formation of new business ecology and the growth rate of segment track industry are flat or higher than the overall growth rate of the market, the company is expected to continue to upgrade its products and user strategies in the future, actively respond to market changes, quickly respond to the needs of generation Z users, and continue to build its core competitiveness, so as to drive profits and achieve considerable performance growth.
Risk warning: the risk that the company’s products cannot meet consumer preferences; The risk of continuous loss of the company’s operation; The risk that the company cannot maintain its competitive position in the industry
