Securities code: 300781 securities abbreviation: Guangdong Insight Brand Marketing Group Co.Ltd(300781) Announcement No.: 2022-005 Guangdong Insight Brand Marketing Group Co.Ltd(300781)
Reply to the letter of concern of Shenzhen Stock Exchange
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Guangdong Insight Brand Marketing Group Co.Ltd(300781) (hereinafter referred to as “the company”) received the notice on Guangdong Insight Brand Marketing Group Co.Ltd(300781) issued by Shenzhen Stock Exchange (GEM notice [2022] No. 20) (hereinafter referred to as “the notice”) on January 11, 2022, requiring the company to make a written explanation on the matters involved in the notice. After receiving the letter of concern, the company attached great importance to it and worked with all relevant parties to carefully study and implement the matters involved one by one. Now the reply to the relevant questions is as follows: the announcement on question 1 shows that zhengniao sea was established on April 2, 2020 with a registered capital of 1024300 yuan. It is a brand sea enterprise operating household goods in the mode of export e-commerce. From January to September in 2020 and 2021, the operating revenue is 552 million yuan and 458 million yuan respectively, and the net profit is 64 million yuan and 47 million yuan respectively.
(1) Please describe in detail the specific ways in which the target company carries out cross-border e-commerce business, including but not limited to product sources, product sales channels, self-produced and agent sales amounts, and the specific path of product transfer to consumers, and fully prompt relevant business risks;
(2) Please supplement and disclose the target company’s operating revenue structure, top five customers and suppliers composition, number and composition of employees in the latest year and period, and explain its core competitive advantages in combination with the target company’s industry development trend, market competition, operation and management team, business qualification, etc.
(3) Please explain the main purpose and necessity of your company’s capital increase to obtain the equity of zhengniao sea in combination with question (1) (2), and whether it is conducive to improving your company’s sustainable operation ability.
reply:
(1) Please describe in detail the specific ways in which the target company carries out cross-border e-commerce business, including but not limited to product sources, product sales channels, self-produced and agent sales amounts, and the specific path of product transfer to consumers, and fully prompt relevant business risks;
1、 Specific ways for the target company to carry out cross-border e-commerce business
The target company is a leading cross-border e-commerce enterprise of household goods in China. Relying on the product brand strategy of high-quality and brand integration, independently developed it system and data analysis ability and excellent supply chain management, the target company has effectively cut into the middle-class home life scene in the European and American market, creating beautiful and cost-effective home lamps, home textiles Pet products and other product categories are mainly sold and delivered through Amazon platform. 1. Procurement mode
The target company adopts the product strategy of combining branding and high-quality products, makes full use of the manufacturing capacity of China’s Yangtze River Delta and Pearl River Delta, and adopts the production and procurement mode of outsourcing production such as OEM and ODM, that is, the product R & D personnel of the target company participate in the design, or entrust suppliers to complete the production in China by means of R & D design and purchase. After the supplier completes the production of the ordered products according to the design and quality requirements of the target company, the products are sent to the designated warehouse of the target company, and the target company performs quality inspection and warehousing to complete the purchase of relevant products.
2. Sales model
The target company mainly realizes product sales through third-party sales platforms such as Amazon and eBay. Taking Amazon as an example, the main sales work is as follows:
Preparation stage: after opening a store on Amazon platform, the target company will formulate personalized product and marketing promotion strategies according to the target market of the sales category, and prepare and deliver the products to the storage center designated by Amazon in advance according to the cooperation agreement reached with Amazon platform.
Sales stage: the target company obtains traffic by means of advertising clicks on the procurement platform and accumulating praise through continuous operation, so as to attract users to browse, convert and buy online. After the user pays, the target company realizes product distribution and delivery by relying on the storage and logistics system of Amazon platform.
The sales of the target company are conducted to C-end consumers through the third-party e-commerce platform, and there is no intermediate agency link or secondary distribution.
3. Specific path of product transfer to consumers
According to the figure below, the flow path of the products sold by the target company is: ① the supplier transports the products to the China warehouse of the target company; ② The target company packages relevant products according to sales needs and exports them by sea, air and other means to the overseas warehouse of the target company; ③ The target company will transport relevant products to the FBA (fulfillment by Amazon) warehouse designated by Amazon according to the sales situation and Amazon’s regulations; ④ Amazon distributes products to end consumers according to the sales instructions of the target company. In rare cases, the target company will directly deliver goods from China warehouse to Amazon FBA warehouse (corresponding to ⑤), or directly deliver goods from the target company’s overseas warehouse to consumers (corresponding to ⑥).
2、 Tips on business risks
The main risks of the business development of the subject company are as follows:
1. Risks of changes in management policies of third-party sales platforms
In order to adapt to the rapid development of cross-border export and retail industry and the changes in the needs of consumers of various products, the target company opens stores on third-party platforms such as Amazon in the name of itself or its main holding subsidiaries or account companies. During the reporting period, the target company maintained control over the account company and its corresponding stores by means of agreement control, capital account, operation management, personnel control, data control and so on. At present, Amazon and other platforms have no clear policy to prohibit the opening of stores in the form of account companies and relevant punishment measures. During the reporting period, the target company opened stores on major third-party platforms in the form of account company, which did not violate the prohibitive provisions of such third-party platforms. In view of the actual operation, the third-party platform may change the platform operation regulations, which does not rule out the measures of suspending sales or closing stores for multiple online stores opened by the same subject, which may have a certain adverse impact on the business expansion and operation stability of the target company.
2. Risks of intensified international trade frictions
The revenue of the target company mainly comes from the markets of developed countries such as Europe and North America. Since 2017, the global trade situation has taken a major turn, trade protectionism and domestic prioritization have prevailed in developed countries, and the uncertainty of the global economic situation has increased significantly. Although the international trade friction has not had a significant impact on the sales of the target company’s products during the reporting period, if the international trade friction continues to expand, or major changes occur in the laws, tax policies, economic environment and industry access standards of the main product sales countries and regions, it will lead to the increase of the company’s procurement costs, the reduction of the bargaining power of export manufacturers and the squeeze of the industry’s profit space, It will have a certain adverse impact on the operation of the target company.
3. Covid-19 epidemic risk
Since 2020, covid-19 epidemic has erupted all over the world, and there is no obvious sign of remission at present. Covid-19 epidemic has affected the logistics, warehousing and distribution involved in the company’s cross-border sales to varying degrees, resulting in the rise of freight prices, and some delays in the arrival of seaborne containers and the warehousing of products.
If the covid-19 epidemic is not fundamentally contained, the operation and performance of the target company will continue to be affected.
4. Risk of intensified market competition
At present, Chinese enterprises have occupied a dominant position in the cross-border B2C platform. With the gradual maturity of the market, the pressure of enterprise homogenization competition is increasing. Small and medium-sized cross-border retail enterprises continue to join the household goods segment operated by the target company. The target company also faces the competition of self-supporting sales from online platforms such as Amazon, eBay and Walmart, and the competition of brand manufacturers’ continuous layout of online sales. With the gradual intensification of competition, if the target company cannot accurately grasp the development trend of the target consumer market, improve the company’s R & D and brand strength, timely respond to market needs, and continuously iteratively optimize product innovation ability and business model, there will be business risks such as narrowing market share and declining performance.
5. Risk of online sales channel concentration
The target company mainly relies on the internationally famous third-party online platform for product sales, so it has a high degree of dependence on the third-party online sales platform. If the platform Party’s market share decreases due to market competition, changes in business strategy or changes in the local national political and economic environment, the target company’s failure to adjust its channel strategy in time may have a negative impact on sales. In addition, if the platform side makes major adjustments to the merchant policies and rates, it will increase the service fees paid by the target company, which will have an adverse impact on the business performance of the target company.
6. Risk of inventory management
In order to improve the consumption experience of overseas end customers, the target company purchases inventory through Amazon FBA warehouse and overseas warehouse to ensure the timeliness of product supply. With the continuous expansion of the sales scale of the target company, the scale of inventory goods also shows an upward trend. During the reporting period, other inventories of the subject company were stored in China warehouse or in transit. If the overall operation efficiency and inventory turnover are lower than expected due to the company’s excessive procurement and preparation, it may lead to sales delay and inventory backlog, so that the target company faces the risk of falling price loss caused by backlog and unsalable inventory, and then affect the company’s net profit level.
7. Risk of exchange rate changes
During the reporting period, most of the income of the target company came from export income. The exchange rate fluctuates with the changes of political and economic environment outside China, with certain uncertainty. In the short term, RMB appreciation will cause the price of export commodities to rise, weaken the market competitiveness of export products, reduce market demand, and have an adverse impact on the growth of operating revenue and profits of cross-border export retail enterprises; On the contrary, the depreciation of RMB will have a favorable impact on the growth of operating revenue and profits of cross-border export retail enterprises. In the long run, the two-way fluctuation of RMB exchange rate and the aggravation of the fluctuation range will increase the exchange rate change risk faced by the target company.
8. Risk of changes in tax regulatory policies
The target company is mainly engaged in cross-border e-commerce business, relying on Amazon and other third-party e-commerce platforms to achieve sales, and the products of the target company are sold to many countries and regions around the world. The business activities of the target company are not only subject to the jurisdiction of the Chinese government and relevant tax jurisdictions, but also subject to the tax supervision of the United States, Europe and other countries and regions. In the future, if the tax policy of the income source country or region changes, and the target company fails to correctly understand or timely adjust according to the change of tax policy; Or due to the inaccurate identification of the source of income, if the target company fails to accurately make tax declaration according to the source country or region of income, tax supervision measures may be taken by the source country or region of income, which will have an adverse impact on the operation of the target company.
Meanwhile, the target company and its domestic subsidiaries mainly undertake the functions of procurement, production and store operation, but the product sales revenue is mainly realized through the sales of overseas subsidiaries. Therefore, the target company has cross-border internal transactions. If the internal transfer pricing is considered by the tax department not to meet the principle of independent third party, there may be a risk of supplementary income tax.
(2) Please supplement and disclose the target company’s operating revenue structure, top five customers and suppliers composition, number and composition of employees in the latest year and period, and explain its core competitive advantages in combination with the target company’s industry development trend, market competition, operation and management team, business qualification, etc.
1、 Relevant operating data of the company
The business income structure of the target company in the latest year and the first period is as follows:
Unit: 10000 yuan
Project from January to September 2021 to 2020
Amazon platform 41683.78 50416.84
EBay platform 3882.68 4699.46
Other platforms 287.65 66.05
Total 45854.11 55182.34
The target company is mainly engaged in the retail business based on the third-party e-commerce platform. The downstream customers are individual end consumers. The number of consumers is large and scattered. The details are as follows:
Unit: 10000 yuan
S / N customer name amount as a percentage of revenue
January September 2021
1 customer 1 31.54 0.07%
2 customer II 12.43 0.03%
3 customer III 12.42 0.03%
4 customer IV 10.67 0.02%
5 customer V 10.04 0.02%
Subtotal 77.09
