The life of Kua Jing Tong is not easy.
On June 29, suppliers contained the second-tier subsidiary Zaful of Kua Jing Tong, forcing Kua Jing Tong to make a promise and come up with a solution within half a month.
Prior to this, in order to deal with debts, Kua Jing Tong sold its cash cow Patosun for 2.02 billion yuan. However, Paterson closed its main store by Amazon in May, which may affect the payment of the transaction.
In the context of continued tightening of suppliers, Kua Jing Tong once again set its sights on Zaful, another high-quality asset.
As a leader in fast fashion independent stations, together with SheIn, it ranks among the top 50 Chinese overseas brands.
When was the gap between Zaful and Shein not much?
In 2017, Shein’s revenue was about 3 billion, and Zaful’s revenue was roughly the same.
However, in two or three years, the gap between the two has widened rapidly. SheIn has risen rapidly, leaping towards 100 billion in revenue, and is pointing to the trend of the global fast fashion boss Zara, but Zaful seems to have failed to seize the opportunity to achieve a new one. Feiyue even declined in the ranking of Chinese overseas brands.
However, among the subsidiaries that have had many hard times in Kua Jing Tong, Zaful stands out from the crowd and is a rare member that still remains profitable.
If it is not helpless, Kua Jing Tong will not use this high-quality asset as a “proton.”
There is no alternative. The half-month commitment period with suppliers has come. Kua Jing Tong invited 300 supplier creditors as scheduled, discussed, and gave two sets of debt-to-equity swap plans on July 19th.
However, these two plans have not been recognized by the suppliers. Most suppliers believe that this is a “routine” for Kua Jing Tong, which is to attract them to use real money in exchange for an inflated valuation. Equity.
In the plan, Kua Jing Tong raised Zaful’s valuation to 5 billion yuan, exceeding its current market value of 3.833 billion yuan as the parent company.
The two plans are as follows:
Option 1: Kua Jing Tong establishes a new subsidiary and transfers 10% of Zaful’s equity to the company. The company does not conduct any actual operations. The new company provides debt guarantees for suppliers based on a valuation of RMB 500 million and guarantees to repay supplier debts after the expiration of the three-year period.
(Otherwise, the subsidiary will be mortgaged to the supplier.)
The company promised that during the guarantee period, it will not mortgage, transfer or provide guarantees for other people’s 10% of Zaful’s shares.
Option 2: Set up a new company to take over 10% of Zaful’s shares, but change the method of handling debts. The supplier holds shares in this new company in proportion to its debt, which is equivalent to holding Zaful shares indirectly. After the three-year period expires, Zaful will repurchase 10% of Zaful’s equity at a price of no less than 500 million yuan. During the period, all operating income generated by the new company belongs to the supplier.
From the perspective of the two schemes, the debt-for-equity swap is achieved by indirectly holding 10% of Zaful’s shares.
After three years, either Kua Jing Tong will pay back the money, and the suppliers will return Zaful’s equity. Either Kua Jing Tong can’t afford the money, and the 10% stake in Zaful belongs to the supplier.
So is the agreement really, as the supplier thinks, “having a trick”? As a secondary subsidiary of Kua Jing Tong, can Zaful’s 10% share valuation reach 500 million yuan, that is, can Zaful’s own valuation reach 5 billion yuan?
The key points of all problems are focused on Zaful.
Zaful, rescued by Kua Jing Tong
Zaful is the fast fashion independent station brand under the banner of Kua Jing Tong in the past two years, and it is also one of the few at present. It has a subsidiary that can replace Globalegrow and become the new pillar of Kua Jing Tong.
Zaful has been able to maintain profitability in the past two years of huge losses in the past two years of global e-commerce and Kua Jing Tong, which shows that it currently plays a pivotal position in the Kua Jing Tong system.
Industry insiders generally believe that Zaful, after independence, can achieve better development and become a strong opponent of SHEIN, the No. 1 fast fashion brand going abroad.
In 2007, Zaful was born with Global EGrow. Zaful’s earliest target was the overseas swimwear market. After years of practice, it has transformed into an independent station brand focusing on fast-fashion women’s clothing, targeting European and American women aged 18-25.
From positioning to style, Zaful and SHEIN can be regarded as highly overlapping.
Zaful’s own potential has always been good. In 2011, he independently obtained a round A financing of 50 million yuan from Shenzhen Venture Capital. In 2014, Global EGrow was acquired by Baiyuan Pants to form Kua Jing Tong.
As a subsidiary of Global EGrow at that time, Zaful naturally became a secondary subsidiary of Kua Jing Tong.
Subsequently, in the context of the rapid development of Global EGrow, Zaful also became famous in the industry. In 2017, Kua Jing Tong achieved a revenue of 20 billion and became the strongest listed company in the cross-border e-commerce industry.
Backed by Kua Jing Tong resources and brand effect, Zaful has achieved considerable growth.
However, with the huge losses of Global EGrow for two consecutive years in 2019 and 2020, the blueprint of the cross-border e-commerce empire created by Kua Jing Tong has collapsed. Under such circumstances, Zaful is one of the few independent stations under Global EGrow that can maintain profitability.
Now that the big ship of Global EGrow will sink, as the parent company’s Kua Jing Tong, it is natural to understand the potential of Zaful. In order to save Zaful, Kua Jing Tong carried out a series of operations.
At present, Zaful is subordinate to Shenzhen Safu Commercial Co., Ltd. (hereinafter referred to as “Safu”), and its legal representative is Qi Haibo, which is a first-level subsidiary of Shenzhen Saful Electronic Commerce Co., Ltd. (hereinafter referred to as “Saful”). From the information on the company’s search, we can see that from November 23, 2020, Safu has been 100% transferred to Saiteng by Global EGrow.
But in fact, according to the company’s information, Saiteng is still a 100%-owned subsidiary of Kua Jing Tong. In other words, Zaful was resold from the left hand to the right hand by the Kua Jing Tong, and it is still in its system.
After Zaful operates independently, it will have a more autonomous system and more free management.
In short, Kua Jing Tong intends to strip Zaful from the black hole of global e-commerce’s huge losses. The ship will sink and the vortex has arrived. How many boats can be rescued, I have earned it.
However, Chinese people always pay attention to “paying debts from father to son.” Global EGrow is a subsidiary of Cross-border. Kua Jing Tong cannot be resolved, it does not matter, there is also a secondary subsidiary Zaful.
On June 29, 2021, suppliers who were unable to collect payment at the Global EGrow office began a roundabout operation, bypassing the Kua Jing Tong, directly confining Zaful, and forcing the Kua Jing Tong to make a promise to repay the payment. There are also two plans this time.
Kua Jing Tong desperately tried to catch Zaful, which was about to be silent with Global.com. In the end, Zaful still had to pay for the loss of Global.com and was besieged by the supplier.
Even now, in order to repay debts, 10% of the shares have to be used for turnover.
This shows that among the debt collection providers, some people still understand the importance of Zaful for Kua Jing Tong at the moment.
But, is Zaful really “worth 5 billion”? This valuation is higher than the current valuation of the parent company, Kua Jing Tong. This will inevitably cause doubts among suppliers.
After Zaful is truly independent, will its value exceed the parent company’s Kua Jing Tong?
In fact, if Zaful can truly achieve independence, its valuation may still surpass Kua Jing Tong. On the one hand, on the giant ship of Kua Jing Tong, Global EGrow, the main power engine, is now riddled with defects, which has caused the valuation of Kua Jing Tong to be repeatedly lowered.
On the other hand, the loss of Kua Jing Tong has further negatively affected Zaful.
From these two points alone, Zaful’s individual valuation is higher than that of Kua Jing Tong, which can also be explained. The key also depends on Zaful’s own capabilities.
In 2020, there are two data related to clothing by Kua Jing Tong. One is the revenue of the clothing industry, but from the perspective of its classification, this part of the clothing revenue should be offline entity sales or wholesale, not in the scope of e-commerce.
The other is its apparel and home furnishing products, with revenue of about 5.3 billion yuan in 2020.
According to the data in the 2020 semi-annual report of Kua Jing Tong, Zaful accounts for about 70% of the apparel business.
As it involves home furnishing products, it is not clear how much the specific clothing is accounted for. It is not easy to estimate what Zaful’s revenue will reach in 2020.
However, as of the end of 2020, Zaful has registered 50.325 million global users, 17.09 million monthly active users, and approximately 107 million monthly visits.
Calculated on the basis of its average monthly traffic conversion rate of 1.25%, Zaful has an average monthly turnover of 1,336,100 orders and a customer unit price of 54.1 US dollars. Then Zaful’s average monthly revenue is about 7228.44 US dollars, which is equivalent to about 468 million yuan.
So roughly calculated, Zaful’s revenue in 2020 may reach 5.613 billion yuan.
The revenue of the apparel and home furnishing products of Kua Jing Tong in 2020 is about 5.3 billion yuan, and the difference between Zaful’s revenue data calculated above is about 300 million yuan.
According to Zaful’s revenue accounting for 70% of the apparel category, it should be around 3.71 billion yuan.
So should Zaful’s revenue be calculated based on its traffic data of 5.613 billion yuan, or the 3.71 billion yuan calculated based on the proportion of Kua Jing Tong category revenue?
This requires you to judge based on your own experience.
However, no matter what the data is, at the moment Patton has been sold and Global EGrow is on the verge of bankruptcy, Zaful is undoubtedly the strongest card in cross-border transactions.
Under this circumstance, Kua Jing Tong hopes to make Zaful independent, so as to find another way to reverse the adverse impact of the large-scale loss of Global.com. It is also reasonable.
However, according to SimilarWeb data, Zaful’s total traffic from April to June 2021 is about 8.615 million, ranking No. 383 in global fashion websites.
Among them, 34.06% of the visits came from the website side, and 65.94% came from the mobile side.
During the period from April to June, Zaful’s monthly average number of visitors was about 2.871 million, the average visit time was about 4 minutes, and the number of visited pages was 5.65. The bounce rate was good, only 44.5%, which is not high.
However, this data from SimilarWeb obviously differs from the data on the cross-border financial report. It is unknown whether there is a difference in the methods of capturing data between the two parties, or after entering 2021, Zaful’s traffic has declined.
Or is it not Zaful’s peak sales season from April to June? Also unknown.
In terms of social media, Zaful has also spared no effort to open up promotion channels.
In 2020, Zaful cooperated with many international Internet celebrities to establish a Z-Me community on its site. There are already 800,000 active users in the community and more than 860,000 popular posts.
Zaful’s own social media account operations have also achieved certain results. As of May 7, 2021, Zaful has accumulated 9,138,800 followers on Facebook.
And 62.52% of its social media traffic comes from Facebook, which is more in line with its business direction on social media.
From the perspective of overseas popularity, Zaful’s overseas popularity has declined slightly in the past two years. In 2019, Zaful ranked 23rd in the BrandZ overseas brand rankings, and fast fashion ranked second.
In the 2020 BrandZ rankings, Zaful has fallen to 38th place, and the fast fashion category is still ranked second.
But overall, Zaful has indeed achieved a certain degree of popularity overseas. One or two can be glimpsed from the source of its traffic.
During the April-June period of 2021, 44.38% of Zaful’s visits were direct visits to the website, which may be accessed directly from the mobile APP, or directly entered the URL when opening the website.
Another 21% of the traffic comes from natural search, that is, search engine search products, which rank high and are clicked by consumers to enter the web page, or directly search Zaful to enter its official website.
In comparison, paid search accounts for 18.7%, which is not so high.
In general, in the years of rapid development of Global.com, Zaful has also enjoyed a lot of benefits following the growth of its parent company. Although it has been dragged down in the two years of 2019 and 2020, whether it is the basis of traffic or revenue, there is still a good foundation.
Come to think of it, if Zaful is calculated at a valuation of 5 billion, there will be a certain deviation, but it will not be too far away. After all, as a benchmarking opponent, SHEIN is now valued at more than 100 billion yuan.
As for whether to choose to trust Zaful, suppliers still need to make their own judgments.
The whole story of Global EGrow’s debt
The collapse of the Kua Jing Tong came very suddenly, but its hidden illness seems to have been buried long ago.
At the beginning of 2020, Kua Jing Tong announced its 2019 annual report as usual. Previously, it was expected to lose about 1.2 billion yuan. But after the real announcement, the number of losses soared from 1.2 billion to 2.7 billion, which caused a violent response.
Immediately, in less than half a year, the payment owed by the supplier by Kua Jing Tong was exposed to the public.
In September 2020, a large number of suppliers blocked the gates and corridors of Global EGrow to collect debts from them. After some suppliers released live videos, it caused a huge shock in the cross-border e-commerce industry.
Hong Kong’s victimized supplier, Ms. Chung, revealed that Global EGrow has defaulted on its payment since September 2019. Among them, a sum of up to 220,000 US dollars, equivalent to more than 1.5 million yuan in RMB, has been in arrears for more than half a year since the 15-day billing period.
Ms. Zhong has communicated with Global EGrow customer service many times but failed to solve the problem. Affected by the epidemic, Ms. Zhong’s company had difficulties in business operations, and Global EGrow’s default on payment made her worse.
From 2015 to 2017, Global EGrow developed very rapidly, but starting from 2017, dragged down by the mobile phone business, the situation of Global EGrow has taken a turn for the worse.
As early as 2015, its net profit had a good performance, but since 2017, the scale of Global EGrow has been expanding, but its net interest rate has been declining.
At that time, insiders explained that because of the expansion of the scale, the cost must have soared, and the decline in the net interest rate is a normal phenomenon. Come to think of it, the situation at that time should have buried hidden dangers for the subsequent huge losses.
However, Global EGrow has not given up on this and has been looking for a solution.
In September 2020, at the point where the debt was called, Kua Jing Tong issued an announcement and sold its secondary subsidiary, Shenzhen Junmeirui Information Technology Co., Ltd. for 326 million yuan.
Shenzhen Junmeirui is the import division of Global EGrow. Kua Jing Tong hopes to “change the seller’s property” to alleviate the financial pressure.
Subsequently, at the end of 2020, an employee of Kua Jing Tong revealed that the company would sell its subsidiary, a 60% stake in cash cow Patosun, for a price of 3 billion.
According to the employee, the 3 billion will be used to repay the arrears owed to suppliers. (Information: China Business News)
However, things backfired. In March 2021, Patosun was indeed sold, but the price was only 2 billion yuan, which was far from the estimated 3 billion yuan. At the same time, the shares sold are not 60%, but 100%.
Only a few months later, Paterson “shrinked”, it is hard to say that it was not affected by the situation of Kua Jing Tong.
After the Kua Jing Tong sold 100% of Pattoxun’s equity, another problem was also involved, that is, the 230 million yuan loan originally applied to Shenzhen Hi-tech Investment Group was collateralized with 20% of Pattoxun’s shares.
Now that Patoson has all been sold, he can only replace the collateral with its import e-commerce business, the cash big Niu Youyi e-commerce company, and once again make an attack on the import business.
As of June 2021, suppliers once again blocked Global EGrow, kneeled down to the senior executives of Kua Jing Tong, and a series of follow-up situations of debt collection, such as the senior executives of Kua Jing Tong, were frequently reported. The two debt-to-equity swap schemes given by Tongtong.
At the moment, we can only hope that whether it is Kua Jing Tong or the supplier who is in debt, the problem can be solved sincerely and rationally. As a former industry benchmark, we also believe that Kua Jing Tong will take its own responsibility.
