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Original first release | Jinjiao Finance (ID: F-Jinjiao)

Author | Jiaoye

The wind of layoffs has finally hit outdoor brands.

Recently, Jiaoxia, known as the "Hermes" of the sunscreen industry, laid off its entire brand department. All employees in the public relations department have resigned, the marketing department has been merged into the sales department, and Chief Marketing Officer Guo Xiaoye has also confirmed his resignation.

This may be a turning point event for the entire outdoor apparel industry.

In the past three years, the outdoor industry has become a rare "upward elevator", creating well-known brands such as Arc'teryx, Camel, and Jiaoxia, and also driving a large number of white-label brands to make huge profits.

In the hottest days of summer, the chill brought by the layoffs also means that the bonus period of the outdoor industry is coming to an end.

Not surprisingly, the fading of dividends is often accompanied by the rise of price wars, and the first to collapse is often the one that once had the most fascinating story.

Step down from the altar

The reason why the layoffs at Jiaoxia attracted so much attention was firstly because of the myth it once created.

In 2013, a double-layer small black umbrella sold for 200 yuan was launched by Jiaoxia, and it quickly became a hit. In 2013, the sales of the first generation exceeded 100,000 pieces; the sales of the second generation exceeded 400,000 pieces the following year. By 2021, Jiaoxia had achieved sales of about 500 million yuan just by selling umbrellas, and its overall revenue soared to 2.407 billion yuan.

What is the concept of this?It took 31 years for Tiantang Umbrella, the "first giant in China's umbrella industry", to reach annual sales of 2.6 billion from its founding. But Jiaoxia caught up in just 8 years.

Some even say that the Chinese invented the umbrella twice: once in ancient times, the earliest parasol; and once more than 3,000 years later, the most fashionable luxury item.

What grew faster than performance was valuation. In 2021, Jiaoxia's valuation was only about US$100 million, but a year later, this figure soared 30 times to US$3.026 billion (about RMB 21.7 billion).

It was also in this year that Jiaoxia started its IPO journey. In April 2022, Jiaoxia submitted its prospectus in Hong Kong for the first time. After it expired, in October 2022, Jiaoxia submitted its prospectus for the second time, and then there was no news.

Although the listing on the capital market suffered a setback, it did not seem to affect the continued surge of Jiaoxia at the time. Since the double-layer small black umbrella became popular, in order to get rid of the dependence on a single umbrella product, Jiaoxia gradually developed sun protection clothing accessories.

From 2019 to the first half of 2022, its clothing category revenue soared from 3.04 million yuan to 792 million yuan, surpassing umbrellas to become its largest business. Jiaoxia has won many battles, and its reputation as the "Hermes" of the sunscreen industry has become more and more famous.

｜Revenue share of Banana's sub-businesses in 2021, Sina Finance

In 2023, Jiaoxia first proposed the new concept of "lightweight outdoor" and continued to maintain its leading position. iResearch Consulting data showsIn 2023, Jiaoxia is the brand with the largest market share in sun-protection clothing, reaching 26.5%, and its cumulative sales in the past five years have exceeded 10 million pieces.

In the first half of 2024, Jiaoxia ranked first in the sales ranking of sun protection clothing on Tmall, Taobao and JD.com. Among them, Jiaoxia's market share reached 36.6%, ranking first on JD.com.

With sales so good, why would Jiaoxia commit suicide?

Beneath the glorious scenery, undercurrents surge.

It is undeniable thatJiaoxia is stepping down from the altar.Although Jiaoxia still holds the top spot, data from JD.com shows that its market share has declined significantly compared to last year.In the second quarter of this year, Jiaoxia's sales were significantly lower than expected. Jackets were sold at half price and sun-protection jackets were sold as low as more than 100 yuan.

And friendly competitors are growing strongly.According to Mojing Insight data, Camel, SINSIN and Bosideng have grown significantly. There are also a large number of online celebrity white-label brands that are trying to cross the river. Qifei data showsIn 2023, 31.3% of the market share of sun protection clothing below 200 yuan on the Douyin platform will be occupied by white-label products.

The deeper reason may be that Jiaoxia's story can no longer be told. From 2019 to 2021, Jiaoxia's distribution and sales expenses were 125 million yuan, 323 million yuan, and 1.104 billion yuan, accounting for 32.4%, 40.7%, and 45.9%, respectively.

｜2019-2021 Banana distribution and sales expenses

Taking 2021 as an example, the gross profit margin of Jiaoxia was nearly 60%, but the net profit margin was less than 6%. In terms of cost, the marketing expenses were as high as 1.1 billion yuan. The marketing share of 45.9% can be simply understood as"More than 90 yuan of the 200 yuan Jiaoxia sun umbrella was spent on advertising."。

Of this 90 yuan, a considerable portion may have been earned by Internet celebrities. In 2019, 2020 and 2021, Jiaoxia cooperated with 274, 326 and 597 opinion leaders respectively. In the first half of 2022, Jiaoxia reached cooperation with 1,577 KOL opinion leaders, which has exceeded the total number of the past three years.

It is worth noting that Jiaoxia, which is burdened with high marketing expenses, faces considerable capital turnover problems. The prospectus shows that at the end of the reporting period in 2019, 2020 and 2021, Jiaoxia's loan amounts were 8.95 million yuan, 6.8 million yuan and 174 million yuan, respectively. In addition, the corresponding current ratios in the same period were 0.53, 0.61 and 0.26, respectively.

With no hope of listing and being besieged by low-priced white-label products,The growth of Jiaoxia has slowed down and it can no longer support the high marketing costs., then the first department to be reshuffled is the brand department responsible for burning money.

Jay Chou can't carry it

The most glorious moment for the brand department that was "taken down" this time should be inviting Jay Chou and Yang Mi to endorse the brand in 2023. Before that, it had spared no expense to invite popular stars such as Chen Qiaoen, Di Lieba, Ouyang Nana and others to endorse the brand. "Owning the same style as the stars" has also become the most attractive story of Jiaoxia.

However, judging from the growth trend of Jiaoxia, consumers are becoming disenchanted with celebrity endorsements, which means that Jiaoxia’s own brand power has not completely captured the minds of users.When the brand is not enough to serve as a moat, consumers will quickly magnify the product's flaws.

According to statistics from the Black Cat complaint platform, as of August 15, there were 1,155 complaints with the keyword "蕉下", mainly focusing on out-of-stock, slow refund, poor quality, bad service attitude, fake gifts, unclear warranty period, etc. Some consumers complained on social networks that 蕉下 is"Outdoor brand that harvests sunscreen IQ tax", a friend of mine also had the experience of “the umbrella handle breaking twice”.

In fact, as early as 2022, when the prospectus of Jiaoxia revealed the constitution of "focusing on marketing and neglecting R&D", the controversy over IQ tax and quality gate has always existed. Compared with the heavy blow in marketing, Jiaoxia's investment in R&D seems to be very careful.

From 2019 to the first half of 2022, Jiaoxia's R&D expenses were RMB 19.9 million, RMB 35.9 million, RMB 71.6 million, and RMB 63.2 million, respectively, and the proportion of revenue decreased from 5.3% in 2019 to 3% in the first half of 2022.

So, how do we explain Jiaoxia’s core technology in sun protection?

Take the most famous product of Jiaoxia, the black umbrella, for example. According to Jiaoxia, its self-developed LRC coating is the black technology in the sun protection industry, and its sun protection effect far exceeds that of ordinary black plastic coating. However, a blogger evaluated several sun protection umbrellas such as Jiaoxia and Tiantang Umbrella, and the final conclusion was that the difference in UVA (long-wave ultraviolet rays) blocking rate between Jiaoxia and Tiantang Umbrella was only 0.1%, and Jiaoxia won with difficulty.

Tianyancha data shows that Jiaoxia currently owns 204 patents, of which 99 are appearance patents, accounting for nearly half; and there are only 31 invention patents, of which only 6 have been "authorized", and most of the others are in the "substantive examination" status.

Although Jiaoxia lacks in technological content, it is actually consistent with Jiaoxia’s “lightweight outdoor” positioning.The research and development principle of Jiaoxia is "just enough to be functional". A typical example is the "entry-level ski suit" that Jiaoxia has recently developed, which is aimed at those who spend hundreds of yuan to rent ski suits for the first time. If the selling price can be equal to the rental price, and it is better looking and cleaner than the rental ones, and designed to be suitable for daily wear, Jiaoxia believes that "some people will definitely buy it."

Therefore, if you buy the Jiaoxia for its technological content, you will definitely be disappointed, and the gap will inevitably make you feel like you are being paid a "tax on your IQ".

In fact, the so-called "light outdoor" concept means that it cannot be as professional as brands such as Nike, Arc'teryx, and lululemon. When consumers find it difficult to maintain their consumption levels and white-label competitors fill the market, Jiaoxia will no longer be attractive and will naturally be the first to be kicked out of the shopping cart.

The best time has passed.

Regarding the layoffs of the brand department, Jiaoxia responded that it was "a normal adjustment and upgrade of the company's organizational structure." The new department is the Public Affairs Department, and it is currently recruiting people for related positions.

However, the official recruitment platform of Jiaoxia shows that among the 16 social recruitment positions released this year, only one position is in the brand development department. In the recruitment of media categories, all three required positions are Douyin live-streaming anchors.

It can be seen that Jiaoxia's adjustment is more like a change of posture to strengthen "marketing and sales", and the Internet celebrities are too expensive to go out of business. However, this kind of change of soup but not the substance may have little effect on breaking the bottleneck of the light outdoor strategy.

In the prospectus of Jiaoxia,The opposite of "high-density marketing" is "light-asset OEM".Data from the prospectus shows that as of 2021, Jiaoxia has reached cooperation with 166 contract manufacturers. The cooperation with these OEM companies is not exclusive, and the contracts are signed for one year.

The advantage of the OEM model is that it helps Jiaoxia reduce R&D and procurement costs, while being able to flexibly respond to market changes and achieve asset-light operations. Through this model, Jiaoxia can maintain flexibility in the fierce market competition, quickly respond to changes in consumer demand, and thus seize market opportunities.

In fact, a more straightforward statement is:In the short term, OEM can reduce a company's capital investment and improve its return on capital.

The disadvantages are also obvious. Since the products are produced by OEM factories, Jiaoxia's ability to control product quality is weakened, and various quality problems are inevitable. In addition, the OEM model may also lead to a decline in brand competitiveness, because the participation of OEM factories in market competition may lead to the loss of Jiaoxia's potential customers.

With such a high average customer spending, but the products are from non-exclusive OEMs, how can it be worthy of the status of "Hermes" in the sunscreen industry? In addition to the return of consumption to rationality, there is another reason to say goodbye to Jiaoxia.

Since 2021, the outdoor industry has ushered in a three-year bonus period. Jiaoxia has been making great strides, but has never taken the move to build its own production line. In sharp contrast is Camel.

According to a report by LatePost, when Tmall's outdoor industry employees visited Luotuo at the end of 2022, founder Wan Jingang said that he had done nothing else that year except building factories. That year he built 5 factories producing jackets, 2 shoe factories, and 1 tent factory.

According to Jiuqian's platform, Camel's e-commerce revenue on Tmall, Douyin and JD.com will reach RMB 4.78 billion in 2023, a year-on-year increase of nearly 300%, more than twice that of the second-placed brand, Jiaoxia. In 2023, 40% of the sales of jackets on e-commerce platforms came from Camel. Jackets accounted for 70% of Camel's total revenue.

You know, Camel used to rely on the OEM model, until 2022, when founder Wan Jingang focused on building factories. In two years, Camel built more than 500,000 square meters of production and research centers in Huanggang, Shaoxing, Foshan, Qingyuan and other places, which is rare in the clothing industry with mature OEM.

Liu Haoyu, head of Camel's outdoor equipment, said that building its own factory also ensures that when the market is in short supply of jackets in 2023, Camel can respond quickly and does not rely on external factories to place orders. Camel's major single products are now almost all self-produced, and self-produced Camel jackets can reduce costs by about 10%.

Camel's success only highlights Jiaoxia's mistakes. Worse still, Jiaoxia is being stabbed in the back by its OEM factories. A person in charge of the e-commerce channel industry belt project told Shenzhen Net that in Fujian, a major clothing production province, there are countless products like Jiaoxia."There are many Banana OEM factories that also produce 'Banaana's same style', and the price is even less than one-tenth of Banana's."

Whether intentionally or unintentionally, the best opportunity for Jiaoxia to reverse its fate may have passed. With the end of the bonus period of the outdoor clothing industry, the white-label companies that are eyeing it will not miss any opportunity to replace Jiaoxia.