Tagged: traditional

Bottleneck and struggle of chengguang

However, the company’s traditional retail business is also facing increasing competitive pressure.
The proportion of traditional core business of Chenguang is decreasing year by year. According to the 2019 annual report, “with the change of domestic population structure and the decline of birth rate, the contribution of traditional core business to income by increasing sales volume is weakening.”
Correspondingly, the new business for tob office market, Chenguang klip, is experiencing rapid growth. From 2016 to 2018, its revenue has doubled for three consecutive years, with an increase of 41.45% in 2019, which may become a highly anticipated new focus in the future development of Chenguang stationery.
As an office direct selling business platform, Chenguang krip mainly provides one-stop office procurement services for government, enterprises and institutions, Fortune 500 enterprises and other small and medium-sized enterprises.

cheng guang
Why direct marketing? American office stationery market gives the answer: direct selling is a good track.
According to ibis statistics, in 2016, the size of the U.S. office stationery market was about 43 billion yuan, of which the direct sales channel accounted for about 50%. The two leading companies, staples and Odie, occupy more than 80% of the market share. Both of them have been impacted by e-commerce, resulting in the shrinkage of offline retail business, but the b-end business is still strong. The reason is that the direct sales business is relatively stable and is not vulnerable to external shocks.
Office direct selling refers to the direct sales of office supplies enterprises by means of directional marketing, Direct stores, e-commerce, etc. the products cover office supplies, office consumables, office equipment and other fields. In China, the customers of direct selling business are mainly government agencies, large central enterprises, top 500 enterprises and enterprises with a certain scale.
In fact, the market capacity of office direct selling business is much higher than that of traditional retail market.
The data shows that the market scale of student stationery in China is about 50 billion yuan, and the retail market capacity of office stationery is about 90 billion yuan.
However, the direct sales market capacity of large office supplies is trillions (including IT equipment and other products), and the industry growth rate is faster than the traditional retail market.
According to the data of China industry information network, the market scale of domestic large office stationery (including office furniture, equipment, etc.) will be 2.07 trillion in 2019, and the compound average growth rate is expected to be about 9% in the next three to five years.
In 2019, the sales revenue of Chenguang office direct sales business reached 3.658 billion yuan, accounting for 32% of the total, surpassing the company’s traditional retail office stationery (21.07%) and writing tools (19.63%), becoming the company’s largest source of business income.
In addition, Chenguang has also opened the layout of offline retail stores, mainly including Chenguang life center and Jiumu sundry club. In 2019, the revenue of these offline retail stores is 600 million, with a year-on-year growth of 96%. Among them, the revenue of Jiumu sundry club is 460 million, with a year-on-year growth of 200%.
It can be seen that the growth of the morning light business is very fast, but at present most stores are in a state of loss, and the loss is gradually narrowing.
From the perspective of Chenguang’s gross profit margin, it has been maintained at about 26% in the past five years, while the net interest rate has declined slightly, from 10.86% in 2015 to 9.66% in 2019. The main reason is that the net interest rate of krip is very low, only about 3%, and the retail stores and Chenguang technology are in a state of loss or break even, which lowers the overall net interest rate.
It can be seen that Chenguang is trying its best to catch up with the top in terms of both the office direct sales business of Tob and the layout of new retail formats. However, it is still uncertain whether the healthy growth can be sustained in the future.