Embracing the Internet+ fan economy, Jiangnan Buyi (03306) handed over a “spectacular” report card.

On February 27, Jiangnan Buyi announced the results for the first half of the 2024 fiscal year. As of December 31, 2023, the company achieved total revenue of 2,976 billion yuan, up 26.1% year on year; gross profit of 1,948 billion yuan, up 27.6% year on year, gross margin increased 0.8 percentage points year on year to 65.5% year on year; and net profit of 574 million yuan, up 54.5% year on year.

Looking at the whole year, in 2023, Jiangnan Puyi achieved total revenue of 5.81 billion yuan, gross profit of 3.339 billion yuan, and net profit of 823 million yuan. Nearly all of the core financial data showed a positive trend.

Compared to domestic apparel brands that are still fighting in the stock market, Jiangnan's performance in terms of increasing revenue, net profit, and gross profit is unquestionably outstanding.

Boosted by this excellent financial report, Jiangnan Buyi recorded a sharp increase of 26.6% the next day (February 28). Although the upward trend did not continue in the next two days, the trend industry is not very weak. As of the close of trading on March 1, its stock price was reported at HK$14.54.

As we all know, in recent years, due to a series of negative events, the brand image of Jiangnan Cloth has been greatly affected.

In February 2018, a bag launched by CROQUIS (CROQUIS), a brand owned by Jiangnan Puyi, is suspected of copying the work of emerging Martin designer River Renjie Wang, causing this product to be removed from the shelves.

In addition to revealing the plagiarism incident, in September 2021, JNBY by JNBY caused a public opinion crisis due to inappropriate patterns on children's clothing; in May 2022, Jiangnan cloth was once again on the hot list due to “dark painting” children's clothing. “Dragged down” by negative events one after another, the growth momentum of Jiangnan cloth clothing came to a standstill a few years ago.

Now, Jiangnan Buyi has handed over a report card showing a sharp increase in both revenue and net profit. Does this mean that the company has come out of the negative impact of the incident? And what was the correct layout that prompted the company to turn around?

Internet barriers “gain strength”

The reason why Jiangnan Puyi was able to reverse its performance strongly is probably inseparable from the barrier effect that it embraced the establishment of the Internet in the early days.

Bill Gates once said, “The 21st century will either be e-commerce or unbusinessable.” In view of this perception, at the time of the advent of the Internet era, Jiangnan Puyi did not rest on its own, adhering to traditional business ideas, but instead chose to embrace the new economy and embrace internet commerce on an experimental basis.

Since 2023, in the face of many uncertainties such as the retail environment and continuous changes in consumer behavior habits, Jiangnan Cloth has launched emerging consumer scenarios or products including “More than a Box” and “Gangnam Clothing+” multi-brand collection stores. These actions are all one of its initiatives to actively embrace the Internet.

Thanks to the company's embrace of the Internet, Jiangnan Puyi's internet barriers were also strong during this earnings season, prompting the company to show an online+offline growth trend.

According to financial data, as of the end of the reporting period, Jiangnan Cloth had a total of 2,036 physical retail stores, compared to 1990 as of June 30, 2023, of which 935 mature brands JNBY had a total of 935. Meanwhile, with the recovery of offline traffic, Jiangnan Puyi's offline retail store has achieved a 23.9% increase compared to the same store.

By channel, revenue from both online and offline sales channels increased in the first half of fiscal year 2024. Among them, revenue from offline channels increased 26.5% to 2,442 billion yuan, and revenue from online channels increased 24.2% to 534 million yuan.

Among them, Jiangnan Buyi said that offline retail stores recorded an increase of 23.9% compared to the same store, and these factors are all related to the “Internet +” mentality — first, benefiting from strategic investment in image upgrades and visual development of various brands; second, incremental retail sales brought about by inventory sharing and distribution systems, which increased 48.7% year over year to 597 million yuan; third, continuing to use Internet+ thinking and technology to enable sales. “More than boxes”, “WeChat Mall” and “diversified social e-commerce” contributed most of the sales volume of digital intelligence retail channels Now in physical stores Comparable to the same store.

Also, by brand, with the increase in brand power, all major brands of Jiangnan clothing also recorded growth: JNBY brand revenue increased 24% year over year to 1.7 billion yuan, and gross profit was 1,138 billion yuan, up 25.2% year on year. Total revenue generated by CROQUIS (sketch), jnby JNBY, and LESS brand products increased 29.7% to 1,228 million yuan, with gross profit of 788 million yuan, up 32.2% year over year. Various emerging brands such as POMME DE TERRE (POMME) and JNBYHOME achieved total revenue of 48 million yuan.

As far as traditional industries are concerned, when the tide of change of the times comes, they either abandon the past business model and embrace e-commerce, or wait for the end of gradual decline. This is not empty talk. In the Internet wave, some companies that have not kept up with the trend are currently showing obvious performance bottlenecks

According to incomplete statistics, in 2022, 28 of the 66 listed apparel companies in China lost money, accounting for about 42% of the total. 7 of them lost money for the first time since listing. In addition, the revenue and net profit of nearly 60% of companies also declined. Of these, 56 companies had a net decrease of 4,075 stores in 2022.

However, the reason why Jiangnan Puyi's performance went against the market is undoubtedly an effect of the “strength” of its internet barriers.

The fan economy “increased revenue”

In fact, behind the rise of Jiangnan cloth clothing, it is also inseparable from a precise grasp of the fan economy.

The Zhitong Finance App observed that Jiangnan Buyi mainly cultivates the fan economy through the establishment of omni-channel interactive platforms, including offline retail stores, online platforms, and WeChat interactive marketing service platforms.

Among them, retail stores provide offline experiences to familiarize customers with the brand concept. The online platform provides customers with the convenience of shopping at any time. The WeChat interactive marketing service platform not only sells products, but also becomes an online window for conveying the brand image and brand concept: by regularly posting the latest products, promotions, design and fashion information, customers who agree with the Jiangnan cloth brand philosophy, lifestyle and vision can become loyal fans of the brand.

More than that, in order to maintain fans, Gangnam Puyi also provides a membership-based customer loyalty program. According to this, customers who join the membership can accumulate reward points by purchasing products and can exchange these reward points for vouchers that can enjoy discounts on subsequent purchases.

Thanks to an accurate grasp of the fan economy, the purchasing power of Gangnam Puyi members is also coveted by many brands.

According to financial data, as of the end of 2023, the number of Jiangnan cloth loss member accounts reached 7.4 million, while the number of 6.91 million members in the first half of 2023 had increased by nearly 1 million compared to the same period in 2022. It is worth mentioning that the retail sales contributed by the company's members account for more than 80% of total retail sales, and their purchasing power should not be underestimated.

At the same time, the large membership base and strong purchasing power have clearly boosted the profitability of Jiangnan Cloth.

In the first half of the 2024 fiscal year, the gross margin level of Jiangnan Cloth Clothing has risen to 65.5%, second only to high-end brand Biyin Raffen among the listed apparel companies. According to reports, in the first three quarters of 2023, the gross margin of high-end Yamafin Sports was 52.2%. In the first half of 2023, the gross margin level of Binyinleven was 77.15%.

However, it should be noted that as a designer brand group, the key to its successful development ultimately depends on the word “design.” If you place your hopes on “fans,” you have to take the risk of “falling out of favor.”

On September 24, 2021, “Jiangnan Cloth Indecent Children's Wear Design Claims Distilled from Classical Paintings” was a hit. And the brand's “rollover” this time also started with a post from Gangnam cloth fans. Amid the storm of public opinion, on September 23, the government issued an apology and stated, “We attach great importance to the relevant complaints. We have completely removed the relevant product series as soon as possible, withdrawn the relevant promotional materials, and set up a special team to initiate a self-inspection.” However, the late apology was unable to recover public opinion, and investors also made their own choices. On September 24, Jiangnan cloth closed down 13.21%.

As can be seen from the above, although Jiangnan Puyi has consolidated its basic market by embracing the Internet+ fan economy, returning to the inside, “design power” is probably the real growth force for a clothing design brand. Looking at this point, it is clearly an area where Gangnam cloth needs to be improved.