China: Tiaoma increased capital by 70 million, "extreme" capital control to do low-margin business
- DRC Discount Retail Consulting GmbH
- 3 hours ago
- 4 min read
Discount Wholesaler Retail Chain Tiaoma is one of the best hard discount stores in China." A senior retail executive commented.
This hard discount chain store headquartered in Chongqing has about 200 stores, with an average daily sales of 20,000 to 30,000 yuan per store. Yipin Fresh, the leading fresh food brand in the community, changed its Chongqing regional store to Yipin Wholesale Department to compete with it. This is a typical event that Tiaoma Wholesale Department has attracted the attention of the retail industry.
On June 30 2021, Toma Food Technology (Shanghai) Co., Ltd., the parent company of Tiaoma Wholesale Department, completed the change of registered capital from RMB 1.5 million to RMB 78.757813 million, indicating that Toma Wholesale Department is preparing for new actions. At the same time, the equity and company attributes of Tiaoma Wholesale Department have also been adjusted, which is closely related to the layout of the capital market.
According to Qichacha's public information, before this round of capital increase, Guo Hao and Zhou Yixiao were the two co-founders of Tiaoma Wholesale Department, accounting for 51% and 49% of the shares respectively. After the capital increase was completed, the shareholding ratio of the two dropped to 1.2697% and 25.2673%. The new major shareholder is Zhang Huazhi, holding 72.4630% of the shares. The parent company of Tiaoma Wholesale Department has also changed from a limited liability company (invested or controlled by natural persons) to a limited liability company (invested by Hong Kong, Macao and Taiwan, non-sole proprietorship).
"Usually, companies preparing for listing on Hong Kong stocks will adopt a VIE equity structure. Judging from the layout of the parent company of Tiaoma Wholesale Department and the early financing plan, it is more likely to impact the listing on Hong Kong stocks in the later stage." An investor in the consumer sector told the "Third Just look at retail," said the analyst.
Being able to gain capital attention in the context of a relatively cooling consumption and investment field, the competitiveness of Tiaoma Wholesale Department is mainly reflected in three aspects.
The first is track selection. The discount store format targeted by Tiaoma Wholesale Department has grown significantly in recent years. Some research institutions predict that discount store formats including snacks, fresh food, food and other categories will squeeze out at least 30% of the market share of traditional supermarkets.
Secondly, in terms of model setting, Tiaoma Wholesale Department operates as a full-direct store. In the early stage, capital strength is used to build stores, and in the later stage, the scale is expanded to improve efficiency, which is conducive to its rapid occupation of the market. A retail executive close to Tiaoma's wholesale department said, “Tiaoma's founding team has many years of investment background and is highly competitive in business model planning, accounting, and attracting financing.”
The third is to achieve low-margin operations through "extreme" cost control, and the gross profit of the front and back offices is controlled at about 15%. Guo Hao, the co-founder of Tiaoma Wholesale Department, once said, "All our organizational structures and systems are efficient and minimalist. As long as the departments are necessary, the departments that are necessary or not are resolutely not. What a department can do is resolutely not. to both departments."
Featured 500-800 SKUs, logistic costs account for 2%
At the beginning of the establishment of the Tiaoma Wholesale Department, there were first-line domestic US dollar funds investing. The investors were early investors of well-known companies such as JD.com, Kuaishou, Meicai, and Jiangxiaobai. It is understood that the first round of financing of Tiaoma Wholesale Department is RMB 100 million.
A retail executive close to the Tiaoma Wholesale Department told "Third Eyes on Retailing" that Guo Hao once calculated an account and verified that the Tiaoma Wholesale Department can achieve scale effect with the current model. An important reason to invest in the wholesale department of horses.
According to calculations by the Wholesale Department of Tiaoma, its stores are mainly opened in second-tier cities and surrounding towns to reduce rent costs. A Tiaoma wholesale department store of about 150 square meters can break even if the average daily sales reach 20,000 yuan. Tiaoma Wholesale Department sets the front-end and back-office gross profit margins to 15%, of which rent costs account for 2 points, labor costs 4-5 points, warehousing and logistics costs 2 points, excluding headquarters expenses, theoretically there is still 1%-2 % of net profit.
"It's hard to believe that the cost of logistics and warehousing can be controlled at 2%, but because the Toma Wholesale Department does not do fresh food, it is still possible to achieve the ultimate efficiency. If the Toma Wholesale Department operates with such a low gross profit, it can still run If it comes out, it will be very successful in the domestic retail market." The above-mentioned executive commented.
"Retail with the Third Eye" learned that Tiaoma Wholesale Department adopts the principle of minimalism in cost control, reducing costs from all aspects.
Among them, low commodity purchase price and fast sales rate are the core factors. This is mainly due to the fact that the wholesale department of Tiaoma has set the product structure as fast-demanding fast-moving consumer goods with high consumption frequency. The specific categories include frozen products, grain and oil, condiments, convenient instant food, casual snacks, milk/baking, beverages, daily chemicals and a small amount of fruit. The number of SKUs in a single store is around 500-800.
On the other hand, the wholesale department of Tiaoma also puts on the shelves various kinds of private label products produced by the OEM factory, so the price can be better. These products are mainly snacks and other categories with low brand concentration, and OEM production can earn more profits for Tiaoma Wholesale Department.
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