Hello! I'm your financial analysis assistant. This report on the financial performance of Dongfang Zhenxuan (formerly New Oriental Online) is incredibly informative and full of dramatic "turnarounds."
In simple terms, even after losing its core figure, Dong Yuhui, and its original star team (the F4), Dongfang Zhenxuan not only survived but also made a huge profit. The reason behind this is a complete transformation from relying on celebrities to focusing on its products.
Below, I'll break down the key points of this financial report into five aspects in plain language to help you understand this "star-removing" business strategy.
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I. Core Summary: From a "Celebrity-Driven Company" to a "Product-Oriented Retailer"
In one sentence: Dongfang Zhenxuan has delivered a result that goes against intuition. Despite the departure of Dong Yuhui and the dispersion of its original hosts, the company's revenue increased by 30%, and its profit turned from a loss to a profit of 544 million yuan.
Change in Core Logic:
- Previously, people bought Dongfang Zhenxuan because of Dong Yuhui's cultural content and personal charisma (流量-driven).
- Now, people buy it because of the high quality and cost-effectiveness of its own products (product-driven).
The company has successfully shifted from being an MCN (Celebrity Management Network) agency to a brand retailer, similar to companies like Sam's Club or Costco.
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II. Detailed Analysis in Five Dimensions
1. Products Are More Important Than Celebrities: Own-Brand Products Become the Cornerstone
Simple Explanation: Before, Dongfang Zhenxuan was like a department store that sold products from others and earned a commission. Now, it's like its own brand factory, developing, producing, and selling its own products.
- Data Highlights: This year, the company's own-produced or customized products (own-brand items) generated 5.4 billion yuan in sales, accounting for 52.6% of the total GMV (Gross Merchandise Value). This means that for every 100 yuan sold, more than 52 yuan came from its own brand.
- Why This Is Significant?
- Strong Risk Resistance: When Dong Yuhui stopped hosting, sales plummeted. With 1,009 own-brand products, even if the hosts change, as long as the products are available, the business can continue.
- Fast Product Expansion: It has expanded from fresh snacks to paper products, home goods, and clothing, offering a wide range of items like you would find in a supermarket.
- Multi-Channel Presence: It no longer relies solely on live broadcasts on Douyin; it also sells on Taobao, JD.com, Pinduoduo, and has opened its first 400-square-meter physical store in Beijing. This diversifies its revenue sources.
2. The Secret to Surging Profits: Saving on Salaries and Making Higher Margins
Simple Explanation: Why did profits increase by over 500 million yuan? Mainly due to two strategies: reducing salaries and increasing profit margins.
- Reducing Salaries (Cost Cutting): With the departure of top hosts like Dong Yuhui, the company no longer has to pay high salaries.
- Although the total number of employees increased by over 400 (mainly in operations and supply chain), total salary expenses decreased from 1.2 billion yuan to 800 million yuan.
- Average Salary Halved: Average salaries dropped from 856,000 yuan to 442,000 yuan. This shows that the company no longer relies on a few stars but uses a large number of standardized hosts and multiple Douyin accounts to distribute traffic.
3. The Cost of Traffic: Spending Money to Maintain Growth
Simple Explanation: Without Dong Yuhui's traffic, Dongfang Zhenxuan had to buy traffic from platforms like Douyin.
- Marketing Expenses Doubled: Sales and marketing expenses increased from 300 million yuan three years ago to 1.078 billion yuan, mostly for advertising on Douyin.
- Challenging Situation: Order volumes didn't increase much, but GMV did, indicating that the growth came from higher average transaction values (people buying more expensive own-brand products), not from new users.
- Low Fan Loyalty: With 10 million app users, only 350,000 are paid members, showing a low conversion rate. Compared to Sam's Club, this channel's ability to generate revenue is still weak.
- Essence: The company is paying Douyin for traffic, a painful but necessary strategy to maintain its operations.
4. Growing Pains: Larger Scale Means Greater Quality Control Challenges
Simple Explanation: As it grew from a live streaming platform to a large retailer, problems emerged. More products meant more quality control issues.
- Quality Control Crisis: With 1,009 own-brand products, there were nearly 2,000 complaints about issues like moldy cakes.
- Inventory Pressure: Since products are produced in-house, unsold inventory becomes a problem. Inventory turnover times doubled, indicating longer storage times and higher capital ties.
- Core Dilemma: The company faces a typical retail challenge: how to maintain quality while expanding rapidly. A failure in quality control could undermine its transformation efforts.
5. The Capital Market's Perspective: From "Concept Investing" to "Performance Evaluation"
Simple Explanation: Investors now evaluate Dongfang Zhenxuan based on its potential to become a successor to Costco.
- Valuation Shift: Previously, the company's value was tied to its hosts' IP, which was highly risky. Now, it's valued based on metrics like repurchase rates, supply chain strength, and brand assets.
- Comparison: It's compared to companies like Costco, Sam's Club, and Hema.
- Costco's own brands account for 1/3 of its sales.
- Sam's Club's Member's Mark accounts for over 30% of its sales.
- Dongfang Zhenxuan's own-brand products account for 52.6%, potentially even more.
- Risk Warning: With a market value of HK$25 billion and a P/E ratio of 40, the market is already betting heavily on its success. If its physical stores don't perform well or its own-brand products don't sell, the stock price could face pressure.
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III. Insights for Everyone
1. For Consumers:
- Dongfang Zhenxuan's core competitiveness now lies in "value for money and quality." If you don't care about the hosts and only care about the quality and price of products, its own-brand items (especially snacks, fresh food, and daily necessities) are worth trying.
- Check out its physical stores, such as the one in Zhongguancun, to experience the "online prices, offline shopping" service.
2. For Investors/Observers:
- Key Metrics: Repurchase rates of own-brand products, profitability of physical stores, and growth of paid app members.
- Risks: Frequent quality control issues, inventory buildup, and heavy reliance on Douyin for traffic.
- Conclusion: Dongfang Zhenxuan has shown that removing star reliance is feasible, but whether it can transform into a great retailer depends on its performance in the next 1-2 years in terms of physical store expansion and supply chain management.
In summary: Dongfang Zhenxuan has taken a year to shift from relying on its hosts to focusing on its products. It's on the right track, but the road ahead is long and full of challenges (quality control, inventory, and competition).