GAP, which has been greatly transformed by Baozun E-commerce, finally shows signs of rejuvenation
王俊杰2017
发表于 2024-11-22 19:56:29
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After taking over GAP China for over a year, Baozun E-commerce saw a glimmer of hope.
According to the Q3 2024 financial report released by Baoshun E-commerce, GAP's China business achieved comparable revenue growth for the first quarter in recent years.
Baozun E-commerce has two major business segments: e-commerce services and brand management. The latter includes GAP and the British shoe brand Hunter, with GAP accounting for the vast majority. In the third quarter of 2024, the sales revenue of Baozun e-commerce brand management products was 330 million yuan, a year-on-year increase of 11.3%. Baozun E-commerce stated that the growth is mainly due to the company's continuous optimization of product strategies and improvement of consumer experience, which promotes the sales growth of GAP brand.
However, GAP's business in China still has some distance to go before profitability. After completing the acquisition of GAP China for 290 million yuan in February 2023, Baozun E-commerce has not yet made any money from this business. From early 2023 to the third quarter of 2024, Baozun's e-commerce brand management business has accumulated a loss of approximately 320 million yuan, but there is a trend of narrowing losses. In the third quarter of 2024, the adjusted operating loss of Baozun e-commerce brand management was 55.33 million yuan, compared to 50.09 million yuan in the same period last year.
The improved performance indicates that Baozun E-commerce has played a role in the series of transformations made by GAP China.
The specific details of Baozun E-commerce's acquisition of GAP China were that Baozun E-commerce obtained control over the product design, production, promotion, and channels of GAP Greater China (including mainland China, Hong Kong, and Macao), which means that Baozun E-commerce has great potential to transform GAP China.
The core idea of Baozun E-commerce's transformation of GAP is to gradually transform it from a discount driven brand to a brand that wins with consumer mentality, with the goal of turning losses into profits by 2025. The relevant measures include optimizing product portfolio, improving supply chain efficiency, strictly controlling discounts, integrating product marketing strategies, adjusting offline channel structure, etc.
In terms of products and marketing, Baozun E-commerce has positioned GAP's target audience in the Chinese market as urban youth aged 18 to 30, as well as fashionable spicy moms aged 25 to 40. Regarding the former, GAP has incorporated more localized trendy designs while retaining its American casual DNA, such as introducing functional clothing in line with outdoor trends, collaborating with Chinese designer brands, and inviting 00s generation Ouyang Nana to serve as the "Brand Renewal Manager". For fashionable and spicy mothers, GAP has increased its development efforts in women's clothing and baby children's clothing.
In terms of channels, GAP China has been focusing on both online and offline channels, launching more specialized products online - this is also the old line of Baozun E-commerce. Before acquiring GAP China, Baozun E-commerce was its online business partner for many years. Offline GAP has bid farewell to the common large store model when it first entered China, and instead opened medium-sized stores of three to four hundred square meters, focusing on improving floor area efficiency. In addition, more emphasis is placed on fashionable combinations of different scenes and themes in the display. However, Interface News reporters have visited GAP offline stores multiple times and found that there are still frequent promotional activities in GAP stores, and they have not yet shaken off their dependence on discounts.
GAP China significantly accelerated its store opening speed in the second half of 2024. In the third quarter of 2024, GAP opened 24 new stores in mainland China, distributed in first tier, new first tier, and second tier cities, with a total of 144 stores. Previously, GAP's pace was relatively cautious, opening 10 new stores in 2023, and 2 and 9 new stores in the first and second quarters of 2024, respectively. Baozun E-commerce still plans to achieve its goal of opening 50 new GAP stores by 2024, indicating that GAP may open an additional 15 stores in the fourth quarter.
While trying to attract consumers with higher quality products and stores, GAP China is also improving its internal operational efficiency, including fully transferring the brand's supply chain to the mainland and reducing the risk of inventory backlog through rapid return orders.
In the first to third quarters of 2024, the gross profit margins of Baozun e-commerce brand management product sales (mostly contributed by GAP) were 53.1%, 52.3%, and 52.8%, respectively, which were relatively stable but decreased from 54% in 2023. Compared to other fast fashion peers, this level is not too outdated. By comparison, H& The gross profit margins of M Group and Uniqlo's parent company, Fast Retailing Group, for the first three quarters of fiscal year 2024 were 53.0% and 54.0%, respectively, while the gross profit margin of Zara's parent company, Inditex Group, was even higher, exceeding 57% in recent years.
Although the latest quarterly performance shows that GAP China is expected to reach a turning point, the truly celebratory moment has not yet arrived.
In the first three quarters of 2024, GAP China's revenue was about 900 million yuan, while in 2023, its revenue exceeded 1.2 billion yuan for the whole year. Before Baozun E-commerce took over, its revenue was 2 billion yuan in 2022- this is already the level of GAP after years of decline in China. Regardless of when GAP China can return to the 2 billion yuan mark, it is not fully certain whether it can achieve year-on-year revenue growth for the whole year in 2024.
Baozun E-commerce, as a long-term e-commerce agency, lacks offline and brand operation experience, which is its weakness in transforming GAP. One of the reasons for GAP's previous decline in the Chinese market was the lack of brand building, which mainly benefited from the fast fashion trend, but the brand itself lacked attractiveness.
The senior management of Baozun E-commerce stated at the second and third financial reports in 2024 that GAP China will continue to maintain close cooperation with the global resources of the GAP brand, while achieving localization and maintaining the integrity of GAP as a global brand. In other words, Baozun E-commerce still hopes to make good use of the resources of GAP's parent company and its influence in the domestic market, and leverage its advantages as a global brand.
This strategy is related to the development momentum of GAP outside of China. The latest financial report released by GAP Group, the US parent company of GAP, shows that GAP's global market revenue reached $900 million (approximately RMB 6.5 billion) in the third quarter of 2024, with comparable sales increasing by 3% year-on-year. This is the fourth consecutive quarter of positive growth and the sixth consecutive quarter of market share growth.
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