Can Nanji, which no longer sells tags, successfully turn around?

In 2024, when Nicholas Tse appears in sun protection clothing from the NanJi brand across various media nationwide, it signifies that NanJi E-Commerce, which has been profiting for over a decade by "selling tags," is undergoing a significant transformation.

The business model is shifting from light to heavy, and to shed the negative label brought by brand licensing, NanJi E-Commerce needs to invest more.

The pain of transformation is inevitable; in 2024, the company's losses are just the beginning of this pain.

Transforming NanJi into a substitute for Uniqlo is the beautiful vision of brand founder Zhang Yuxiang. However, the difficulty of turning a brand from black to red may be no less than creating a new brand from scratch.

The Pain of Transformation Begins

Once, while having tea with friends, Zhang Yuxiang heard a friend complain in front of him: "What kind of socks are you making? I threw them in the trash without even wearing them." The friend's words struck a nerve with Zhang Yuxiang. As the founder of the NanJi brand and the leader of NanJi E-Commerce, he realized that the company's brand licensing business model had encountered problems.

In 2023, NanJi E-Commerce optimized and transformed its brand licensing business, establishing three major business segments: fashion series licensing services, strategic cooperation licensing services, and self-operated retail. This means that after profiting for over a decade through a light asset brand licensing model, NanJi E-Commerce must now personally engage in product development.

2024 marks the first complete accounting year for the company's restart of self-operation. Has the newly re-emerged NanJi gained market recognition?

The annual report shows that the company achieved an operating income of 3.358 billion yuan for the year, a year-on-year increase of 24.75%; the net profit attributable to the parent company was -237 million yuan, turning from profit to loss, a year-on-year decrease of 312.04%.

From the data disclosed in the annual report, the mobile internet media placement platform business remains the core of the company's revenue, achieving an income of 2.796 billion yuan during the period, accounting for 83.25% of the company's revenue, but with a gross profit margin of only 4.61%, indicating weak profitability.

Moreover, due to the underperformance of the subsidiary engaged in this business, Time Internet, an impairment of goodwill of 108 million yuan was recognized, directly impacting the annual performance of the listed company.

The comprehensive brand services are the profit drivers for the company, achieving an income of approximately 270 million yuan during the period, a year-on-year increase of 55.59%, with a gross profit margin as high as 94.76%, making it highly profitable. Additionally, the merchandise sales business achieved an income of 189 million yuan, a year-on-year increase of 191.63%.

Regarding the self-operated retail business, which is of most concern to the outside world, NanJi E-Commerce did not separately list it in the annual report. It is currently difficult to accurately assess user acceptance of the newly refreshed NanJi through the annual report.

However, perhaps some insights can be gleaned from the data on e-commerce platforms. The official flagship store of NanJi on Tmall shows that the sales of the Nicholas Tse-style quick-drying sun protection clothing recommended on its homepage are currently less than a hundred.

To recreate NanJi, the investment from NanJi E-Commerce cannot be considered small. For the year, the company's sales expenses increased by 430.28% year-on-year, reaching 588 million yuan, with the sales expense ratio rapidly rising to 17.50%, far exceeding the previous overall level of around 3%. Among these, the largest expenditure was promotion service fees of 486 million yuan, which is 23 times that of the same period last year In June last year, the company signed an agreement with Chizhong Advertising, a subsidiary of Focus Media, to invest 200 million yuan in advertising platforms such as ladder media from June 24, 2024, to January 26, 2025.

The sudden increase in sales expenses is another important reason for the company's losses in 2024.

Selling Tags No Longer Works

NanJi E-Commerce has been humorously referred to as the "A-share tag dealer." Relying on the external authorization of the Nanji brand, the company went public in 2015 by backdoor listing through Xinmin Technology.

After going public, NanJi E-Commerce continued to expand its trademark portfolio, successively acquiring trademarks such as Cardin Crocodile and Classic Teddy. From 2021 to 2022, the company acquired trademarks like Baijiahao and Bella Villa, bringing the total number of brands under its umbrella to over ten.

The business model of brand authorization is not unique to NanJi E-Commerce, but it is the only one in the country that has taken this business to the extreme and achieved A-share listing through this model, with the company's market value once reaching 60 billion yuan.

Especially the Nanji brand, under the open authorization model, is almost all-encompassing. The brand once expanded into over 60 categories, with more than 100,000 SKUs, covering not only traditional underwear, panties, and socks but also small appliances like juicers, fans, and massagers, and even later introduced snail noodles and various trendy snacks.

Frequent online shoppers should have noticed that Nanji is everywhere in e-commerce; as long as you are willing, it can take care of your daily life.

At its peak, there were thousands of suppliers and tens of thousands of distributors and online stores making money around NanJi E-Commerce. The platform supported by tags had an annual GMV of hundreds of billions. During its peak performance, NanJi E-Commerce achieved a revenue of less than 4 billion yuan, with a net profit of 1.2 billion yuan. This level of profitability is enough to make the vast majority of A-share listed companies envious.

As the founder of Nanji and the actual controller of NanJi E-Commerce, Zhang Yuxiang aimed to transform the company into a private brand retailer through this model, rapidly expanding categories with a light asset model and managing the entire lifecycle of consumer spending.

However, over time, under various influences, NanJi E-Commerce easily made money but lost its respect for consumers.

For a long time, the all-encompassing "Nanji" has almost become synonymous with low-quality products.

In recent years, relying on e-commerce and short video platforms, a large number of white-label and factory brands have rapidly risen, undermining NanJi E-Commerce's business model. Consequently, the company's overall performance has significantly declined.

Zhang Yuxiang's New Ambition

Zhang Yuxiang is a contemporary of the character Bao in the TV series "Blossoms," and his early experiences are remarkably similar to Bao's.

In 1985, after graduating from university, Zhang Yuxiang entered the workforce and went into business in 1992. His first entrepreneurial project was selling women's clothing at a counter in the North Store of New World Department Store on Nanjing Road in Shanghai.

In 1997, the Nanji brand was established, innovatively opening up the thermal underwear market. In an era when supply and brands were relatively scarce, Nanji vigorously promoted its brand, quickly winning the market With the intensification of market competition and the disappearance of the dividend in the thermal underwear category, Nanji Ren has fallen into a bottleneck. In 2008, Zhang Yuxiang led the company to transform, closing self-operated factories, authorizing cooperative factories for production, signing cooperative distributors, and authorizing the sale of "Nanji Ren" brand products. By "selling tags," it welcomed another decade of rapid growth.

Image source: Xiaohongshu APP

Now, over sixty years old, Zhang Yuxiang is leading Nanji E-Commerce to restart self-operation and embark on another major transformation.

Having been an entrepreneur for over 30 years, he has experienced the development of China's market economy, witnessing the transition of goods from being in short supply, to supply-demand balance, and now to oversupply. He believes that he sees many opportunities in traditional manufacturing, and a blue ocean is just beginning.

At this moment, he remains ambitious. For the returning Nanji Ren, he hopes to achieve Decathlon's prices, Uniqlo's categories, and Lululemon's quality, aiming to build it into "the alternative to Uniqlo."

At the end of last year, Zhang Yuxiang stated in a media interview that to achieve this goal, the company is making high investments in R&D, hiring world-class researchers and world-class pattern makers as "structural talents."

However, according to the data disclosed in the 2024 annual report, the company's R&D investment has decreased rather than increased. The number of R&D personnel has dropped from 47 last year to 28, the number of R&D personnel with master's degrees has decreased from 2 to 0, and the number of R&D personnel with bachelor's degrees has fallen from 29 last year to 9.

Finally, the opportunity has arrived, and Zhang Yuxiang is ready to go all in, planning to invest 10 billion yuan in the entire industry chain and happily accepting temporary losses.

Over the years, the negative labels attached to Nanji Ren have also been faced by Zhang Yuxiang with calmness. "When you come out to mix, you still have to pay it back."

This article is reproduced from Zebra Consumption (ID: banmaxiaofei) with authorization. Copyright belongs to Zebra Consumption, and translation or reproduction without permission is prohibited.

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