Long press the QR code or click "Read Original" to register. 30+ industry experts, 100+ B2B platform founders, 800+ manufacturer and distributor friends, gather in Fuzhou to jointly explore the Internet transformation path of the FMCG industry. Yesterday, the news that the chairman of Beijing Haifuxin Trading Co., Ltd. (hereinafter referred to as Haifuxin) surnamed Xu was on trial in Beijing Haidian Court for allegedly defrauding loans of over 140 million yuan sparked heated discussion in the industry. At a time when the FMCG industry is in turmoil and uncertainty, this undoubtedly brings another painful dilemma. Today, the author does not speculate on how the case will develop, but only states that it is an indisputable fact that Haifuxin is deeply trapped in a funding crisis, and that this crisis was actually an inescapable fate for Haifuxin. The origin of this fate is the financing black hole of trading companies that people have never paid attention to.
Financing Background of Trading Companies From the beginning, trading companies are the least adept at utilizing capital value. Due to the low gross margin, non-standardization, and instability of the industry, trading companies have always been the least favored low-level clients in the financial industry. Over nearly two decades of development, the trading industry has hardly received any favor from financial policies. The initial capital of all trading companies basically comes from two sources: self-accumulation and borrowing from friends. This is also a major reason for the relatively slow development of the industry. In the past two or three years, with national financial institutions being riddled with problems by real estate, central state-owned enterprises, and other entities, with adjustments in industrial policies and directions, and with further opening up of small loans, especially the tacit approval of shadow banking, trading companies have gradually entered the threshold of enjoying national credit in various financing forms within just three to five years. Although the conditions are quite harsh, some trading companies have finally expanded their sales scale with the help of capital. Unfortunately, no trading company realized that the opportunity to revitalize their business was quietly hiding a fatal killer. I dare say almost none, even today. Profit Analysis of the Trading Industry Let's look at the overall profit situation of the trading industry using the two most typical types of companies in the FMCG industry. First, trading companies mainly focused on modern channels. Their average gross margin is maintained at around 30 percentage points. Terminal expense investment (including contract deductions, promotional discounts, etc.) is about 15 percentage points or more. Operating expenses exceed 10 percentage points. Adding some unpredictable random investments, basically nothing is left. Especially in the past two years, with declining sales and soaring expenses, if the net profit of a trading company can reach 3-5 percentage points, it is considered a very ideal operating performance. Second, trading companies mainly focused on circulation channels. Their average gross margin is only around 15 percentage points. Especially in third- and fourth-tier markets, or for trading companies handling first-tier brands, the gross margin is even lower. After deducting various market investments and company operating costs, if they can achieve a net profit of around 3 percentage points, they should almost burn incense to thank the gods. Trading companies mainly focused on catering channels generally have similar operating conditions. Capital Turnover of Trading Companies Since the initial investment of trading companies is their own assets, for a long time in the entire trading industry, there was no concept of capital usage cost. When Carrefour's contract negotiation equated a one-month payment term with a 0.5 percentage point expense investment by the supplier, few trading companies realized that capital usage also has a cost. I usually tell trading company bosses with the simplest principle: if you take the funds invested in the company and use them for wealth management, the return might be greater than your operating profit. They seem to understand this truth, but when they return to the company's financial accounting, they seem to forget this fact. The capital recovery cycle for trading companies is about 90 days or even longer for modern channels, and about 30 days or more for circulation channels. Once encountering products with slow sales, if no returns are made, recovering capital within 60 days is also a good result. To ensure no stockouts, trading companies must also reserve more than one month's sales inventory. When encountering strong manufacturers or hot products, inventory capacity is not even based on sales. So generally speaking, if a trading company's capital can safely turn over 3-4 times a year, meaning 1 million yuan can generate 3-4 million yuan in sales, it can be considered a very good capital turnover rate. Financing Costs of Trading Companies So, what is the situation of trading companies' financing loans? Let's take a 1 million yuan one-year loan as an example. First, commercial bank loan interest rates are based on the national benchmark rate with an increase of no less than 30%. The latest one-year benchmark rate in 2014 was 6 percentage points, plus an increase of over 30%, so it is basically around 8 percentage points. Second, trading companies' loans must be guaranteed by a third party, and the guarantee fee is basically around 2 percentage points. Third, to avoid credit risk, banks will retain more than 20% of the loan amount as risk deposit. That is, you pay interest on a 1 million yuan loan but only get 800,000 yuan of usable funds and 200,000 yuan of one-year fixed deposit interest. In addition, various procedures such as collateral evaluation and notarization during the loan process will cost several thousand yuan. Assuming this is the case, we see that to obtain 800,000 yuan of usable funds, we have to pay nearly 100,000 yuan in interest, meaning the one-year loan interest rate is almost over 12 percentage points. There are two more terrifying situations: First, commercial banks basically give trading companies one-year loans. Even if the annual renewal process goes smoothly, it will at least create a gap of more than one month. If there are national policy adjustments or other unexpected events, the renewal process often becomes indefinitely delayed. For trading companies, this is painful torment. Theoretically, they cannot suddenly withdraw a large amount of repayment funds from normal operations. The higher the loan amount, the harder it is to pass. Therefore, most trading companies must use high-interest bridging loans (commonly known as "bridge loans") to get through this difficulty. The bridging loan interest rate is basically over 20 percentage points. After one or two months, the financing cost invisibly increases by about 1.5 percentage points. Second, the emergence of shadow banking, although providing more loan possibilities for trading companies, these non-bank financial institutions and private lending have stronger blood-sucking power. They fuel the recklessness of trading companies and quietly erode their profits. In summary, if the loan capital turnover rate is 3-4 times a year, in fact, far more than 3-4 percentage points of the company's sales profit goes into the pockets of financing institutions. Risk Warning By this point, industry insiders should already realize the huge crisis caused by loans for trading companies. Whether it is slow sales or manufacturers forcing inventory, the most essential consequence is reducing the speed of capital turnover and increasing the cost of capital usage. Many trading companies that act as agents for first-tier brands, especially those like Haifuxin that mainly act as agents for well-known liquor brands, are often forced by manufacturers to stock products that take half a year or a year to sell. Assuming all these goods' funds come from bank loans, it means that at least six percentage points of the trading company's sales profit are paid to the bank. Isn't this a shocking fact! Let's return to the topic of Haifuxin. When do professionals think the 180 million yuan invested in June can be roughly recovered? How much of this funds comes from banks or even more blood-sucking shadow banks? If interested, we can calculate how much profit Haifuxin needs to fill into the financial black hole from the 180 million yuan in sales. In fact, not every industry can develop rapidly with the help of capital. The industry's profit margin, capital turnover speed, and industry sustainability determine whether we can afford to use bank money. For the FMCG trading industry, low profit margins, large demand changes, high price elasticity, disorderly competition, and unstable macro environment are all important hidden dangers of financial side effects. For trading companies, they objectively cannot control the dual-faced incarnation of capital as both angel and devil. When the market is booming, the financial black hole may be temporarily covered, but in the current situation of market downturn, declining purchase rates, and manufacturers eager to recover funds, the larger the financial capital, the more it becomes the last straw that breaks the camel's back for trading companies. "I know that no one in the industry has ever raised such a warning, and I also know that after carefully reading the author's analysis, it will cause greater panic in the entire trading industry. But unfortunately, this is the fact: excessive financing costs and blind sales expectations are the biggest culprits behind Haifuxin's predicament, and I believe there are more Haifuxins to come!" Source: Meisi Meiyu, Author: Chen Yafeng New Food Era · New Distribution —— 2016 China "FMCG + Internet" Summit Forum —— This is a grand event focused on how the FMCG industry channels should transform under the trend of Internet+ transformation Agenda 08:00-09:00 Registration 09:00-09:05 Host opening 09:05-09:35 2016 China FMCG Industry Trend Analysis Report - Zhao Bo 09:35-10:05 Transformation Strategy and Path for FMCG Enterprises - Liu Chunxiong 10:05-10:35 Opportunities and Challenges Brought by FMCG Channel Reform - Liu Zhao, CEO of Waiqin 365 10:35-11:05 Reconstructing Distribution Channel System, Promoting Urban Retail Upgrade - Tian Yuan, General Manager of Alibaba Retail Tong's Backend 11:05-11:25 Channel Efficiency in the Internet Era - Fu Xiaoyun, Vice President of Benlai Holding 11:25-12:00 Roundtable Forum - Brand Transformation: Improvement vs. Reconstruction? Guests: Liu Zhao, Liu Chunxiong, Fang Gang, Chen Feng, Shi Zhengchuan, Deng Xia 12:00-13:30 Lunch 13:30-13:50 Distributor Transformation: Urban Distribution Trends - Wang Qi, CEO of Weijie City Distribution 13:50-14:20 Roundtable Forum - Why Distributors Should Do Logistics in Transformation Guests: Zhao Bo, Wang Qi, Liu Zhongmin, Tang Guangliang, Wang Cheng, Sheng Yan 14:20-14:40 How FMCG Enterprises Can Take Off with the Internet - Wang Hui, E-commerce Operations Director of Xijiu 14:40-15:00 Detailed Explanation of Zhongshang Huimin's One Machine, Two Wings Strategy - Su Xiaoxin, Vice President of Zhongshang Huimin 15:00-15:20 Category Value and B2B E-commerce Development Strategy - Wang Chaocheng, CEO of Yijiupi 15:20-15:40 Supply Chain Finance as a Lubricant for B2B Driving Traditional Business - Chen Xian, CEO of 51 Order 15:40-16:00 Zhanghe Cloud Factory Helps Upgrade FMCG Supply Chain - Yang Lixiang, CEO of Zhanghe Tianxia 16:00-16:30 Integrating Small and Micro Retail, Reconstructing Business Ecology - Miao Dong, Vice President of Quanshi 16:30-16:50 B2B Investment Principles and Ideas - Zhao Mingwei, Vice President of Junlian Capital 17:00-17:30 Roundtable Forum - Who is the King of FMCG B2B Models? Guests: Fu Xiaoyun, Zhuang Jianzhong, Jiang Tao, Zeng Weiqin 17:30-19:30 Dinner For manufacturer and distributor friends who want to transform, this grand event is not to be missed. Interested friends can long press the QR code below or click "Read Original" to register. Registration Method: Long press the QR code below or click "Read Original" ↓↓↓ Click "Read Original" [Register] ↓↓↓