Entering a new era without dividends, the Seaweed Age seems to be struggling in its first year of listing. According to the recently published 2023 financial report, Seaweed Age achieved a total revenue of 6.56 billion yuan, an increase of 33.7% compared to the previous year; net profit was 340 million yuan, up 81.62% from last year, gradually recovering to its previous performance levels.
Looking at last year’s business operations and market overview, a centralized strategy remains the main trend for the company. Starting with apparel, Seaweed Age has continuously increased the sales proportion of clothing accessories, which now account for 70% of the total revenue. With the major trend toward brand identity, the sales of its menswear and home wear exceeded 1 billion yuan for the first time last year, with a year-on-year growth of over 40%.
Despite hopes of reducing dependence on a single category, Seaweed Age’s reliance on Amazon and the North American market seems unabated. Sales on Amazon account for nearly 90% of the company’s revenue, while its own independent website shows a downward trend; meanwhile, revenue from the European market accounts for just 7.64%, with the North American region making up as much as 90%.
Clearly, Seaweed Age has recognized the risks of overly centralized operations. Last year, the company further developed its sales channels through Walmart, achieving revenue growth of 139.74% and accounting for 4.08% of the total income. This indicates that while Seaweed Age has begun to make slow adjustments in 2023, and the net profit has gradually returned to former levels, the substantial reduction in reliance on a single sales channel has not yet materialized.
As for the significant growth in net profit, this is largely due to the high-profit margins of apparel brands and the company’s cost control over various expenses. A mature domestic supply chain and low R&D investment result in higher gross margins for clothing accessories, with the department’s gross margin reaching 49.2% in 2023. As sales revenues for multiple brands increased, the company’s overall gross margin also climbed to 46.3%.
While focusing on high gross margin categories, Seaweed Age has also worked to reduce expenses. Clothing accessories require high sales costs, including expenses for brand promotion and platform commissions. Last year, the company’s sales expenses reached 2.34 billion yuan, with fees paid to third-party platforms amounting to 1.12 billion yuan. According to reports, the cost of sales in 2022 accounted for 56% of the total revenue, far exceeding other companies in the same period. However, over the past year, the company successfully compressed this ratio to one-third, effectively reducing sales expenses to increase profits.
In terms of logistics and warehousing, Seaweed Age has also seen a gradual decrease in costs. According to data from Guotai Junan Securities, last year, the company’s inventory turnover rate increased to 5.05 times, improving by 2.8 times from the previous year. Constrained by account suspension issues, the company previously had to write off long-aged inventory valued at over 100 million yuan. As the turnover rate improved, Seaweed Age began to alleviate the burden of inventory.
From a long-term perspective, the cost control strategy has enabled Seaweed Age to gradually recover, but it has not yet returned to its heyday. Since 2021, the company’s problems with weak risk prevention have been persisting. It was not until last year that its net profit situation slightly improved. Looking back at 2020, Seaweed Age had a net profit of 451 million yuan, which fell to 185 million two years later; after last year’s significant increase, net profit has finally risen to 340 million yuan, with a net profit margin reaching 5.11%.
Despite breaking into high-margin product categories and implementing comprehensive cost-cutting strategies, the Sevii era did not achieve the expected commercial success. Since the company’s listing, it has essentially only escaped the unfavorable situation of previous years. Long-term dependence on Amazon and the slow progress of the company’s diversification has maintained a single image for Sevii over time—a best-selling clothing merchant on Amazon.
Industry insiders generally view “de-platforming” as a major trend, yet, regrettably, Sevii’s pace has remained stagnant. Even after experiencing a series of Amazon account suspensions, the company has yet to make a significant change. In recent years, it has intended to reduce the number of stores on Amazon. By the first half of 2023, Sevii had 430 stores, having closed 82 in the process. However, even with a reduced number of stores, its revenue share from the Amazon channel has hardly declined, still hovering around a high of approximately 90%. In this situation, revenue remains highly concentrated on men’s clothing brand Coofandy, homewear brand Ekouaer, and several other billion-level brands, most of which rely on Amazon.
The reduction in the number of stores has actually made Sevii’s revenue more concentrated, which may have increased the company’s risk exposure. However, Sevii is not without risk awareness. In 2018, the company established its own independent site to spread business risks. Additionally, it uses platforms like Facebook and Google for customer acquisition, striving to attract consumers. Last year, the company spent a total of 690 million yuan on promotions on these platforms and its independent site, while income from the independent site was only 180 million yuan, accounting for less than 3% of total revenue. This indicates that despite considerable investment, Sevii’s independent site business has developed slowly and is difficult to scale up.
When discussing independent clothing sites, SHEIN is an unavoidable subject. SHEIN achieved impressive performance without relying on platforms, relying on its own independent site—last year’s revenue exceeded 30 billion US dollars, with an expected net profit of 2 billion US dollars, making it a rapidly growing, globally recognized unicorn enterprise. Both Sevii and SHEIN concentrate their main products on clothing, but there are significant differences between the two in terms of determination and capacity in the branding process.
After years of trying, Sevii’s independent site still has not become the main source of revenue. Thus, expanding to other platforms has become a necessary consideration. Walmart has become one of the significant platforms for Sevii. In the fourth quarter of last year, Sevii’s revenue on Walmart doubled, exceeding its performance on the independent site.
Over time, Walmart has been increasing its investment in the e-commerce sector in China and attracting merchants with various favorable policies. Walmart has a mature offline sales network in the US domestic market and an online order fulfillment team, which is consistent with Sevii’s market positioning, helping the company to deepen the penetration and layout of the local market.
Overall, Sevii’s pace in channel expansion appears to be slightly slow. However, with companies like SHEIN and TEMU increasingly eating into Amazon’s market share in categories such as clothing and accessories, even forcing Amazon to lower commissions, it is evident that competition at the supply chain and traffic level is becoming more intense. As a veteran seller long focused on the clothing category, Sevii faces a market environment that is vastly different from the past. How the company adjusts strategies to compete anew is a matter of anticipation.
[ad_2]
