The WeChat ecosystem has been continuously improving in recent years, and there is optimism that WeChat Stores can break the situation through gift-giving, achieving rapid growth in the e-commerce business. Online revenue has already become an important source of income in the Clothing and Home Textiles Industry.
According to Zhito Finance APP, GF SEC has published a Research Report stating that, according to Wind, the retail sales of clothing, footwear, and textile products of enterprises with above-designated size reached a cumulative growth of 0.4% from January to November 2024, while the online retail sales of apparel commodities across the country grew by 2.8%. The growth rate of online revenue is faster than that of offline. Currently, in the e-commerce industry facing the decline of traffic dividends and slowing growth, more than half of the listed Clothing and Home Textiles companies that disclosed online revenue saw a decline in online revenue from the first three quarters of 2024. Furthermore, from the 2024 mid-year reports, the return rate has significantly increased. If WeChat Stores can achieve rapid growth through social interaction and gift-giving in the future, it is expected to bring new performance growth points to the Clothing and Home Textiles Industry.
GF Securities' main points are as follows:
WeChat Stores are testing the gift-giving feature, and there is significant development space for WeChat Stores in the future.
According to an announcement from the official WeChat Store public account on December 17, 2024, WeChat Stores have officially launched the gray testing of the "gift-giving" feature. According to the announcement, currently, with the exception of jewelry and education training categories, other categories of WeChat Stores will default to supporting the "gift-giving" feature for products priced at 0.01 million yuan or less.
Considering that gift-giving is one of the important social forms, although other e-commerce platforms have previously developed similar features, due to lack of social scenarios, the final effect did not meet expectations. In contrast, the WeChat Stores are built on the WeChat social scenario. The launch of the gift-giving feature coincides with the Christmas and Spring Festival season, and it eliminates the need to confirm the address with the other party, only requiring confirmation of whether to accept the gift, thus avoiding offline awkwardness and pushing away. Additionally, with the WeChat ecosystem continuously improving in recent years, there is optimism that WeChat Stores can break the situation through gift-giving, achieving rapid growth in the e-commerce business.
Seizing the channel dividends is expected to assist in the rapid growth of the Clothing and Home Textiles Industry, even leading to a turnaround.
People, goods, and the market are the three essential elements of retail for Clothing and Home Textiles brands. Looking at the past decade, many leading companies in Clothing and Home Textiles have successfully achieved rapid growth or turned around their performance by relying on channel transformations. In offline aspects, including Belle International, a leading women's shoe company that achieved significant growth by tightly controlling women's shoe counters in department stores, and Hla Group Corp., a national men's wear brand that quickly occupied the sinking market street stores based on a quasi-self-operated model. In online aspects, according to reports from Tianxia Wangshang, Ningbo Peacebird Fashion participated in Alibaba's first November 11 Shopping Festival-Related in 2009 as one of 27 brands. Since then, the sales volume for November 11 has increased from 0.52 million yuan in 2009 to 0.818 billion yuan in 2018, and the proportion of online revenue to total revenue has been continuously rising, reaching 26.29% in 2018.
In 2020, Jinhong Fashion Group turned around by seizing the e-commerce opportunities on Douyin, with its Teenie Weenie brand being one of the first brand merchants to collaborate and experiment with live streaming on the Douyin platform. In Q3 and Q4 of 2020 and Q1 of 2021, the sales revenue of the Teenie Weenie brand on Douyin reached 13.1048 million yuan, 9.9428 million yuan, and 0.13 billion yuan respectively, accounting for 10.69%, 3.87%, and 46.75% of its brand's e-commerce sales revenue, and the proportions of Teenie Weenie's brand operating revenue were 2.59%, 1.06%, and 15.88% respectively.
Listed companies have a high proportion of online revenue, and the WeChat Small Shop is expected to bring new performance growth points to the Clothing and Home Textiles industry.
According to the Earnings Reports of various companies for the third quarter of 2024, among the listed Clothing and Home Textiles companies reporting online revenue, the online revenue accounts for 9% to 43% of the main business income, with most companies exceeding 20%. Online revenue has become one of the important sources of income in the Clothing and Home Textiles industry. According to Wind, from January to November 2024, the retail sales of clothing, shoes, hats, and textiles for enterprises above designated size increased by 0.4%, and the online retail sales of clothing products nationwide increased by 2.8%, with online revenue growth outpacing offline.
In the current e-commerce industry facing diminishing traffic benefits and slowing growth, data from the first three quarters of 2024 indicates that more than half of Clothing and Home Textiles listed companies that reported online revenue saw a decline. Furthermore, the mid-2024 reports show a significant increase in return rates. If the WeChat Small Shop can achieve rapid growth through social interaction and gifting, it is expected to bring new performance growth points to the Clothing and Home Textiles industry.
Investment Suggestions
It is recommended to pay attention to leading Clothing and Home Textiles companies actively laying out WeChat Small Shops, as their online business is expected to bring new growth points, including: A-share Zhejiang Semir Garment (002563.SZ), Biem.L.Fdlkk Garment (002832.SZ), Winner Medical (300888.SZ), Jinhong Fashion Group (603518.SH), Baoxiniao Holding (002154.SZ), Hla Group Corp. (600398.SH), Shenzhen Fuanna Bedding and Furnishing (002327.SZ), Shanghai Shuixing Home Textile (603365.SH), Jiamei Fashion (301276.SZ), Ningbo Peacebird Fashion (603877.SH), Hong Kong stocks ANTA SPORTS (02020), BOSIDENG (03998), LI NING (02331), XTEP INT'L (01368), etc.
Leading companies in the sector involving e-commerce agency operations or investments in e-commerce agency companies expect growth in agency service demand alongside the rapid expansion of WeChat Small Shop's e-commerce business, including Anzheng Fashion Group (603839.SH), Shenzhen Ellassay Fashion (603808.SH), and Lancy Co.,Ltd. (002612.SZ).
Risk Warning: Risks of a downturn in the macro economy, volatility in Exchange Rates, rising labor costs, and significant fluctuations in raw material prices.