"The king of hangtags" Antarctic e-commerce makes a turnaround

There has never been a fixed business model. Now, the once-famous Antarctic, known for selling hangtags, has started selling goods again.

In 2008, facing a business crisis, Antarctic transformed from a thermal underwear brand to a brand authorization model. With this lucrative business model, it grew to become the "Hangtag King" of the A-share market.

However, as the e-commerce boom waned, the hangtag model lost its appeal in the market, and Antarctic's brand authorization business faced years of declining pressure. Even the acquisition of multiple brands and replicating the model proved futile.

As a result, Antarctic has begun to pivot back to self-operated retail business, launching men's and women's clothing, underwear, and other products under the Antarctic brand.

The key question is whether this long-standing national brand, which has made fast money for over a decade, can win back everyone's favor with a rejuvenated image and self-operated products.

Hangtag King

Like the San Yang brand, the Antarctic brand was also born in the era of "Flowers in Full Bloom."

In 1998, Zhang Yuxiang founded the underwear brand Antarctic, using intensive advertising to become the number one brand of thermal underwear in China. Wearing a set of Antarctic thermal underwear in those cold winters was just a luxury for most ordinary people.

However, within a few years, the footwear and apparel industry entered an industrial downturn, and competition in the underwear industry intensified. Brands such as Antarctic, Yuzhaolin, Hengyuanxiang, and Beijireng competed on the same stage, and price wars escalated, signaling the end of the good days.

In desperation, Antarctic began to transition to a brand authorization model in 2008: closing its own factories and authorizing cooperative factories to produce; signing contracts with cooperative distributors to authorize them to sell "Antarctic" brand products. This business model is commonly known as "selling hangtags."

Leveraging the rapid development of e-commerce, Antarctic, as a brand comprehensive service company, went public through a backdoor listing in 2015, transforming into Antarctic E-commerce (002127.SZ).

In the hangtag world, Antarctic has over 60 product categories, more than 100,000 SKUs, including not only traditional underwear, underpants, and socks, but also small household appliances such as juicers, electric fans, and massagers, and even internet-famous food such as snail noodles, covering almost everything. At its peak, it attracted over a thousand suppliers, tens of thousands of distributors, and tens of thousands of online stores, achieving hundreds of billions in GMV.

This kind of high-profit business model gives the company a strong profit-making ability, with the core business gross profit margin consistently exceeding 90%, and at its peak, even approaching 95%. In 2019, during its peak performance, Antarctic E-commerce achieved a net profit of over 1.2 billion yuan with a revenue of less than 4 billion yuan.

In fact, the brand authorization model is not unique to Antarctic E-commerce. However, Antarctic E-commerce was an early and successful adopter of this model during the golden age of e-commerce, seizing the opportunity and becoming the epitome of this model. Subsequently, many struggling brands in the footwear and apparel industry, such as Aokang, Saturday, and La Chapelle, have regarded Antarctic E-commerce as a reference for transformation.

Business Bottleneck

However, while many brands were entering the realm of brand authorization, Antarctic E-commerce itself encountered business difficulties. After the peak period from 2019 to 2020, Antarctic E-commerce faced a bottleneck, with a decline in distributors, suppliers, store numbers, and e-commerce GMV, leading to a decrease in the scale and performance of the listed company.

The direct cause is the decline of the traditional e-commerce industry dividend, coupled with an increasing number of brands selling authorized products. In the lingerie market where Antarctic E-commerce was originally located, competitors such as Yu Zaolin, Hengyuanxiang, Beijirong, and Maoren successively entered the brand authorization business, intensifying competition.

Of course, the fundamental reason lies in the waning appeal of Antarctic E-commerce's brand authorization.

In the early days, there was an information gap in the market, and consumers did not pay much attention to who actually produced Antarctic E-commerce's products. As long as the products were of good quality and reasonably priced, and had a brand endorsement, they were favored by consumers.

However, as the "secret" of the brand authorization model became widely known, and with the rise of white-label products in the new e-commerce era, the appeal of brand-authorized products naturally declined.

Furthermore, in the brand authorization market, if the control weakens, brand-authorized products can erode the brand's reputation. In other words, authorized brands have a lifecycle—this also serves as a warning that if the value of the brand is not enhanced, brand authorization will eventually decline.

To address this issue, Antarctic E-commerce has been acquiring more brands to replicate its business. In 2016, it acquired Cartelo Crocodile and Classic Teddy, and in 2022, it acquired BASIC HOUSE, Mind Bridge, JUCY JUDY, and others.

On the other hand, based on brand licensing business, value-added services have been launched to enhance the overall value of the brand business. To this end, the company also acquired the internet marketing company Time Interconnect for 1 billion yuan.

Looking at the performance in recent years, simply replicating the business has not solved the problem of the company being deeply mired in business bottlenecks. Also, due to the underperformance of the acquired targets, impairment losses were recognized, leading to huge losses for the company in 2022.

Turning Point

Zhang Yuxiang, the helm of Antarctic E-commerce, realized that relying solely on selling labels was no longer enough to bring the company back to its peak. Without quickly adjusting the strategy, it might sink even deeper.

In 2023, the former "king of labels" Antarctic E-commerce has deeply adjusted its business model.

In the past few years, Antarctic E-commerce's main business was divided into two parts: the company's own brand authorization business, which was not large in scale but was profitable; and the Time Interconnect division, which mainly focused on mobile internet marketing business and was the company's largest source of revenue, although its profitability was moderate.

Last year, Time Interconnect streamlined its business lines, resulting in a decrease of nearly 500 million yuan in revenue from mobile internet business. This was the main reason for the decline in Antarctic E-commerce's operating income in 2023.

On the other hand, the core focus of the brand authorization business has shifted to the fashion authorization business, mainly centered around Baijiahao (BASIC HOUSE) and its subsidiary brands. Last year, it achieved a total platform GMV of 25 billion and entered the top 10 in the annual ranking of women's clothing on Douyin.

In addition to strategic cooperative authorization business with brands such as Nanjiren and Cardile Crocodile, Nanji E-commerce has also launched its own retail business, focusing on the men's clothing, women's clothing, and underwear categories of the Nanjiren brand. Currently, the first milestone series of sunscreen clothing products under the Nanjiren brand has been launched.

In other words, after selling other brands' labels for over a decade, Nanjiren has chosen to return to its own brand business, aiming to transform into a trendy home clothing brand that embraces the lifestyle of young people.

In 2023, the brand authorization business revenue of Nanji E-commerce has seen a significant decline, with the self-operated retail business becoming one of the few bright spots for growth.

Last year, Nanji E-commerce's operating income was 2.692 billion yuan, a year-on-year decrease of 18.66%; it achieved a net profit attributable to the parent company of 117 million yuan, turning losses into gains. However, compared to the peak moments of previous years, the current situation is incomparable.

Nanji E-commerce is finally attempting to break out of its comfort zone of brand authorization, but can the brand value of Nanjiren bear the weight of the company's transformation?