Hongxing Erke Expressed Its Determination To Become A Century Old Brand After Its Popularity Disappeared

What netizens affectionately call "Erke" is Hongxing Erke, which has just lost more than two billion yuan and has to donate 50 million materials to Henan.

Why is hongxingerke going bankrupt? Let's start with a set of data:

In 2020, the annual revenue of Hongxing Erke is less than one tenth of Anta's, and even has a loss of 220 million yuan. In the first quarter of this year, it will continue to lose more than 60 million yuan. Even if you look at hongxingerke's "Hometown", Jinjiang, Fujian Province, you can only say that it is "unsatisfactory", slightly better than the noble bird and Xide dragon.

Hongxing Erke, whose family is not so rich that even its official microblog members are reluctant to open, has provided 50 million materials to support Henan. This strong contrast, let the netizens have great love and sympathy for Hongxing Erke instantly.

This love and sympathy, so that thousands of netizens into the hongxingerke live broadcast room. By the afternoon of July 24, the sales volume of Hongxing Erke shuoyin studio exceeded 100 million, and the total sales volume exceeded 600000 pieces, setting off a round of "wild consumption".

Suddenly, Wu Rongzhao rushed to the studio in the early hours of the morning to express his gratitude to the netizens and persuade everyone to consume rationally. However, netizens insist on "wild consumption" and rush into Hongxing Erke's online outlets and offline stores to "buy out" its products. Netizens said, "this wave of not allowing your factory sewing machines to step on smoke, are all our netizens' dereliction of duty."

As a businessman, Wu Rongzhao said bluntly: "who doesn't want to sell more?"? But helpless "usually there are only so many goods", "everything comes too suddenly, the team is excited, a little unprepared."

Under the "wild consumption" of netizens, Hongxing Erke even sold out of goods and had to start pre-sale. According to statistics, the sales volume from July 22 to July 24 reached 220 million yuan, more than 10 times that of Anta, the second largest. According to a report released by Jingdong on July 24, Hongxing Erke's sales on July 23 increased by more than 52 times compared with the same period last year.

For a conscientious enterprise that maintains a sense of social responsibility, netizens have said, "we don't allow you to be unprofitable.". No, some netizens renewed the membership of hongxingerke's official microblog to 2140.

Hongxing Erke said that it is determined to become a century old brand, otherwise I'm sorry for the members sent by netizens.

However, how easy is it to become a century old enterprise? We should know that in the past 20 years, hongxingerke has experienced three difficulties which can be called "disaster of extinction".

　 　01 Three "disasters of extinction"

At the end of the 20th century, Jinjiang, Fujian Province was the largest shoe processing base in China. Chendai town is also known as the "shoe city". However, under the financial crisis in 1997, foreign trade orders decreased sharply, and the "shoe city" encountered the test of life and death.

As one of the many local garment factories, Wu's father and son decided to create their own clothing brand. On June 8, 2000, hongxingerke was born. This year, Wu Rongguang and Wu Rongzhao were 25 and 23 years old respectively.

It's not easy to start a business. Wu Rongzhao once recalled that "my father and family members co founded Hongxing shoe industry, but later he withdrew his shares. In 2000, my father took us to establish Hongxing Erke, starting from a rough workshop. At that time, more than 3 million yuan of accounts receivable, hundreds of thousands of yuan in cash and foreign trade inventory in a warehouse were all assets. However, the enterprise was burdened with more than 10 million yuan of bank liabilities, and the start-up of business started with negative assets. The old man once said, "if you can't, go home and plant."

In the second year, in order to rapidly expand the company's popularity, Wu brothers learned from Anta and other enterprises, and also used star spokesmen. In 2001, Hongxing Erke invited Chen Xiaochun, who was popular among young people because of his perplexity, as the spokesperson of the brand image; In 2004, Zhang Nala, a famous South Korean star, was invited to be the spokesperson of the brand image, while advertising on CCTV. Soon, hongxingerke quickly opened the market with a young and fashionable image.

During this period, hongxingerke developed rapidly. In 2005, the company was listed in Singapore, becoming the first clothing brand listed overseas in the industry. At the same time, xingerke opened a large number of offline stores and put forward the slogan of "to be No.1".

Since then, hongxingerke has begun to expand its categories, lay out the tennis line, and shape its brand image from tennis related apparel products. In 2005, hongxingerke began to sponsor domestic and foreign tennis events, and successively cooperated with the last atp1000 masters, China open, Shenzhen WTA tennis open, WTA Istanbul year-end final and other tennis events.

Wu Rongguang, a professional in design, gradually believes that only the soft power of "brand marketing" and no hard power of "technology research and development" will be a huge crisis. In 2004, Hongxing Erke took "science and technology leading" as its development strategy, focusing on R & D technology; It is reported that hongxingerke is second only to Nike and ADI in the 2004 tennis shoes competition.

In May 2007, Wu Rongguang retired behind the scenes and became chairman of Hongxing sports board. Wu Rongzhao, 30, became the actual director of hongxingerke. Ambitious Wu Rongzhao wants to push Hongxing Erke to the whole world.

This year, hongxingerke started its first large-scale and rapid expansion in the world, with more than 7000 stores worldwide in 2007. According to the data, when Hongxing Erke's sales volume reached 1.4 billion yuan in 2006, 2 billion yuan in 2007, and 2.88 billion yuan in 2008, Wu Rongzhao said confidently: "by 2013, the sales volume of Hongxing Erke will reach 10 billion yuan!"

But the situation is not as good as Wu Rongzhao expected. With the decrease of market heat after the Olympic Games, the sales volume of physical stores is far from rising as expected. However, under the distribution mode, sports shoes and clothing companies such as hongxingerke are still increasing production capacity and blindly expanding. This year, the inventory and sales ratio of domestic sports brands reached the highest of 10:1. Some people commented that "the industry has burst, and Jinjiang shoes can still be sold for three years if it stops production." According to the disclosure, in 2009, Hongxing Erke's revenue was only 1.999 billion yuan, a sharp drop of 30.8% compared with that in 2018.

During the period, in order to stimulate dealers to continue to open stores and clear inventory, Hongxing Erke paid 335 million yuan to dealers in various regions, and also paid 467 million yuan interest free short-term loans to dealers in six provinces such as Anhui and Fujian. But in 2009, hongxingerke's board of directors has banned interest free loans.

In 2011, hongxingerke was exposed as "suspected of financial data fraud". At that time, hongxingerke's account showed that there was 1.4 billion yuan, but the actual account was only 263 million yuan, a difference of more than 1 billion yuan. This eventually led to the stock delisting in 2020. Wu Rongzhao had to take the blame and resign.

In 2012, Hongxing Erke sought a new way out and transformed into a lifestyle brand. However, compared with Zara, UNIQLO and other international fast fashion brands, Hongxing Erke lacks competitiveness in popularity and fashion image, and this wave of forced transformation fails. "Most of my gray hair is contributed at this stage," Wu Rongzhao said with a smile in an interview with Xinhua

What is even more difficult is that in the summer of 2015, a fire made them fall into a "dark moment" - the fire destroyed more than half of the production facilities in Quanzhou plant area and the new products to be launched. It took 11 hours for 23 fire engines and more than 110 officers and soldiers to put out the fire. The loss of serious let Wu Rongzhao so far lamented, "the most difficult time, the cash flow on hand is not enough to support a week."

However, the brothers did not give up. In April 2016, Hongxing Erke reshaped the company's vision. Based on the return of the company's brand sports tonality and commodity style adjustment, hongxingerke officially proposed: "build a global leading sports brand!"

However, things may not be so easy, and there is no new content in hongxingerke's official website. In 2017 and 2018, Hongxing Erke continued to close its stores; In 2018 and 2019, the losses were RMB 298 million and RMB 2.958 million respectively; In 2020, Hongxing Erke has a revenue of 2.843 billion yuan and an annual loss of more than 200 million yuan.

　 　02 How to grasp the turning point of "Nirvana rebirth" brought by the explosion of red?

Despite years of losses, Wu Rongzhao does not think that hongxingerke is "on the verge of bankruptcy". On July 25, he responded that "in recent years, through active adjustment with the team, certain benefits have been achieved. The transformation process we are facing is still very difficult, but there is no "on the verge of bankruptcy" as many netizens ridicule

From the perspective of public information, hongxingerke may be gradually stepping out of the "dark moment". In an interview with Xinhua news agency in 2019, Wu Rongzhao said that hongxingerke has introduced an amoeba like business model to promote the transformation of the team from a manager to an operator.

While other major brands pursue the concept of "fashionable shoes", Hongxing Erke pursues technology and product development. In 2019, the company launched the "erkeqi bullet" technology, which enables the mass production of the insole material with soft elasticity and unique performance and foot feel. It is reported that in 2019, Hongxing Erke has invested tens of millions of R & D every year for more than ten years. It has a R & D team of more than 300 people and more than 270 patents.

"In the past, we always considered to occupy the market with price performance ratio first. Now it is different. The product must be attractive and topical enough." Wu Rongzhao is also trying to follow the taste of young consumers born after 95 and 00. He also said that Hongxing Erke has realized the information integration from R & D to value chain, and can supply the market quickly through its own production capacity; At the same time, the company has strict control over the quality of products. In 2019, the company's products are sold to Southeast Asia, the Middle East, Eastern Europe, North and South America, Africa and other regions, with more than 1000 stores overseas.

However, this is far from enough. Some analysts believe that Hongxing Erke is still dominated by production rather than design and R & D; Hongxingerke's return to public opinion C this time is purely an abnormal result. It will return to the old road after the popularity. If the shackles of the traditional business model can not be broken, it will be very difficult to turn over.

In addition, some netizens questioned that "hongxingerke is ugly and Shanzhai has no technology", so it can't work“ Is it because he donated money that we should buy it? "

Indeed, with the declining focus on donation topics, hongxingerke really needs to think more about how to go next.

From the perspective of 4P marketing model, if Hongxing Erke wants to seize this turning point and turn it into a development opportunity, it still needs to make efforts from product, price, place and promotion.

The product is the first. Products should have enough selling points and put the functional demands of products first. In the huge purchase of consumers, Hongxing Erke's products "swept away". But this time, consumers are totally for Hongxing Erke's brand to help, and their attention to its products is not high. In this era of products as the king, only from the product design and development, ordering and distribution, store operation management, customer service and other directions "practice internal skills", can we highlight the advantages of products and brand positioning.

Among them, innovation is always the core competitiveness of products. Some netizens said: "strongly support design innovation! The quality of Hongxing Erke is really good, but the design is not enough. This is really a hard injury. I think it is essential for enterprises to understand customer needs and realize self revolution if they want to transform. We hope that a good brand like Hongxing Erke can really become a century old store, and at the same time, on the way of innovation, we can pay more attention to product design and experience. "

What's more, Hongxing Erke's first short board is the ability to build brand and popular models; Hongxing Erke, founded in 2000, has been short of classic models. In this regard, some netizens put forward opinions on Wu Rongzhao, asking for the addition of basic small white shoes or dad's shoes and other product styles; And set up the sub brand to produce high-end brand series; It also cooperates with museums, famous IP, and so on, and has more elements of Chinese style.

The second is price. According to different market positioning, different price strategies are formulated. The pricing basis of products is the brand strategy of enterprises, and the gold content of brands is emphasized. Cost performance has always been an important strategy of hongxingerke. Hongxing Erke, which is located in the young group, has experienced a big increase in R & D investment for many years, but its product price has not risen much. At present, hongxingerke is following the strategy of "protecting the city in rural areas". In 2020, it will open 800 stores, mainly in the third and fourth tier cities.

For the production of high-end products, there are different voices from the outside world. The netizens who hold opposing opinions think that if consumers choose to help and support the weak brands in Hongxing Erke, take advantage of the public's sympathy and national conscience brand, take advantage of the situation, reap the market, and take the high-end route. This is actually equivalent to breaking the original personal device in the minds of consumers and deviating from the consumers' perception of "sincerity and conscience" inherent in its brand, On the public gradually tired of "cutting leeks", "playing routines" on the old road.

In view of this, the above-mentioned netizens believe that Hongxing Erke needs to improve its manufacturing strength, quality and quality control. On this basis, the route to be taken is the affordable mass, fashionable and personalized route.

The third is more diversified channels (place). Various channels such as short video e-commerce, live e-commerce and xiaohongshu grass planting have risen. Hongxing erkemu is mainly engaged in production. If it wants to expand its marketing in the future, it also needs to explore more diversified sales channels. Now hongxingerke's popularity and adaptation to the live broadcasting mode have opened a window of opportunity for hongxingerke to transform into online channels and live broadcasting with goods.

The new billion found that Hongxing Erke mainly focuses on the traditional Taobao, pinduoduo, Jingdong and other large e-commerce platforms, and lacks the layout of new social media such as xiaohongshu, shuoyin and Kuaishou.

For example, in express, hongxingerke only released the first content on March 13, 2021. After that, the content was released in the rhythm of 1-2 days; It was only after the popularity that the company accelerated the pace of short video release. On July 23 and 24, the company sent 7 short videos of product introduction. At the same time, Rongjie found that hongxingerke's shuoyin was founded in 2019; But until this time, only four short videos were sent, and the content was still traditional propaganda content, which was not consistent with the attributes of the shaking tone platform; It was not until this time that Hongxing Erke started the live broadcast with goods.

Finally, promotion. Publicity should include a series of marketing behaviors, such as brand publicity (advertising), public relations, promotion, etc., to establish a sound marketing system. Rongjie believes that in the face of the current critical inflection point, Hongxing Erke should immediately establish a relatively complete brand marketing team to reorganize and improve the company's brand, publicity strategy and corporate culture.

On the whole, sheen, which has been suddenly popular recently and has a valuation of nearly 300 billion yuan, may be a good example for hongxingerke. According to public information, sheen2020's revenue was nearly 10 billion US dollars. At present, the e-round financing has been completed, behind which are Sequoia Capital, global Tiger Fund, IDG capital and other institutions. Some venture capital institutions called sheen "China's most mysterious $10 billion company.".

With its strong supply chain integration capability, Sheen has further upgraded the "fast fashion" and "direct consumer" modes, creating the so-called "real-time retail mode". It takes only a week for a garment to go from a Chinese production line to a foreign buyer. Even sheen can shorten the time from design to production of a garment to at least 3 days.

In terms of marketing, in addition to the advantages of China's supply chain, sheen also makes the most of the global social media development trend. In 2011, sheen began to use online celebrities to promote and drain sites on social networking sites; For a while, most of the traffic in the station came from the recommendation of Internet Celebrities.

At present, for hongxingerke, which has already been "out of stock", the most important thing is to mobilize supply chain resources, step up production and replenishment, speed up the layout of new social media such as xiaohongshu, ensure fast delivery and retain new and old users.

Otherwise, this once-in-a-lifetime enterprise "turning point" opportunity will really be fleeting. Hongxing Erke will also miss the best opportunity for "Nirvana rebirth" in recent years and even lead the brand of new domestic products.