China's Biggest Wig Company In Crisis

- Nov 20, 2018 -

Rebecca, known as "the first in the wig", had a rather bumpy month.

On the morning of June 12, Rebecca, whose share price had been stable, suddenly fell to the limit. 


Along with the stock's plunge, there was news of a "stock fire" on BBS. Although that afternoon Rebecca 


quickly came out to clarify, but did not prevent the second day down stop. On June 13, the company 


suspended trading on the grounds that it was planning a non-public offering. Rebecca resumed trading on 


June 29, but fell by the daily limit for two consecutive trading days. Although Rebecca's decline has since 


rebounded, its total market value is nearly halved since June 11.

"The trigger for the collapse of Rebecca's stock was a rumor in the stock exchange on June 12. 


However, the root cause is the lack of investor confidence in the enterprise, and the development space of 


the company's main business is also restricted by the bottleneck of the limited market space in the 


industry. Famous economist song qing - hui analyses to times weekly reporter.

In fact, Rebecca's growth has all but ground to a halt in recent years, driven by the rise of e-


commerce and a slowing economy in major global markets. As a leading enterprise with the largest production 


scale in the global hair products industry, where will Rebecca go? In response to this, the reporter called 


Rebecca and went to interview outline, as of press release did not receive a reply.

As to the reason for the decline, people from the securities department of Rebecca told the media 


that the recent decline in the company's share price was related to trust.

The reporter noted that as of the first quarter of 2018, seven of Rebecca's top 10 outstanding 


stock holders were trust plans, divided into five trust companies.

Mr Song told reporters that the trust's concentrated shareholding created uncertainty risks for the 


company's shares. "At present, it is an inevitable trend for trust institutions to clean up their 


allocation and leverage ratio, and the Banks are also cleaning up their outsourcing business, resulting in 


the suppression of trust fund sources. Investors should be careful to avoid trust stocks with a large 


number of related stocks, and for the time being mainly wait-and-see. "Mr Song said.

According to public information, the main business of Rebecca is the development, production and 


sales of hair products series, including human hair wigs, synthetic wigs and so on. According to the 


company's official website, "the company's six series of thousands of products, including process hair, 


women's wig, chemical fiber hair, learning head, men's hair lump, fiber hair, sell well in more than 40 


countries in North America, Western Europe, Asia and Africa and more than 100 large and medium-sized cities 


in China".

There is a story about Rebecca's rise. More than 30 years ago, zheng youquan, a farmer in xuchang, 


henan province, started his business by buying wigs from street to street. Therefore, zheng youquan is 


known as the great wig king.

Wang fanrong, secretary general of the China chamber of commerce for the import and export of light 


industrial arts and crafts, who is familiar with zheng youquan, told reporters that zheng's success depends 


on two points. Second, it has a strong brand awareness, the company from the start to build their own 


brand. "The fact that Rebecca has become the number one in the country and the world has something to do 


with his leadership as chairman." "Wang said.

Benefiting from the strong demand in foreign markets, Rebecca has been growing rapidly in the 


international market since 1993. From 2003 to 2008, the rapid growth period of Rebecca was from about 500 


million yuan to nearly 2 billion yuan.

In addition, Rebecca has also targeted the domestic wig market in recent years. From 2008, Rebecca 


began to open stores in China. Among them, high-end brand Rebecca and Sleek adopted the mode of self-


operation in first-tier cities and open alliance in second and third-tier cities. Since then, Rebecca has 


been expanding all the way. According to the annual report, by the end of 2017, Rebecca had 220 stores in 


large and medium-sized cities in China, including Beijing, Shanghai, guangzhou and shenzhen, 26 more than 


the same period last year. Among them, there are 186 "Rebecca" brand terminal stores. There are 34 "Sleek" 


brand terminal stores.

In the 2016 annual report, Rebecca disclosed the business plan target for 2017, which was set to be 


less than 400 million yuan during the period, but the actual cost of Rebecca in 2017 reached 456 million 


yuan, 14% higher than the expected. Financial expenses rose 39.65 percent from a year earlier, while sales 


expenses rose 8 percent from a year earlier. With the development of the domestic market and the increase 


of stores, the rent and labor costs have been raised directly, and the expenses have reached a new high.

Wang believes that in order to promote the brand, Rebecca's large-scale expansion in the past few 


years has brought the problem of "turning around the ship in a big way".



Perhaps aware of the problem, 


Rebecca has been undergoing transformation and adjustment in recent years.



Wang told reporters that in 


recent years, Rebecca has slowed down store expansion and integrated its stores. In addition, Rebecca also 


increased the layout of the global market and the investment in e-commerce.

Currently, Rebecca has established sales subsidiaries in several countries in Africa, Europe and 


South America, and has established production bases in Nigeria, Ghana and Cambodia.

Given the importance of the north American market, Rebecca set up a sales subsidiary there. On July 


4, Rebecca issued a notice saying that she had received the enterprise overseas investment certificate 


issued by henan provincial department of commerce, which was the approval of the application for the 


company to invest 1.238 billion yuan (20 million U.S. dollars) to set up a wholly-owned subsidiary in the 


evening announcement of May 23.

According to official accounts, Rebecca's e-commerce has entered a rapid development period, and 


the completed domestic e-commerce platforms mainly include the flagship store of Tmall Rebecca, Sleek 


flagship store, and the store of jd.com Rebecca and micro-mall. The international e-commerce platform 


mainly includes Sleek store, Rebecca store, NOBLE store, self-built shopping mall and amazon store.

But the main challenge facing Rebecca is the industry's bottleneck, several industry insiders told 


reporters.



One industry consensus is that the domestic production industry has long been highly dependent on 


foreign markets. According to the latest statistics from the state customs, China's exports of manufactured 


goods totaled $710 million in the first quarter of 2018, up 4.1 percent year-on-year. North America, the 


world's largest consumer market for manufactured goods, accounted for 44.28 percent of the world's exports, 


with exports of $310 million, up 16.01 percent year-on-year. The us, as the main market in North America, 


accounts for 43.76 percent of exports, accounting for nearly half of the global market.



Wang believes that hair products are popular in foreign countries because wigs are seen by 


consumers in North America, Japan and South Korea as a kind of fashion luxury related to daily wear and 


fashion. At home, the conventional wisdom is that wearing a wig is associated with low hair volumes or 


baldness and is not decent enough. However, due to economic and market reasons, the north American market 


has a large inventory, which leads to the sluggish domestic wig industry in recent years.

Now, though, things may be looking up. A number of experts interviewed told reporters that the 


domestic market demand for hair products is gradually becoming strong.



In wang's opinion, with the change of 


people's concept, the domestic wig market has a huge prospect.



"As the world's largest consumer of luxury 


goods, beauty products and electronic products, China's consumption of hair products is expected to reach 


over 30 billion in the next 10 years, and the domestic wig market has a huge space for development, 


presenting a new pattern." Song told reporters.

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