Preview of US Stock IPOs | Is profit growth dependent on layoffs? The sustainability of selected global family performance growth is questionable

In recent years, the development of e-commerce platforms has entered a period of intense change where new e-commerce and traditional e-commerce are in full confrontation.

Against the backdrop of changes in the overall traffic pattern, the development of the entire e-commerce market, and changes in consumer backgrounds, the previously relatively stable e-commerce landscape has been impacted. With the increasing antagonism between new and traditional e-commerce forces, a comprehensive battle over traffic, supply, and delivery has been launched among platforms with different foundations and operating models. In order to win this battle, many new platforms have gradually emerged in the capital market to better attract market attention.

Recently, the innovative e-commerce platform QQJ INC. (referred to as "Global Family Selection") updated its prospectus with the U.S. Securities and Exchange Commission (SEC) and plans to list on the Nasdaq in the United States with the stock code "QQJ".

According to the Intelligence Finance APP, Global Family Selection was established in 2021 as an e-commerce platform headquartered in Hangzhou, China. It aims to create an ecosystem integrating business, shopping, entertainment, and social media for people aged 40 and above. The company's platform adopts the S2B2C model, selecting suppliers through a strict screening process to provide a variety of products.

As a latecomer to the e-commerce industry, what are the highlights worth paying attention to for Global Family Selection's upcoming U.S. listing?

Rapid Expansion in the Industry Market

Let's first look at the industry market. Driven by the expansion of the retail market and the continuous increase in online penetration rate, the Chinese e-commerce industry has experienced tremendous growth. According to the Ministry of Commerce's "China E-commerce Report," in 2022, China's national e-commerce transaction volume was 40.28 trillion yuan, with a year-on-year growth rate of 3.9%. It is estimated that by 2025, China's e-commerce transaction volume will reach 44.49 trillion yuan.

It is worth mentioning that in recent years, China has continuously increased its policy support for the e-commerce industry and accordingly formulated multiple strategic plans and industrial policies. Among them, in the joint release of the "14th Five-Year Plan" for e-commerce development by the Ministry of Commerce, the Cyberspace Administration of China, and the National Development and Reform Commission, it is planned that by 2025, China's e-commerce transaction volume will reach 46 trillion yuan, the national online retail sales will reach 17 trillion yuan, the industrial e-commerce penetration rate will reach 73%, and cross-border e-commerce transaction volume will reach 2.5 trillion yuan.

As an emerging model of e-commerce, member social e-commerce connects suppliers and consumers through the S2B2C model based on social networks, enabling product manufacturing, marketing, and procurement. The platform connects product suppliers (S) and provides a range of services to small B-side store owners, such as supply chain, logistics, IT systems, training, and after-sales service, and then promotes C-end product sales and consumer retention Analysis indicates that in the increasingly fierce competition in the retail industry, the soaring customer acquisition costs and channel marketing costs have made it extremely difficult for small and medium-sized enterprises to survive. The emergence of social e-commerce, especially membership-based social e-commerce, effectively solves the problem of difficult customer acquisition and high costs by converting traditional channels and marketing expenses into member promotion rewards. Members are not only consumers, but also brand advocates and sales channels, greatly reducing the intermediate costs of traditional retail and improving efficiency.

According to data from the China Service Outsourcing Research Center and the Qianzan Industrial Research Institute, the scale of China's membership social e-commerce industry has achieved rapid growth in the past few years, soaring from only 930 million yuan in 2015 to 626.85 billion yuan in 2022, with a compound annual growth rate of 153.57%. In the future, this market is expected to continue expanding.

Stable Net Profit Growth, Bright Prospects?

Against the backdrop of rapid industry growth, the performance of Global Home Selection appears to be quite volatile.

According to the prospectus data, for the 2022 fiscal year ending on September 30 and the 2023 fiscal year, the company achieved revenues of $10.4 million and $12.8 million respectively, representing a year-on-year decline of 18.8%. The company explained that the revenue decline was mainly due to significant delays in the supply chain from December 2022 to February 2023 as epidemic prevention and control measures were lifted, leading to a reduction in online purchase orders and subsequently affecting the company's performance.

With the elimination of the impact of the epidemic, the company's revenue has returned to an upward trajectory. For the first half of the 2023 fiscal year ending on March 31 and the first half of the 2024 fiscal year, the company achieved revenues of $3.795 million and $7.912 million respectively, representing a staggering 109% year-on-year growth.

Financial news app Zhitong Finance noted that in the first half of the 2024 fiscal year, Global Home Selection provided consumers with products from third-party suppliers in 16 major categories, with main sales categories including clothing, shoes and bags, maternity and baby products, food and beverages, furniture and home goods, health and nutritional supplements, books, and office supplies, among others, totaling 31,400 SKUs.

In the first half of the 2024 fiscal year, the company's GMV was $22.7 million. The mobile platform's total order volume was approximately 600,000 items, with an average daily order volume of around 3,180 items. The company collaborated with 1,030 suppliers, reaching 777,000 consumers across 31 provinces including Shanghai, Beijing, Zhejiang, Hubei, and Fujian. Among them, there were approximately 431,000 B-end consumers and 346,000 C-end consumers.

Further breakdown reveals that the new health market, medical care and footwear, clothing, and bags contributed to over 70% of the company's GMV during the period. Specifically, the GMV for footwear, clothing, and bags was $3.8 million, medical care was $4.2 million, and the new health market was $8.1 million.

Despite slight revenue fluctuations, Global Home Selection's profit performance continues to develop positively. In the 2022 and 2023 fiscal years, the company achieved net profits of $1.1 million and $2.1 million respectively, with a year-on-year growth rate of 90.9% By the first half of the 2024 fiscal year, this figure had reached $4.004 million, surpassing the total net profit of the previous two fiscal years.

The Wise Finance APP noted that since the first half of the 2024 fiscal year, the company's operating expenses have been significantly reduced, mainly due to a substantial decrease in sales, customer service, and research and development personnel. Operating expenses during the period decreased from $3.3766 million in the same period last year to $2.5766 million, while research and development expenses decreased from $1.3 million to $0.7 million. This phenomenon also occurred in the 2023 fiscal year.

However, the reduction in operating expenses may not necessarily be a good thing for latecomers in the global home selection industry. In the view of the Wise Finance APP, the competition in the member social e-commerce market is intense, rapidly evolving, decentralized, and subject to technological changes, demand changes, frequent introduction of new competitors, as well as the impact of new products and services. Compared to some strong competitors, the competitive advantage of Global Home Selection is not outstanding. Like most unknown platforms in the market, its main products and services are relatively homogeneous, lacking core competitiveness, and therefore vulnerable to price wars to attract users.

In the short term, reducing operating costs may bring certain economic benefits to Global Home Selection. However, in the long run, if this cost reduction method harms the interests and satisfaction of customers, it will have a negative impact on the company's brand image and market share, ultimately leading to a decline in long-term benefits. It is worth mentioning that the company has stated that in the face of intense industry competition, it focuses on building brand awareness, diversifying products, and differentiating services to better meet the unique needs of customers. However, with the reduction in operating costs, can the above vision be successfully realized? This is a question that Global Home Selection needs to consider