Red children Founder: Red children eventually died on the CEO’s dream test
Source: 21 Century Network – ’21st Century Business Review,’ a ‘child’, was all praise of ‘Excellence’, just a few years, actually back into an uncertain future of ‘backward students’ that eight years old when he was abandoned. It is the ‘red children.’ Beginning in 2004, with DM (catalog sales) outlets baby products business, its fame, later transition to the Internet, the product line horizontal expansion to cosmetics, food and other household goods, but from difficult. September 25, held a news conference in Nanjing Suning headquarters, announced Air Jordan Women $ 66 million acquisition of a wholly-owned red children. On the day of the conference, a noteworthy detail is red children’s VC shareholders no one attended. It had been a total of four rounds of private financing totaling $ 80 million, Northern Light Venture Capital, NEA and Triumph Ventures is red children’s main investor, holds a total of more than 60% stake. Collective absence may indicate that, for them, the price of $ 66 million, is not a worthy reward pride. In fact, that two months ago, Suning will acquire Redbaby rumors have been flying. At that time, Li will continue to receive calls and text messages friends, congratulating him on his next will be a good income. Li Yang is one of the founders of the Red children. By the end of 2008, he left midway red children, and a small amount of cash in the equity of the price of several hundred million yuan. Until now, Li Yang ‘is still one of the largest individual shareholder red children.’ But he was not informed, own the remaining equity in the red child can bring him much profit. It is clear that even those VC has ‘liquidation preference’, it could not justify all the costs. ‘My most depressing is that, if the business is in my hands do fail, I put VC money squandered, and finally businesses sold, I can not get a penny, I willingly. But I left time, this business has done quite cattle, basically do the Chinese first in the retail industry, you want to do business is very hard, but you want to do business more difficult to defeat (and now someone did). ‘ In mid-October, in the interview with our correspondents, the phone’s Li Yang, tone of some excitement. Li Yang’s hard to understand ‘unwilling.’ In 2004, the red children to ‘directory + network’ approach, began to get involved in baby products retail, Liu Qiang East has just registered the ‘Jingdong Mall’ domain name, Dangdang also only get a second round of financing. 2008 Li Yang left, red kids still Jingdong, Dangdang revenue similar size were 1 billion, 1.32 billion and 7.6 billion, once outsiders called vertical e-commerce market, ‘Troika.’ However, today’s red children and Jingdong, Dangdang, has obviously not in the same order of magnitude of. According to Suning’s announcement, in 2012, revenue is expected to red children will be from 1 to 1.05 billion yuan, the latter two in 2011 revenue, had respectively 30.9 billion and 36 billion. And then the same baby products started to catalog direct marketing and direct competition with the red child had baby room, in July 2012 has submitted an application in the Shenzhen Stock Exchange listing. Counterparts, suppliers, and Li Yang’s eyes, Suning to $ 66 million acquisition of red children ‘is a good price,’ and even some people think Suning ‘overpaid.’ ‘We feel sorry for the red child, have been two or three years ago.’ Red child once a milk supplier Luo enlightenment (a pseudonym) of the correspondents said. He recalled the 2008 red child before, a former employee of ‘flowers with brocade, fire cooking oil’ to describe its spectacular, but let her surprise, and shortly ‘like building call assassination assassination dumping’ the. Behind the fate of such ups and downs, red children experienced what? In the end is who killed the former electricity supplier hopefuls? Rise in 2003, Wang Shuang in Beijing opened a retail store baby products, soon to achieve profitability. This allows Wang Shuang extra surprises. She began to share with her husband Li Yang from doing ‘catalog sales’ idea, which is of military origin, it was being run an advertising agency. 2004 Spring Festival, Li completed writing ‘directory outlets baby products’ market research and business plan, in March, he turned off his own advertising company, and three friends set up a red child together . Li Yang was first recruited to join this venture is the Tao, they each invested 600,000 yuan to red children, then they introduced two other partners Guo Tao and Xu Peixin, duo invested 400,000 yuan, so the four of them in Red child’s shareholding ratio of 3: 3: 2: 2. Initially, only Li Yang and Yang Tao involved in the company’s operations, and Guo Xu Peixin, more acting as a ‘financial investment’ role. Let them overjoyed that red child against a dazzling array of product manuals, quickly catapulted to star baby market, the first year to achieve revenues of 6 million yuan, the second year of 40 million yuan, 120 million yuan in the third year the fourth year 400 million yuan. We can say that red children caught up DM brilliant final in the Chinese market. At that time, although Dangdang, Bertelsmann Online, Joyo and eBay, has given way to ‘electronic commerce’ has become a buzzword, but through the Internet to buy goods, the vast majority of Chinese consumers, is still a strange way . Because of this, the future of e-commerce was almost full replacement of catalog sales, when still has a huge market. At that time, also by DM Direct, McCaw, baby room, well-off family and so in rapidly growing. ‘(Baby products) demand itself is there, DM is non-store sales than retail cost and price advantage, the key is we have to pass through the DM information to more people, and we can delivery, the more products to the more complete. ‘founder and managing baby room Shiqiong, this analysis of the rapid rise of the year maternal DM. Today, 施琼 some fortunate that there was no baby room to continue to do DM, or certainly do, but the red child, ‘First, because the other side has done DM really high level; and second, the red child initial management team is very reasonable.’ Red kids really created a plurality of first. It is the first to get the field of maternal and child B2C venture capital investment by the end of 2005, red kids to sell a 30% stake, get the Northern Lights and $ NEA300 million investment. It is also the first multi-city expansion and maternal self B2C logistics, in 2008, the red child already has 16 branches in the country, distribution of the crew of nearly 2,000 people. That year, the red children over 10 billion in revenue for the first time, a loss of no more than 3%, of which 700 million yuan on revenue of maternal and child category, profit 10 million yuan, cosmetics, home, health care and 3C business, then a slight loss . At that time, the red child is still a successful start-up companies. Conflict by the end of October 2008, Li and Wang Shuang couple went to Tibet – they thought it was holy cleansing the soul. A friend with them, said they were ‘very depressed, not open-minded.’ This is not difficult to understand. In that shortly before the October 6, red kids just experienced a ‘coup’, the result is, Li couple were asked to leave immediately founded his own and red children. It is the board’s decision. The other conflict, is another founder’s Xu Peixin. Operators involved in his real red child was in September 2006. In 2006, red children completed the second round of financing, northern lights and the NEA has invested $ 3 million, its stake rose from 30% to 50%. Loss of control of Li Yang and Yang Tao, feel at a disadvantage in dealing with the capital, so they invited Xu Peixin as the company’s CEO, responsible for communication with investors and the outside world, Li and Yang Tao is an executive general manager, responsible for different businesses. Prior to this, Xu Peixin is fund investors, ‘the idea of a lot of’ outside world the impression he left. After adding red children, Xu Peixin has been inspired karaoke song’s, wanted to develop a new shopping interface, the LCD screen free installation to the consumer’s home, not only for consumers to find a product in this interface, you can also play ad Xu is also the company established for this research group. But the project was soon halted the Board. ‘I heard this thing, do not want to talk to talk.’ Li Yang recalled, at meetings of the company, Xu Peixin ideas often hit him. After Xu Peixin as CEO, Li Yang differences with the company’s development strategy, increasingly prominent. The conflict focused on four aspects: First, Li insisted stronger, every expansion a key category, he considered is whether money, and he was especially fine mother insisted to do business, he also someone foundry OEM Red children’s own products to improve margins. But Xu Peixin do first big insisted. Nike Shoes 2008, red kids working with the banks, the introduction of installment mall, bank credit card holders in the shopping mall, according to credit card bills can be installments, red kids hoping to cut 3C. ‘This is Xu Jinglei tube business, a month can have a billion in sales, but are selling computers, mobile phones product categories, is a loss of business, I do not want to on.’ Li Yang bluntly. Second, Xu Peixin has proposed ‘four carriages’ strategy, namely red children to diversified development, in addition to retail, will enter the logistics, media, finance three major areas, but Li Yang insisted only retail. Third, Xu Peixin insisted on SAP information system, the transformation of IT companies, which, Li does not agree. Fourth, Li insisted entrepreneurial culture, Wang Xu Zexi implementation of professional managers. Differences, resulting in a fierce confrontation. Although Xu Peixin expensive for the CEO, but Li Yang also strong. That time, his own department in charge of the red child health, maternal and child three divisions and 16 branch offices nationwide, his wife Wang Shuang baby is responsible for the procurement division. In other words, Li couple in control of 80 percent of the business red children. Therefore, Li, Xu duo was ‘who can not convince anyone, the relationship became quite stiff.’ October 4, 2008, to find Li Yang Xu Peixin conversation, general content, he and his wife Wang Shuang must have a person to leave, but this time the conversation ultimately to no avail. Two days later, on VC informed the Board on behalf of Li Yang left that scene. ‘This is a 2: Select 1.’ Red children investors, Feng Deng Northern Light Venture Partners, Founder and Managing Director explained that, at that time, the other founder of the company Tao, also chose to support Xu Peixin. To ‘let Li Yang to leave’ decision, they also sought the views of other senior executives, ‘after all, it is a huge change.’ Select team infighting occurs at the start of the end of 2008, the red child has reached a crossroads. At that time, the vast majority of its revenue from red children DM, but this model is being violent impact of the Internet. Its competitors baby room, have begun to shift to the line of business stores, and was the largest catalog sales giant McCaw, also trying to transition to the Internet. Red children, you must make a choice. A red child’s VC shareholder opinion, red children transition to the Internet is imperative. And this judgment, but also ultimately influence the choice between his ‘pay more attention to efficiency Li Yang’ and ‘more attention to the size of Xu Peixin’ made. ‘In the retail-oriented e-commerce business, the most important thing is the size, I do not mind not profitable company in the short term.’ He said, ‘since irreconcilable positions of the parties, VC somehow form a state, choose one now.’ Difficult to judge The choice of right and wrong. Allegedly, at that time, that Li Yang, Wang Shuang leaving red children’s news, it is Beijing’s biggest competitor, the internal ‘rejoicing’ fortunate ‘From a worry-free.’ For those suppliers long-term cooperation with the Red children, which is obviously not good news. Shortly after the establishment of the red children, Luo enlightenment to become its suppliers. In 2008, his delivery volume has a significant share in the red child, and he and Li Yang, Wang Shuang good personal relationships. Before, red kids even if there is another big problem, as long as Li Yang, Wang Shuang say something, they will use some special methods to ensure payment Luo. But after the two left, ‘it is completely male-male to do the standard.’ Luo inspiration that changes in the red after children team, including his many vendors have the psychological gap. ‘In particular, a large supplier, if the fit is good, for example, to provide more marketing resources, can improve the efficiency of its inventory management; Chinese milk powder prices every year, if I let it store goods in advance, its gross profit great help, ‘has friendship’ and ‘male-male’ is completely different result, timely delivery and supply assurance, each will have a different aspect. ‘ After 2010, Luo has stopped the supply of inspired red children. After Li Yang left, to 2009, the red child relationship with suppliers, already in ‘the most intense period of history.’ At that time, the red child, a branch head in the letter addressed to the board mentioned, was in the country, there are still a large number of suppliers and red children no supply contract signed in 2009, ‘We unilaterally extended the account of, in the short term, we can get a good cash flow contribution, but I personally do not think this is a special matter of pride. ‘ Children of older employees in red appears, Li couple’s departure, is beginning to lose morale. Wang Hongjun (a pseudonym) from 2004 followed Li Yang business together, but in June 2010 he was gone. ‘In the past they have been followed (Li Yang, Wang Shuang) dry, we add a year or two without pay, communicate with them, we’re just motivated, but they’ll leave feeling better doing is useless.’ In early 2011, he had acquiesced in the expulsion of Li Yang Xu Peixin red child executive general manager Yang Tao, Yi Yi ‘long vacation’ way to leave the red child, the four founders, only one person Xu Peixin. Detour Li Yang’s departure, gave ample opportunity Xu Peixin. Under his leadership, the red child to accelerate expansion in the retail, media, logistics and finance four major areas, and within the company for bold reform. But today, looking back, perhaps because red children away these detours, only when the tide of the rapid Nike Air Max rise of the electricity supplier, delaying the aircraft. In 2007, the red child’s red product media launched a high-end magazine ‘insider social shopping’, Xu Peixin any of the producers, this is a magazine devoted to high quality of life in China today high society, the red children’s investors, including Deng Feng, have appeared in the magazine’s cover story. Red children founded this magazine ultimate goal is to enter the luxury goods sector. But after the loss of tens of millions, this magazine has been stripped to a company Xu Peixin own name. In 2009, the red children will own the logistics department independent, set up macros goods logistics, not only to undertake a red child’s orders, but also to undertake a third-party business, the goal is to build a capable and SF, home delivery, etc. to compete against the large logistics companies. But in 2011, the red child and the abolition of the country’s logistics company, will this business back into the house. Red children logistics department, said a former employee, macros goods logistics but also to a loss of a lot of red children. The so-called ‘financial’, refers to the red children in cooperation with the bank ‘credit card installment mall.’ Xu Peixin hoping to develop a new user, cut 3C business. But the result, this business is also at a loss to end, by the end of 2010, red kids mall and directory services will be incorporated into the site along with unified management. After a series of unsuccessful attempts, red children eventually returned to the right path: to refocus retail, and really force the Internet. But this time, it is already the third quarter of 2010. In February 2011, a significant reduction in red children Guangzhou, Shenzhen, Dalian and Xi’an catalog business; the same period, the red children’s helter-skelter purchase online mall formally launched, beginning the era of the two legs in parallel on the red child Online: Red child Website Main baby products, Bean purchased the positioning in cosmetics, food, health products. For online retail business, red children’s positioning is based on women to the Internet as the main channel, supplemented by call center, mobile client and the print media, ‘three-dimensional one-stop shopping platform.’ Not long ago, Xu Peixin said publicly, red children spent two years ‘from the list entirely turn to the Internet’, to June 2012, the red child Internet sales accounted for nearly 80% of total sales. But ‘the Internet up piece, cut a piece of the catalog,’ the shift, total revenues remained stagnant red children. When opponents in 2010 third quarter, after two years of wasted, a popular children really force the Internet, this arena has been greatly different. July 2010, the introduction of maternal and child Jingdong channel, then November sales break 10 million yuan, in March 2012, it has become China’s B2C ‘baby’s first month sales of over a hundred million business’ of the enterprise. Luo inspiration now is Jingdong supplier, he expects 2012 revenue is expected to channel Jingdong mother more than 20 billion yuan. November 2011, Dangdang CEO Li Guoqing said, maternal and child products Dangdang growth rate of over 300%, on sales of 30 million yuan, has exceeded the red children. At the same time, Lynx, maternal and child services on the 1st store is growing rapidly. ‘This means that users transfer to these platforms, including red children’s users.’ Luo enlightenment thought. But Redbaby biggest rival, or of its own. ‘(After 2008) Redbaby slow growth is a very important reason is that e-commerce comes, catalog been Air Jordan 5 Retro a huge hit, the red children to meet changes in the market, but the problem is that there is no DNA team of e-commerce.’ Deng Feng analysts say. Back in 2008, Xu Peixin on the request of the Board to give him two years in the red child inside IT transformation and corporate culture recycling. In his view, ‘Every company through a similar phase, just to see what time they choose it, if sales go up when you scale up to do after this, the risk factor is not the same.’ To achieve the transition to electricity suppliers, Xu Peixin it around to find people willing hired professional managers, Xu Peixin in this transformation is called ‘occupation process’, the red children, there have been dozens of executives to be replaced. But many people, including Li Yang, including the question, at that stage of the red children, the need to hire professional managers million a year? The process, hire people appropriate? In the aforementioned opinion former employees Wang Hongjun, professional managers Running between people and older employees, so that red children pay the price, he said, for example, has introduced a red child, director South Logistics Management, bringing a group of men he put in place, but when the director of the departure of his men also leave soon. ‘And, generally will be the new executive office rules and methods of adjustment, if for some reason he left, then people have to readjust.’ Wang Hongjun that ‘the damage which the company is relatively large . ‘As for the IT transformation, Xu Peixin then explained the whole story: In 2008, red kids have to calculate exactly how financial accounts, desperation, please accounting firm Deloitte \u0026 Touche to audit, but in the end, he was informed Deloitte’ Xu, do not review, and your IT system has a problem. ‘ IT transformation, has been VC support. Deng Feng believes that the rapid development of red children problems accumulated before 2008, and to the need to change the time, ‘enterprises should be bigger, some basic things you can do not build it?’ However, whether the child must be on red costing tens of millions of SAP system? After all, it is the success rate of only 35 percent in China. Li Yang in office, has always been strongly opposed to the SAP, Yang Tao has commented, ‘This thing (SAP) was very good, the electricity supplier with caution.’ But in Xu Peixin’s advocate, red kids finally introduced the SAP system. He hoped that ‘the establishment of a process that can carry greater development of the company, completion of the company’s Air Jordan Women professional and legal transition.’ However, SAP system Redbaby heavily in the introduction, did not have the opportunity to fulfill their potential. Although 2008 sales have exceeded 10 billion yuan, but after a few years, the red child’s growth is almost stagnant from 2010 to 2012, revenue figures were disclosed red children 15 billion (unchanged from 2009), 1 billion -15 billion, 1 billion -10.5 billion. ‘Xu represents an investment in human culture, thinking too much jumping, when our middle party that red child finally died on the CEO’s dream experiment.’ Li Yang said. And in the re-set red child ‘to the rapid decline of the smash hit’ process, Deng Feng believes, ‘The biggest problem is the problem of red children perform, such as recruit people get strokes do not recruit, or recruit a person to come back but people are not, and you passed the time. ‘ In the aforementioned VC shareholder opinion, the need for the transition to the Internet from DM red children, taken ‘from 0-1’ of that step, and in a short time accumulate Air Jordan 5 Retro their strength, is the cardinal during this period, take some detours are inevitable. ‘But you have to ask me, red kids all the way up, in terms of recruiting, can recruit better, in terms of organization you work, if you can do better? My answer is YES.’ He said. The second half of 2011, Chen worked for a non-health care products company began selling products in the red child, but it also gives Jingdong, Dangdang and other suppliers. The difference is, the red child monthly sales hovering between a few thousand to a million, and Jingdong, Dangdang monthly scale up to 30 million. Chen non-opinion, Redbaby although positioned as B2F (Family), but it was consumer demand for mining products in addition to mother and child is not enough, and, ‘I personally think, red kids marketing well enough, no support to those things it does. For example, the introduction of a new category every Jingdong, has a variety of marketing, including gimmicks speculation, let people know not just sell 3C Jingdong, but so many people think Jingdong something cheap, but Not necessarily, but it gives the impression that this. ‘ Abandoned since 2010, Luo inspired stopped its cooperation with the red child, but began to Jingdong, the 1st shop platform supplier, his reason is very simple, ‘the growth of more than ten percent of a few percent growth hundred, and standing still even between retrogression, which one would you choose? ‘or even, in the minds of competitors, the red child has begun to be forgotten. A competitor said: ‘we do not pay attention to it, do not play with it, love it where to go where to go.’ Stagnant growth, while VC this family-owned start-up companies, the more deadly it The financial situation is deteriorating. Data provided is Li Yang, the 2008 red child one billion yuan in revenue, a loss of 10 million yuan; but from 2009 to 2011, it does not increase the size, but losses reached 80 million yuan, 100 million yuan and 120 million yuan. In the past few years, red children completed a total of four rounds of financing totaling only $ 80 million. Compared to the amount of financing Jingdong, where passengers, which is almost a negligible number. According to publicly available data, the accumulated amount of financing Jingdong has reached $ 1.5 billion, where the customer has already attract $ 422 million. After the Spring Festival in 2010, there had been a hint of red children again won the ‘blood’ of hope. At the time, Tiger Fund to domestic-appliance business companies out investment letter of intent, including red children, Jingdong and all passengers. But after due diligence, Tiger chose another two. ‘VC investment is rapid growth.’ Li Yang believes, and then the red child, have stagnated or even began to decline. After Xu Peixin has been seeking new financing, but this is not easy. Before Suning announced over the red child, there are rumors that ‘on the red child account has no money’, so they conducted a round of ‘bloodshed financing’, only a few million dollars valuation. Deng Feng able to confirm that the red child before being introduced into a new round of mergers and acquisitions really private, Northern Light, NEA, Triumph Ventures and Xu Peixin individuals are involved, in addition to a new investor, but little change in the equity ratio . In investment terms in this round of financing, ‘also relates, if in the future how cents to sell.’ Sell red children, perhaps already a consensus. The aforementioned red child VC shareholders that China’s e-commerce is now ‘completely invisible prospects, and requires a lot of money to raise, we must do a fairly large scale, it may be the so-called economies of scale.’ From this point of judgment, they believe, red kids with a big merger, is a better choice. Deng Feng also Nike Lunar Haze on the publication admits: ‘At present the entire electricity supplier burn very powerful, red child has a $ 80 million financing, if and then further up to 80 million to fix up the number of the key is not to burn the money?? know what will happen, I think the red child can not do that. ‘quite dramatically, so that children and Suning become attached to the red, actually Xu Peixin even behind, red children’ white elephant ‘of the SAP system. July 2012, Suning Tesco announced to build an open platform, there was a find red children to talk about cooperation, one point is fit, both with the SAP system. Of course, the two sides finally business cooperation nowhere, but opens the door to equity cooperation. After the red child was acquired Suning, Xu Peixin said, ‘We both still very affinity’, ‘we go on SAP Shihai Suning learned.’