In recent years, with the online shopping boom caused by the epidemic, the cross-border e-commerce industry has become the object sought after by capital, statistics show that in 2020, cross-border e-commerce financing 62 cases, and further increase to 95 cases in 2021. By 2022, the winds of capital had changed, with a total of just 24 financings in the first half of this year.

Under the influence of Amazon's title event, brands do not go through third-party platforms or intermediate channels such as wholesale and retail, and the DTC (Direct to Consumer) model of self-built channels to face consumers is undoubtedly the most promising. After the independent station is built, the brand can directly contact consumers, and the operation and sales chain is completely controlled by the brand, forming a complete closed-loop link.

However, no matter how good the business model is, it is also difficult to match the ebb and flow of the industry cycle, the data of Shopify, an independent website construction service platform, shows that in the first half of 2022, Shopify added 71,000 merchants, compared with 680,000 in 2020 and 314,000 in 2021.

Capital ebb tide, the number of new businesses sharply, the entire industry seems to enter a state of great waves. In this context, based on China's strong clothing production capacity and complete supply chain system, it still ran out of such giants as SHEIN. In the subdivided field of children's clothing, there are also unicorns such as PatPat, which received two rounds of financing a month, with a total of $670 million.

In fact, in 2021, among the 58 major financing events in which the cumulative amount of financing for Chinese DTC overseas brands exceeded $1 billion, PatPat became the project with the leading amount of financing. Why does the increasingly picky capital "let go" of the children's clothing track?

01

Kids' wear track gives birth to unicorn

From the macro level, in 2021 alone, the global apparel e-commerce revenue has reached 596.52 billion US dollars. According to Statista's statistics, the revenue of children's clothing in 2021 will be 237.975 billion US dollars, and in the next five years, children's clothing will grow at a compound annual growth rate of more than 4%.

Among all regional markets, the US children's wear market will reach $49.566 billion in revenue in 2021, which is currently the largest share of the children's wear market.

A big market often means greater opportunities and accompanying challenges. Phoebe, a new mother in the United States, said that American consumers have a lot of choices, "when buying clothes for my baby at home, I often try different brands, Mori, Nest design, and sometimes directly buy affordable ones such as Gap and Cloud island. Recently, I like a brand called Janie and Jack, which is British style."

Phoebe said that before, because of the epidemic, most maternal and child products were online shopping, and the consumer habit in the United States is that many brands are sold directly through their official websites. "The overall feeling is not as convenient as domestic Taobao or Jingdong, I can't see all the orders through an APP, some brands have a little longer logistics time, and have forgotten to place an order when receiving the goods, if there are some after-sales problems, it will be more troublesome, and the efficiency of email communication is not high."

Similar pain points PatPat founder Wang Can also deeply feel, in 2014, Wang Can just became a father, in the United States, he personally experienced the purchase of children's clothing: compared with domestic maternal and child products, the United States maternal and child products have few choices, and the price is not cheap. With a sensitive sense of smell, Wang Can began to investigate the maternal and infant market in the United States. In the end, PatPat also chose the cost-effective route, and on the basis of cost-effective, PatPat added the label "cute" for himself.

In the product itself, PatPat has also spent some thought and made some local adjustments for the European and American markets. For example, the brand and product introduction were changed according to overseas consumption habits, and the packaging was also processed.

One PatPat insider said that the hardest thing for a relatively new brand like PatPat is that it takes more time to convince consumers that it is a safe, reliable children's clothing brand.

"So almost from the beginning, PatPat was very focused on the safety of children's clothing, down to an accessory or the fabric used in the clothing. As far as I know, a small part of a big brand's clothes fell off without causing any consequences, but users in Europe and the United States will have a safety hazard because of this clothing, and the small part may have the risk of being eaten by children, resulting in some unnecessary lawsuits. In fact, related safety issues have gradually become a major concern for parents in China in recent years, and consumers are more and more safety conscious, which directly affects product design."

Like many DTC brands, PatPat has also done social media marketing, and according to different regions, PatPat has constructed a complete Facebook social media matrix to precipitate fans. The aforementioned PatPat people believe that the playing method of net red is basically the whole cross-border industry, and PatPat's biggest advantage is to go early on the track of children's clothing, so it can take the lead and obtain a relatively large number of fans and crowd coverage.

In order to expand the variety of products, PatPat adds new product lines of maternity wear and family wear on the basis of the original, to create parent-child clothing, enhance the parent-child relationship, and create a more warm family atmosphere.

Category expansion seems to be the route chosen by many clothing DTC, and the children's clothing that SHEIN has launched in many countries has also made PatPat feel competitive pressure.

The aforementioned employee admitted that PatPat and Shein have a certain degree of overlap in the category. "Suppliers even some of the goods are overlapping, a large number of new delivery patterns are similar, which seems to be a problem faced by many fast-moving clothing brands, even if they have their own plate design, many clothes in the design of the popular elements are very similar."

Obviously, whether it is the model of network celebrity marketing, small single quick return, or the design team, big data application, iteration speed or the degree of supply chain cooperation, SHEIN is the one who goes earlier and does more deeply, which is probably the reason why PatPat has a sense of crisis.

In fact, in addition to SHEIN, PatPat is facing various competitors, also from China, Pin-duo Temu rely on price advantages to quickly open the market, children's clothing is currently one of the best-selling categories on Temu.

Not to mention the big and small sellers on Nike, Adidas, Gap and Amazon. In the United States, there are also local brands such as Carter's with moderate pricing, good materials and American casual style design. In addition, Gymboree is probably the only children's clothing brand that can compete with Carter's. Gymboree's price and material are similar to Carter's, but the design style is different. Gymboree likes to use a lot of cartoon and childlike patterns and bright colors. These brands all have promotions on their official websites such as full reduction activities or free shipping over $50.

In addition, there are also many clothing manufacturers from Southeast Asian countries ready to move. While apparel producers in Southeast Asian countries do not appear to have built awareness of their own brands, a WTO report showed that China accounted for just 23.1 percent of U.S. apparel imports in the first nine months of this year, down from 36.2 percent in 2015. Thanks to lower costs, Bangladesh and Vietnam are increasingly taking a share of U.S. imports.

Under the pressure of competition, PatPat hopes to make differentiation and avoid falling into the quagmire of price war, one possible path is IP co-branding.

The employee said: "In the beginning, IP co-branded products accounted for a relatively low proportion of sales. At present, IP is a very important piece of PatPat, and the sales volume ranks high in all categories. Now IP co-branding has the moat of copyright, so PatPat pays more attention to IP co-branding."

"In fact, PatPat signed a lot of IP a long time ago, but not every IP will bring sales, the company sometimes does not know what to do and what not to do; Sometimes it is because the design elements of these ips are too simple, such as simply printing the IP on the clothes. Later, PatPat optimized many links from product planning, plate design to late marketing and operation, and spent a lot of time adjusting and polishing to achieve later results." The PatPat said.

In just eight years, PatPat ranked first in the user recommendation Index of all children's clothing brands in the United States, and won a large number of American consumer fans. In addition, PatPat also has branches in San Francisco, Los Angeles, Dublin, Manila, London and other places, and users cover more than 100 countries and regions around the world, is the world's largest and fastest growing children's wear DTC brand.

02

Put the "stall" abroad

Compared with PatPat, northeastern native Chen Ping's independent station is much smaller.

Chen Ping family to do children's clothing business has been more than 20 years, 1998, Chen Ping's mother laid off, started a clothing business, "at the beginning of no experience, from the wholesale market purchase, in the relatively dense place set up stalls, suffered a lot of pain also eat very thanks, later have experience, found that children's clothing business is better to do, rented a shop in the city center, Business is gradually getting back on track."

Chen Ping took over the family business after graduating from university, but the younger generation has a lot of different ideas, "Maybe because of the influence of the environment at home, so I grew up on a variety of clothing brands like a number of treasures, plus the northeast side more believe in the quality of South Korea, so I have the idea of selling Korean brand children's clothing." After several visits to South Korea, Chen Ping became an agent for a Korean brand.

"The first few years are relatively smooth, but also opened two stores in Wanda, but in recent years, fewer and fewer young people in the Northeast, the market capacity of the entire maternal and child products is constantly declining, I also have problems, the original estimate of the situation is too optimistic, I agent this brand is not low price, the target customer is middle and high-end consumers, the brick-and-mortar store business is not good in the past two years, Has been affected by some outbreaks." Chen Ping said to Xiaguang.

It is interesting that when Chen Ping visited South Korea, he found that many brand clothes were produced in China, and he went to Zhili Town in Huzhou, Zhejiang Province, several times after returning home. Chen Ping, who has been "importing" foreign brands, found that selling clothes abroad is also a way. "At that time, there was no way to distract myself from the busy shop, and in 2020, the shop was temporarily closed because of the epidemic, so I had time to really consider doing foreign-trade related business, which is also a risk hedge."

Early last year, Chen Ping and friends started an independent station, "because of the experience accumulated before, I am mainly responsible for the procurement and selection of products, independent station operation to friends."

"Times are different, business should also have corresponding changes, the agent of Korean brands let me more distressed is that they believe in traditional channels, do not do e-commerce." This independent station is also a kind of transformation, we have also done some KOL with goods promotion in Europe, the cost of the US network red with goods is already very high, and the current price of the European network red is relatively moderate. My mother thinks that these marketing methods' change the soup without changing the medicine ', like putting the former street stalls on the Internet and placing them abroad, haha." Chen Ping said with a smile.

In fact, Chen Ping Jian Station is not not through the initial detour, the main positioning market is Southeast Asia at the beginning, "but I found that the price of our clothes is still not low enough, there is no advantage in Vietnam, the cost of local production of clothes is very low, many cross-border sellers in the local or Bangladeshi manufacturers to take goods, our clothes quality is better, But Southeast Asia is still a low unit price volume market, less than three months we decided to withdraw and focus on the European and American markets."

Chen Ping said that although the site has been built for more than a year, the business volume of the website is not large, and it is still in the starting stage, "my idea is to settle down a group of loyal customers like the previous business in the country, the promotion of maternal and child products, many of which are word-of-mouth between parents." "Many of our new customers buy their children's clothes because old customers give them clothes, wear them and find the quality is good."

03

The road to branding is easier said than done

Among the many independent merchants, PatPat is undoubtedly the leader of the head, but most of them are small sellers like Chen Ping.

Jason, who just founded an independent station this year, said that because of the outbreak of the epidemic in the previous two years, the entire DTC industry, including children's clothing, has developed very fast, and the growth has fallen this year, which is also expected.

"From an investment point of view, we can obviously see that the first two years of the DTC track is relatively easy to finance, although most DTC platforms have not published their own GMV data, but the entire industry changes are more obvious, the first two years many independent stations and large platforms are lying to make money." In the last year or two, funds have become cautious, the successful financing of DTC began to become less, and large amounts of financing is not so easy to appear, some investors will think that cross-border investment is a kind of risk hedging, everyone is currently making investment decisions may have more thinking, can get financing basically have relatively core competitiveness."

In the context of disappearing industry dividends, independent stations that can get financing either rely on users accumulated in the past in advertising, and rely on inertia to generate natural traffic and re-purchase. Or rely on big data and user feedback, rely on the supply chain to reduce costs, and achieve the link with consumers.

And outside the spotlight, more small and medium-sized sellers also have their own way of survival. Chen Ping said that there may be no more than 20 independent players, and small independent stations like him and industry giants are completely in two different worlds. In his view, the way out of the independent station is in the market segment, the market segment can notice the needs of different consumer groups, user stickiness and vitality are relatively strong, "for me, there are a number of loyal users, step by step, small and beautiful enough".

Jason's experience working on the Internet gave him a different perspective when he entered the DTC industry.

"I was in the Internet company before, everyone around the Internet, into the DTC industry found that cross-border has run so far." Many already make a lot of money crossing borders. I didn't expect to be able to buy a house in Shenzhen Bay with such a relatively simple left hand and right hand, which is such a low threshold to do the industry." Jason exclaimed.

The advantage of a low threshold is that people don't ask about birth, only on merit. Jason said: "In the Cross border circuit, the talent is uneven. In the Internet company and the so-called big factory, you will see a lot of students graduated from top universities, everyone's background may be similar, but the cross-border talent gradient is relatively large, the three mountains and five mountains are gathered in the cross-border track, some may have their own factories, began to do cross-border. Maybe they don't have brand awareness or Internet thinking, maybe they don't even speak English, or they have a lot of grammatical mistakes, but that doesn't stop them from getting business done."

But there are problems, starting with a lack of talent. Jason told Xiaguang: "The whole industry is actually relatively scarce talent, I thought this industry has existed for a long time, talent will be more abundant." But everyone seems to be slow on the track