Direct sales model "Alexander" employees "contracted" Tucao Ocean King lighting

September 06, 2020

“I am very entangled. Why did the leader change the unsigned contract to the completed customer procurement contract? If I can’t finish it, I will deduct the salary.” A former Ocean King lighting employee said.

Recently, Ocean King Lighting issued a prospectus, which is planned to be listed on the small and medium-sized board, issuing 50 million shares and raising funds of 550 million yuan. The company, which specializes in special lighting, had a satisfactory level of revenue last year, but its mandatory apportioning task index has also increased its production aggressively in the absence of capacity utilization, making it a flaw in performance.

Direct sales malpractice

If you only look at the gross profit margin, Ocean King Lighting is enough to make other lighting companies listed on the face.

Among the lighting companies currently listed, the comprehensive gross profit margins of Foshan Lighting (000541), Xuelaite (002076), Sunshine Lighting (600261) and Qinshang Optoelectronics (002638) for 2012 are 25.95%, 29.8%, 19.11%, respectively. 31.61%, while the comprehensive gross profit margin of Ocean King Lighting is as high as 71.11%.

Where does this high gross margin come from? Different from the competitors who adopt the dealer model, such as Qinshang Optoelectronics, the customers mostly adopt the direct sales mode for the marine king lighting of state-owned enterprises, which reduces the intermediate links.

But the direct sales model also has drawbacks. Ocean King needs to purchase core parts from the outside, and it is mainly engaged in assembly and production. However, because the company attaches great importance to product sales, every year, leaders at all levels give their subordinates performance indicators, which makes the pressure of sales personnel extremely great.

A former Marine King lighting employee who left in 2012 revealed to reporters that in order to complete the sales task, many sales personnel paid rebates to customers with their own commissions; even some people suffered from “contracted” situations. “For example, in order to improve performance, at the end of the month, the leader calculated the contract that we did not complete into a completed customer procurement contract and entered the performance indicator of Ocean King Lighting. If the employee finally did not sign the contract with the customer, "Breach of contract" is the reason for deducting wages."

The claim that the person “deducted wages” seems to be supported in the Ocean King’s prospectus: In 2012, the per capita sales cost of Ocean King Lighting decreased by 7.10% compared with 2011, which was greater than the decline in per capita sales revenue during the same period. Most of the industry divisions did not complete their business objectives, so no bonuses were accrued.

More than 65% of Ocean King Lighting's employees are sales personnel. They are called “service engineers” by the company and serve in the service centers. As of December 31, 2013, Ocean King Lighting has 12 specialized industry divisions across the country, and 142 service centers under the industry division.

Ocean King Lighting's operating income is coming from these 142 service centers, which have office areas ranging from 66 square meters to 150 square meters, and many “residents” in residential buildings. It is worth noting that some service centers that are both "sales" and "sales" may have not paid taxes to the local tax authorities.

"According to relevant laws and regulations, enterprises engaged in production and business activities in the field for more than 180 days should apply for registration tax registration at the place of production and operation, so each service center is fearful and afraid of the tax authorities to check. There have been service centers that have been reported by other manufacturers. The local tax department handled it and removed the computers and documents." The former Ocean King lighting staff revealed.

In fact, Ocean Wang Lighting's business model of “sales-oriented, production-assisted” is facing difficulties: after the listing, the company needs information disclosure, and the direct sales model may put the company and customers at risk and become the second one. GlaxoSmithKline." At the same time, with the gradual upward movement of the purchasing power of large state-owned enterprises and the implementation of a centralized procurement system, the business model of Ocean King Lighting may not be sustainable.

Increasing production

Although the aggressive direct sales model has caused great pressure on the grassroots sales staff, it has indeed made a great contribution to the increase in the income of Ocean King Lighting. It also led Chairman Zhou Mingjie to consider expanding the issue.

However, the measures for the final expansion have appeared to be somewhat "snake-up", which makes the necessity of market investment projects quite questionable.

According to the prospectus, Ocean King Lighting's products are mainly “fixed lighting equipment”, “mobile lighting equipment” and “portable lighting equipment”. The sales revenue of “fixed lighting equipment” has occupied 50% of total revenue in the past three years. the above.

However, as a core product, the capacity utilization rate of fixed lighting equipment has declined year by year. From 2011 to 2013, the capacity utilization rate of fixed lighting equipment was 96.19%, 68.7% and 66.42% respectively.

The company also confessed in the prospectus that due to the decline in demand for fixed lighting equipment in the coal, metallurgical and other industries since 2012, the company adjusted the output of fixed lighting equipment accordingly, resulting in a decline in capacity utilization.

Since the main products have been actively reduced by the company for two consecutive years due to insufficient demand, why is Ocean King Lighting still obsessed with expanding production capacity? According to the prospectus, the company plans to invest 336 million yuan in investment in the “production line construction project”. After the completion of the project, it will add 1 million sets of special environmental lighting equipment every year, accounting for 1.11 million sets of lighting equipment in the company in 2013. 90% of production.

In this regard, Ocean King Lighting insisted that the company's business scale has expanded rapidly in recent years, and the production capacity has been “seriously insufficient.” If it is implemented smoothly, the “production line construction project” will be completed within three years.

But in fact, the power cycle, metallurgy, railway and other strong cycle industries downstream of the special lighting industry are currently suffering from overcapacity, coupled with the reality that the company's fixed lighting equipment capacity utilization rate is declining from 2011 to 2013, Ocean King Lighting Whether it can digest nearly double the production capacity in three years is worthy of investors' thinking.

Another detail that has made the market question the listing impulse of the company is that the ocean king lighting that has been "cry poor" may not be short of money.

From April 2011 to February 2014, Ocean King Lighting accumulated a cash dividend of RMB 230 million. In the three years prior to the listing, the company’s monetary fund balance at the end of the year was 346 million yuan, 415 million yuan and 425 million yuan, accounting for 26.15 of operating income. %, 37.8%, 37.58%.

One detail that cannot be ignored is that Zhou Mingjie and Xu Su, the actual controllers of the “Mother and Son Shop” Ocean King Lighting, hold 83.62% of the company's shares. If the Ocean King IPO is successful, Zhou Mingjie and Xu Su still hold a total of 73.17% of the company's shares and are in an absolute controlling position. Obviously, whether it is a pre-IPO dividend or a cash-out that may occur after the listing, the vast majority of funds will fall into the pockets of the Zhou Mingjie couple.

(This article is reproduced on the Internet. The texts and opinions expressed in this article have not been confirmed by this site, nor do they represent the position of Gaogong LED. Readers need to verify the relevant content by themselves.)

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