Shulou(Shulou.com)06/01 Report--

Nowadays, with the three-point pattern of China's e-commerce market, Ali is naturally the undisputed top spot, JD.com second, pinduoduo out of the air, strong chase, and temporarily third; VIPSHOP also needs to find a way to get back on the stage.

On July 10, VIPSHOP spent 2.9 billion yuan to buy OUTLETS business owned by Shanshan. On August 15, VIPSHOP announced its second quarter of this year, making profits for 27 consecutive quarters, with financial indicators growing faster than expected. VIPSHOP was further increased by JD.com, who held a stake of 7.6%.

VIPSHOP released the second quarter of 2019 results, from the data looks bright, financial and operating data continue to grow, the three killer mace continue to help, to show the outside world that its strength is still something to be underestimated.

1. The data sings all the way

In 2012, after VIPSHOP was listed on the New York Stock Exchange, the stock price grew rapidly, and the market capitalization soared to 15 billion US dollars, which was once called "demon stock" by the industry. This is also VIPSHOP's highlight moment.

In the early morning of August 15, VIPSHOP released its financial results for the second quarter of 2019, which showed that VIPSHOP's net revenue of Q2 was 22.7 billion yuan, an increase of 9.7% over the same period last year, while the net profit belonging to shareholders of the company was 813.5 million yuan, up 19.3% from the same period last year. The net profit was 813.5 million yuan, an increase of 19.3% over the same period last year. Under non-general accounting standards, the net profit of VIPSHOP Q2 was 1.1 billion yuan, an increase of 84.2% over the same period last year. Both revenue and net profit continue to grow, and the data win and sing all the way.

At the same time, the most closely watched revenue growth rate is 9.7%, which is an improvement from 7.3% of Q1 in 2019, although it is still at a low level, but the possibility of a continuous recovery in the future cannot be ruled out. In addition, the revenue of 22.7 billion yuan increased by 6.6% compared with the 21.3 billion yuan of Q1. According to financial data, VIPSHOP's gross profit in the second quarter reached 5.1 billion yuan, up 25.9 percent from 4 billion yuan in the same period last year.

VIPSHOP handed in an excellent answer paper. Although the report card in the second quarter did not double the battle of "gongs and drums, firecrackers", it was a powerful "killer's mace" to show and convince the capital market to the outside world. after all, in the popular e-commerce community of "burning money for scale", VIPSHOP's 27 consecutive quarters of profits are commendable, and from the financial results, there is no doubt about his profitability.

27 consecutive quarters of earnings, put in any vertical area, I am afraid it is very difficult for a company to make such excellent results. What's more, VIPSHOP is still in the highly competitive e-commerce world, and this continuous profit alone is enough to win many honors for VIPSHOP.

VIPSHOP ranked 108th and third in B2C e-commerce in the 2018 Fortune 500 list released by Fortune magazine. In recent years, the volume of e-commerce transactions in China has increased rapidly, and major e-commerce platforms have made a lot of money. Among them, including VIPSHOP, who has always made a special sale of the brand with the differentiation of "arrogant brand and cute price".

two。 Member users continue to climb

The return to the special sale strategy is beginning to bear fruit, and the contribution of repurchase users continues to increase. In this quarter, VIPSHOP's total orders were 147.8 million, up 33% from 111.3 million in the same period last year. The total number of active users reached 33.1 million. VIPSHOP's home page rush and fast grab channel accounted for 30% of sales in this quarter, and continued to contribute a large number of new customers through good goods and deep discounts.

VIPSHOP said that strategic cooperation with Tencent and JD.com also contributed about 23% of new customers. In addition, since VIPSHOP launched the super VIP membership customization service in 2018, the number of super VIP members has reached 3.5 million by the second quarter of 2019. From the perspective of data and member customization, VIPSHOP currently presents an overall trend of high repurchase rate, high number of active people and rapid growth of net profit.

Shen Ya, chairman and chief executive of VIPSHOP, also said that VIPSHOP's operating data and financial performance continued to improve in the second quarter of 2019, with the total number of active customers continuing to show a healthy growth momentum, up 11% from a year earlier.

In the early days, the public's understanding of VIPSHOP was "online OUTLETS", which mainly dealt with clothing tail inventory; in the cost-effective era, as a vertical e-commerce platform focusing on women's wear, VIPSHOP was once favored by users. in addition, VIPSHOP has strategic investments from Tencent and JD.com, VIPSHOP also has an advantage in traffic acquisition.

3. Cash flow moat

After the release of the financial report in the second quarter of 2019, there has been a lot of analysis, but many people have not noticed the most important detail and real value point in VIPSHOP's financial report-free cash flow.

Yang Donghao, chief financial officer, assessed the company's free cash flow after the results were released in the second quarter of 2009: "We created a strong free cash flow of 1.2 billion yuan this quarter, an increase of 2.2 billion yuan over last year." This is a very strong figure, showing the width of VIPSHOP's moat: cash increased by 1 billion yuan in the first quarter and 1.2 billion yuan in the second quarter.

Data show that as of June 30, 2019, VIPSHOP's cash flow from operating activities was 3.4 billion yuan. In the first half of the year, as of June 30, VIPSHOP held a total of 7.8 billion yuan in cash, cash equivalents and restricted cash, and 238.3 million yuan in short-term investments.

Entrepreneurs and investors know what the value of free cash means, whether it's Apple, Wal-Mart or Coca-Cola, which has been praised many times, and even Google and Amazon have one thing in common: good cash flow, in the long run, net operating cash flow is greater than net profit.

What is even more amazing is that behind the rapid increase in free cash flow, VIPSHOP has increased in revenue growth, net profit and other core indicators, and shrank in areas of cost expenditure such as marketing expenses: between increase and decrease, more business will be created.

4. The growth rate hit the ceiling and the market capitalization sank to the bottom.

There is a kind of beauty called "looks beautiful", peel off the coat, but expose the cruel reality, if you look at it from another perspective, it reveals more sadness, anxiety and uneasiness. Behind the increase of the giant holdings is the loss of high growth, at the foot of exceeding expectations, stepping on the relative highest point of the market value has shrunk by more than half; there are still many goals for the absorption of new performance, and there is a growing gap between the new performance and Ali Paduo.

From the first quarter of 2017 to the first quarter of 2019, VIPSHOP's revenue growth continued to decline from 31.1% to 7.3%. Although Q2 rebounded slightly to 9.7% in 2019, it still did not break through the embarrassment of single-digit growth: behind the dazzling earnings report, VIPSHOP is losing the momentum of rapid growth.

Although revenue growth continued to grow in the 27th quarter, it is still at a single-digit low, with 9.7% growth in 2019, a far cry from 74% in 2015, 40% in 2016 and 15.9% in 2018. VIPSHOP's financial results for the second quarter were released, and the sluggish revenue growth excited those who had been ready to watch the fun long ago: "just as I expected, VIPSHOP is no good!"

What is even more embarrassing is that revenue growth in the third quarter of this year is expected to be only 0% to 5%, which is frighteningly low, which really adds a lot of blockage to Shen Ya, chairman and chief executive of VIPSHOP.

However, the wind in the market is constantly changing, and competitors such as Tmall have begun to use data and technology to guide production according to the actual market demand, so that merchants have less and less inventory. Tmall and other SKU e-commerce squeeze, so that the category is relatively single VIPSHOP, obviously can no longer sit Hunter to sell dividends.

As of August 23, VIPSHOP, who has been on the market for seven years, has lost his high growth, his business has fallen into a bottleneck, and his market capitalization has also fallen sharply. It has fallen from a peak of $15 billion to about $5.5 billion today, wiping out 2/3 of its market value.

According to the financial report, compared with the revenue growth rate of 1395.79% and 119.78% in 2013 and 2014, it no longer exists after 2015. VIPSHOP's revenue growth rate has been declining all the time, the high growth specialty has been lost, and VIPSHOP's business model is becoming more and more difficult.

5. Shift to war and multiple failures

After the business gradually entered a bottleneck period, VIPSHOP tried to diversify his strategy. To this end, VIPSHOP kept looking for opportunities and "rubbing" one tuyere after another.

As early as October 2016, when the Internet third-party payment was booming, VIPSHOP also launched Vipshop Finance. In 2017, VIPSHOP strategically planned the "three carriages"-- e-commerce, finance and logistics. But in the financial sector, VIPSHOP's performance is not good. According to the 2017 financial report, the net income of Internet financial business is 250 million yuan and bad debts are 120 million yuan. VIPSHOP's start-up of self-built logistics has also led to high performance costs as a proportion of total operating expenses, up to about 50 per cent.

VIPSHOP is also trying to get in fresh, but the future of the business is not clear. VIPSHOP opened the first Pingjun Life fresh Community Store in Guangzhou in October 2017. so far, only eight can be found in public data.

Neither the troika nor the fresh business has driven VIPSHOP to a new peak. After a series of trial and error, VIPSHOP announced from the third quarter of 2018 that he would return to the strategy of special sale and good goods and continue to do what he is good at.

6. From giants to short videos, e-commerce business is gradually scattered.

The platform traffic dividend has peaked, and the growth of e-commerce sales is sluggish. Many people in the industry have said that since the beginning of this year, the number of incoming stores has dropped by more than 20 percent, which means that the cost of obtaining traffic is getting higher and higher, and there is a serious shortage of store traffic. VIPSHOP can hardly resist the rise of Douyin Kuaishou and the further fragmentation of e-commerce business in the era of Taobao and short videos.

Nowadays, Douyin and Kuaishou have a very strong power to bring goods, and business is booming. Relevant data show that the e-commerce business of the two is developing rapidly and has become the main channel for realization. On Singles Day in 2018, Douyin's account with the shopping cart sharing function can sell 100000 items a day, converting sales to more than 200 million items and increasing orders by 1000%. In 2018, Kuaishou and Douyin live streaming add up to 100 billion GMV, the same as Taobao live GMV.

It can be seen that the short video has a strong appeal in sales promotion, VIPSHOP obviously can not compete with it. There is no strong carrying capacity and traffic competition, resulting in scattered e-commerce business, VIPSHOP growth is very difficult.

VIPSHOP faces a lot of competitors, in the traditional e-commerce, VIPSHOP is difficult to fight Taobao, Taobao behind a strong Alibaba support. In the emerging e-commerce, it is faced with a large number of sinking e-commerce such as Yun Ji and pinduoduo. In vertical e-commerce, according to statistics, VIPSHOP, Temple Library, Fifth Avenue, Precious products Network, Youzhong Network, Zouxiu Network, Zunxiu Network, Shangpin Network and so on were all established from 2008 to 2010.

At the same time, VIPSHOP's special sale model has also been used for reference by many e-commerce platforms, and a variety of discounts have emerged one after another. At the same time, pinduoduo relies on the group buying mode, Taobao and live broadcast method; VIPSHOP is not distinctive by comparison, which makes VIPSHOP e-commerce step by step to the ceiling. Platforms such as VIPSHOP and Siku have begun to seek transformation.

Of course, "VIPSHOP is a more successful transformation case, lowered the consumption threshold, began to enter fashion products, take the special sale route." in this way, there are more brands and a lot of audiences. " Yang Qingshan said. It firmly grasps the clothing sales market, not only achieved profits, but also more or less formed a certain barrier; from this point of view, VIPSHOP is still very powerful.

But this is also very difficult, because of Ali's existence, VIPSHOP can only lie on his one mu and three points of land after all, and the previous expansion strategy failed. When user growth slows, where should the company start in the future? This is not only the concern of investors, but also the worry of VIPSHOP himself.

According to McKinsey's 2019 China luxury report, offline is still the main battlefield for buying luxury goods. Consumers tend to buy standardized, relatively low-priced daily necessities online, saving more time to enjoy a unique, stylish shopping experience, the report said. It is estimated that offline channels will continue to dominate future luxury sales, with a compound annual growth rate of about 6% in the next few years.

7. Turn the bow and restart the retail "special sale"

After the business fell into a bottleneck, VIPSHOP continued to sell deeply discounted retail sales, releasing the strong competitiveness of wearable clothing, focusing on the main brand sellers, and building a solid core strategy for good goods.

Begin to "subtract"-costs go down and profits go up. Specifically, VIPSHOP controls spending. VIPSHOP's performance fees accounted for 9.7 per cent of total net income in the second quarter of this year, up from 9.1 per cent in the same period in 2018. VIPSHOP said that the increase in the proportion of performance costs was mainly due to the write-off of 275.5 million yuan in Zhaoqing warehouse-related assets related to land subsidence during construction, which accounted for 8.5 per cent of the company's performance costs in the second quarter.

The middle market is declining, with consumption contributing more than 45 per cent to domestic economic growth over the past decade, reaching 78.5 per cent in the first half of 2018. Since the strategy of resale quality goods was proposed in the third quarter of 2018, the number of orders has increased significantly. There were 148 million orders in the second quarter of 2019, up 33% from the same period last year.

"since VIPSHOP returned to the special sale, various financial indicators have continued to improve," said Yang Donghao, chief financial officer of VIPSHOP. "in the future, we will pay close attention to the return on investment in our business, including offline stores, and strive to balance the steady growth of revenue and profits. achieve long-term sustainable shareholder returns." As the two sharp weapons of the special selling strategy: the time-limited special channel "only goods fast grab" and the deep discount channel "final crazy grab" can be called the biggest contributor behind the rise of VIPSHOP's active users. Over the past 11 years, VIPSHOP has built a voice and differentiated competitive advantage in the field of special sales.

In the future, VIPSHOP will continue to deepen the special selling capacity of discount retail, take special sale as a strategy, locate discount retail e-commerce, mobilize and supplement more "brand special sale" traffic and consumption scenes, and enhance the coverage and depth of "special sale". Continue to create "good goods are not expensive" consumption experience for the majority of consumers. Hold on to middle-class women? For a woman's heart, not only to understand, but also to attract!

The number of middle-class women in China exceeds 70 million, and they are leading the future consumer market, according to the report on the consumption of Chinese middle-class women released by VIPSHOP and iResearch on March 7. In other words, if you seize the middle-class women, you will win the big market. At this point, VIPSHOP, a specialty ecommerce company with 80 per cent of its hundreds of millions of members, has a head start.

In this context, in order to meet consumers' demand for performance-to-price ratio, VIPSHOP takes "good goods" as the focus, cooperates with "good brands", deeply excavates "good styles" through a team of professional buyers, and achieves a "good price" of goods by establishing a "good quality" supply system in a strong supply chain with brands, and finally provides differentiated good goods for the platform, seizing middle-class female consumer groups.

"do not forget the original ideal and ambition, in order to accomplish the mission." in the more than 20 years since its establishment, VIPSHOP has not changed his original mind, that is, to be the largest and best specialty e-commerce merchant in the world. In fact, VIPSHOP has hundreds of millions of members and is indeed the largest special seller in the world.

Shen Ya, chairman and CEO of VIPSHOP, also said: "since VIPSHOP refocused on discounted clothing and profitability, financial performance and key operating indicators have been significantly improved, proving the effectiveness of the strategy. In the future, VIPSHOP will further expand his market share in China's discount clothing wear field, and is confident that he will continue to steadily improve profitability."

8. Offline acquisitions, 2.9 billion of physical "big bets"

VIPSHOP launched a fierce attack on offline brick-and-mortar businesses on July 10. VIPSHOP announced that he had bought a 100% stake in Shanshan, a brand that currently owns five offline OUTLETS plazas, for 2.9 billion yuan. The purchase price of 2.9 billion is almost the sum of VIPSHOP's two-year profits. A brilliant "online OUTLETS" acquired Shanshan Group and expanded OUTLETS business.

In the early years, what investors said most about VIPSHOP was "online OUTLETS". Because its model is the same as OUTLETS, it mainly deals with clothing tail goods. VIPSHOP soon landed on the New York Stock Exchange on March 23, 2012. VIPSHOP, who started selling brand clothing with the "flash purchase" mode of "famous brand discount + time-limited rush purchase", at first the company was quite handy and managed very well. however, with the continuous changes in the pattern of market competition in recent years, VIPSHOP's management began to encounter "difficulties". Therefore, there is no way for Weipin to gamble offline.

VIPSHOP spent 2.9 billion yuan in cash on this acquisition of Shanshan Business, which is almost its net profit in the past two years. Although everyone knows that online traffic basically ends and future opportunities gather offline, only VIPSHOP dares to make a big bet and has to say that this is really a big bet.

The Shanshan business acquired by VIPSHOP is one of the head chain brands. In 2018, Shanshan Olai accounted for four of the top 20 sales of OUTLETS across the country, with total sales reaching 7.6 billion. Unlike other OUTLETS, Shanshan Commercial focuses on second -, third-and fourth-tier cities. It has opened five Olai squares in Ningbo, Taiyuan, Zhengzhou, Nanchang and Harbin, and another four are under planning and construction.

To some extent, Shanshan Commercial and VIPSHOP users highly overlap, the data show that the proportion of users in second-and third-tier cities is as high as 69.7%, this gamble is also initially effective.

9. VIPSHOP's "Jingteng Plan": strong desire to survive

If you only look at the latest quarter's results, it is still a piece of good news. In the second quarter of this year, VIPSHOP's revenue rose 9.7% from a year earlier to 22.7 billion yuan. 147.8 million orders generated these revenues, more than 1.3 times the number of orders in the same period last year. At the same time, the total number of active users was 33.1 million, an increase of 11% over the same period last year: this is largely because VIPSHOP is controlled by two giants, Tencent and JD.com.

In December 2017, Tencent and JD.com jointly invested in VIPSHOP, buying 7% and 5.5% of the shares respectively. The two giants joined hands to support VIPSHOP, which greatly boosted VIPSHOP's confidence.

This time JD.com spent more than $55 million on a 0.8 per cent stake in VIPSHOP, with an average price of $9.4262. Since his first investment at the end of 2017, JD.com has increased his holdings of VIPSHOP one after another, such as last year in April and June. As for Tencent, as of this year, its stake in VIPSHOP was 8.7%. The increase of 0.7% was bought in the open market in February and March this year.

The deal not only injected 863 million US dollars into VIPSHOP, but also brought traffic. In 2018, VIPSHOP JD.com 's flagship store was displayed on JD.com 's home page of APP in March. In the past 618, JD.com conducted joint marketing with VIPSHOP during the "June 18" period. VIPSHOP then opened a super flagship store in JD.com Mall, and the name VIPSHOP also appeared on the entrance of Wechat wallet.

However, in the first quarter of 2018, the number of new users of VIPSHOP showed zero growth, so Shen Ya undoubtedly had no choice but to marry Tencent and JD.com at that time. The effect of the super flagship store itself may not be satisfactory, but the cooperation with JD.com and Tencent has indeed brought new passenger flow to VIPSHOP. The data show that in the past year, more than one of VIPSHOP's new quarterly active users came from Tencent and JD.com.

At the recent second-quarter earnings call, Shen Ya said that both JD.com and Tencent will continue to increase their holdings in VIPSHOP. If Tencent and JD.com own 12% and 8% of VIPSHOP respectively in the 2017 investment agreement by the end of 2019, they will be able to retain their power on the board of directors. But even so, VIPSHOP's growth rate of new users is still weak, still failed to stop its downward trend of growth.

"Jingteng Plan" suspended the decline, Liu Qiangdong held his breath for more than half a year, and now he is a little more comfortable! "We remain committed to implementing the sales strategy and further expanding our market share in China's discount clothing industry, and we are confident that we will continue to steadily improve our profitability in the future," Shen said. "

However, the solidification of commodity content is single, so that the number of new traffic retained by the "Jingteng Plan" to VIPSHOP is still unknown. At present, VIPSHOP's active users continue to increase, but we still don't see a big improvement in revenue speed. Shen Ya: I have been holding my breath for several years. In order to develop steadily, I still have to hold back.

At the same time, VIPSHOP spokesmen have also invited a number of traffic stars to endorse, such as the post-80s collective memory of Jay Chou and his wife. Popular TV dramas are all good. Female No. 1 "Su Mingyu" is Yao Chen. Yang Mi, who is building a dream relationship, also endorses VIPSHOP, and related advertisements are launched on various major platforms. Vigorously seeking cooperation and constantly building marketing, we can see that VIPSHOP's "desire for survival" is very strong.

Conclusion

Although VIPSHOP has continued to make profits for 27 quarters and has an excellent "killer's mace", the market value has fallen steadily and the growth rate is slow. This coexistence phenomenon, coupled with the expansion and engulfment of Ali, has steadily pursued more and more. Are the factors of VIPSHOP's slow growth and falling market capitalization.

With the increasingly fierce competition in the domestic e-commerce industry, VIPSHOP's battle for survival is becoming more and more difficult, and it is also full of challenges to its sustainable profitability. In a short time, it will be difficult for VIPSHOP to return to the peak of his market capitalization of 15 billion US dollars in 2015, but VIPSHOP does not lack the courage to regain his "confidence" to catch up, and the financial results are constantly showing his efforts.

(official account of Liu Kuang / tr. by Phil Newell) ID:liukuang110

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