The Choice Of Everyone

In December 2011, all guests and old people were at a gateway.

Prior to that, it was formally established in October 2007.

Over the past 4 years, relying on the strong manufacturing capability of mainland China, the e-commerce company with its own brand has already sold it.

Over the past 4 years, 3 people, such as Chen and Lei Jun, have invested 7 million yuan in July 2007. They have attracted 6 rounds of investment, including a total of up to 422 million US dollars. Investors include IDG, LIAN strategic sources, Softbank Sai Fu, Qiming venture capital, Tiger Fund, CITIC Industrial Fund, Jiali group and Temasek.

Today, valuations for customers have exceeded $3 billion.

However, in December 2011, when all customers were close to the "listing dream", they encountered unprecedented challenges.

Previously, for all customers, old age and investors behind them, "running faster" and "going to the US market" were two mutually supportive goals. But in 2011, the overexpansion of customers and the rapid deterioration of the market environment eventually turned them into "hard choices".

The seeds of risk were buried at the end of 2010.

"Run faster"

Ever since its establishment in October 2007, everyone has always been a mysterious company for the outside world.

However, by the end of 2010, customers were still recognized as "business stars".

"The first year sales volume of all customers is over 100 million, the second year is 100% or even 200% growth, third years is 300% growth."

On the evening of December 20, 2011, in an interview with this reporter, Chen said.

The sales volume of "von cordial (Beijing) Technology Co., Ltd." (core company of VIC) shows that its sales in 2008, 2009 and 2010 were 118 million yuan, 298 million yuan and 1 billion 200 million yuan respectively, and the growth rate was consistent with what Chen said.

Over the years, the sales announced by customers were over 100 million yuan in 2008, 500 million yuan in 2009 and 2 billion yuan in 2010.

Despite the reservations of these data, at the end of 2010, 2 billion yuan was still the starting point for the 2011 sales target.

In December 23, 2010, Chen announced that the sales growth rate in 2011 was 100%, which reached 4 billion yuan.

However, only more than 10 days later, in the afternoon of January 7, 2011, the sales target was greatly raised.

In 2011, the sales target of van guest has been raised to 6 billion yuan, and its growth rate has been raised from 100% to 200%.

He also said that customers would only consider profitability if they had over 10 billion yuan in revenue.

In the evening of December 20, 2011, Chen recalled, "I remember, I made a joke," originally wanted to say 40, but now, I think we can run 60. "

However, he emphasized that "the goal I said is not the number on the financial statements, but the amount of our order".

And 6 billion is still not the end.

In March 7, 2011, in an interview with reporters, Chen said: "this year, the company's sales target is 10 billion yuan, 5 times that of 2010."

A former van guest recalled that in an internal executive meeting before the Spring Festival of 2011, Chen announced the news. "At that time, the data in January were better, and after communicating with the business department, there was still a chance to go to 10 billion."

Although the goal of "10 billion" has now become one of the main doubts of the outside world, it does not relax.

In the evening of December 20, 2011, Chen told the correspondents: "from 2007 to 2010, all the guests were very good, and they did not meet the test of life and death. Therefore, if I had the chance, I would run faster. Until today, I still think so."

Earlier, an electricity supplier CEO once said, "if customers want to make profits, they can do it in minutes, as long as they reduce the category, reduce the cost of logistics and reduce the cost of promotion.

But in that case, the scale will be relatively small, and the development will be slower.

But Chen said: "in the three quarter of 2008, customers were flat, even slightly profitable. In May 2009, they also made a slight profit. In 2010, they had a slight profit in a month.

But I have to give up. I think everyone should run faster. "

How to run faster is regarded as the core strategy of everyone.

He admitted that before 2010, increasing sales of a small number of products was the main means for all customers to achieve rapid growth. After the slow growth of sales of single products, the increase of product category became the main driving force for customers to continue to grow.

"(everyone's category expansion) began in the first quarter of 2010.

In fact, in the second half of 2008, when everyone wants to be conservative, we have already begun to try, and the experiment in 2009 has a very good conclusion. In the first quarter of 2010, we really started (category expansion).

Chen said.

The limit of expansion

10 billion of the sales target, the autonomy of category expansion, after the Spring Festival of 2011, the "pressure" and "power" were handed over to the director of the five major product divisions of van guest, and thus opened the "Pandora's box".

"After the formulation of the target, we must divide the task into various departments. At that time, the pressure of various departments is very great.

Although the first quarter grew rapidly, it only completed sales of less than 1 billion yuan, which is far from the target of 10 billion and split to 2 billion 500 million per quarter.

A former Fan said.

"Before, the development of customers' purchase for the two time has reached the extreme, including coupons and other means. Many methods are leading in the industry, and again, it is hard to break through the two purchase.

Now, in order to achieve faster growth, all work can only focus on new product development and new product introduction. "

According to Chen's authorization to the general manager of various product divisions, "everything is in their hands" from the determination of products to the final sale.

According to this person, since April 2011, including daily chemicals and other general merchandise products, it has been developed by the new product import department of the front end, and even because the development of new products is too fast, many new products are "too late to enter the ERP system".

However, "the front end continues to purchase and introduce new products, but the backend lacks effective inventory management and promotion, resulting in large inventory."

This person admitted, "in this process, from procurement to information to inventory and other departments, have realized that inventory is increasing, but because all departments have different indicators of pressure, everyone shuffle each other, do not want to pick up this matter first", "so, until around September, because the stock is too large, has reached hundreds of millions of yuan, this problem was finally discovered."

The total inventory of van guest is as high as 1 billion 445 million yuan (US $228 million 600 thousand) as of September 30, 2011, and by the end of June 2011 and the end of June 2010, this figure was 850 million yuan (134 million 700 thousand US dollars) and 198 million yuan (31 million 261 thousand US dollars) respectively.

This person said, at that time, because of inventory problems, many senior guests were punished, vice president was downgraded to director, director was degraded to minister.

This is also a reason why Wu Wu, a former vice president of VW, left office. He said in micro-blog that "lying will be shot" means that.

In this person's view, the inventory has fully reflected the pressure of customers on the operation and the urgent psychology of "pursuing rapid mass production".

With the rapid growth of inventory, the sales growth of van customers has not reached the expected level.

Because the success rate of newly introduced products is not high.

Earlier, an electric business executive said, "although the SKU of every customer is over 10000, there are only a few shoes and clothing products that are booming."

"To say that the difficulties or challenges faced by customers this year is to expand the category too fiercely. There are some mistakes, such as rice cookers, panels, kitchen knives and so on."

In December 7, 2011, Chen said publicly.

However, in the evening of December 20, 2011, faced with this reporter, he insisted: "if it wasn't for trial and error on a large scale in 2009, there would be no harvest for all customers in 2010.

We encourage trial and error, but we must grasp one degree.

We began to discuss this issue in late June and early July. In August, we conducted a comprehensive review of the whole company.

After reflection, Chen lowered the annual sales target of fans.

Aforementioned former customers revealed that in mid 2011, customers began to shrink, began to cut sales targets, from 10 billion yuan to 6 billion yuan, "business growth is not as high as expected, need to immediately rein in the mountains, or else can not digest", "it should be said that customers have become more realistic, previously raised relatively high profile, but 10 billion is a limit, can not be done."

Previously, a widely circulated so-called "customer financial data" said that in the first three quarters of 2011, customers realized sales revenue of 2 billion yuan, and annual sales revenue was expected to be 3 billion 200 million yuan.

Many insiders close to customers said to the correspondents that the two data of "2 billion" and "3 billion 200 million" should be acceptable.

Van guest bleeding point

After the slowdown in the growth rate of customers, the problem of "sustained losses" began to emerge.

In December 2011, in the face of external doubt, Chen responded publicly that "user experience is the sole criterion for evaluating the brand of e-commerce". "I only care about the growth of customers and the two purchase rate."

This is also the core logic of the rapid expansion of all customers.

However, in the past 4 years, customers have paid a high price in pursuit of "user growth" and "two purchase rate".

Taking the fastest growing fiscal year 2011 (from July 2010 to June 2011) as an example, the above declaration materials showed that the sales revenue of 1 billion 937 million yuan (US $306 million) in the current period increased by 300% compared with 472 million yuan (US $74 million 590 thousand) in the previous fiscal year. However, its net loss also increased from 68 million yuan (10 million 745 thousand US dollars) in the previous fiscal year to 486 million yuan (76 million 872 thousand US dollars), an increase of more than 600%.

According to this declaration material, in the 2011 fiscal year, a typical customer order is composed of 108 yuan per unit price, 71.5 yuan of product cost, 14.5 yuan of logistics cost, 26 yuan of marketing cost and 23 yuan of other operating costs.

In the current period, the total number of orders for all customers was 17 million 976 thousand, and each such order brought a net loss of about 27 yuan for all customers.

Although the gross profit margin of 33.7% in the 2011 fiscal year is not low, the high marketing cost, logistics cost and so on still break it down.

In the current period, the total marketing expenses of van customers amounted to 464 million yuan (US $73 million 347 thousand).

In an interview, Chen said that outdoor advertising was the most popular among all customers, but this was mostly for brand building. The real order for customers was search engines, website alliances, clients, video websites, etc.

Take the "website alliance" as an example, it will receive a commission of 16% for every customer who brings an order and finalized the paction.

That is to say, if the order is 100 yuan, everyone will pay 16 yuan to the website alliance.

In July 2011, van customer has announced that its cooperation with the network alliance will be reduced from 16% to 10%.

And the return ticket is one of the most important marketing means for customers to increase the "two purchase rate".

This has also engulfed the gross margins of customers.

Take the "buy 200 yuan to 200 yuan" as an example, after shopping for 200 yuan, you can get 4 4 yuan gift cards. When the user buys the next shopping, if you purchase 300 yuan, you can use a gift card of 50 yuan, directly deducting the 50 yuan cash.

Although the customer's "two purchase rate" has been improved, it also means that the gross profit margin of the 300 yuan order has been eaten by about 17%.

It is said that the customer's current "two purchase rate" is about 50%.

Logistics distribution costs are another big part of the cost of selling customers.

Aforementioned former customers revealed that although the distribution business of all customers was mainly borne by their subsidiaries, however, "such as wind is independent accounting". In 2010, the cost of paying customers such as wind is about 10 yuan per unit.

The problem is that customers only charge 5 yuan / single price for each 5 yuan shipping fee, while in the event of "99 yuan free shipping" (in order to raise the price of passengers) or even "free shipping" and other promotional activities, customers need a full subsidy of 10 yuan / single freight.

In addition, in pursuit of the ultimate "user experience", the "300 kilometers within 24 hours of distribution service" and "free return policy" have greatly increased its logistics costs.

A shopping website CMO admitted that due to the particularity of clothing and footwear products, the return rate is usually between 15% and 20%, and it is hard to lower than 10%. The most obvious cost of return is logistics loss. "Warehousing and distribution costs are basically between 20 yuan and 30 yuan per unit, at least 15 yuan."

In the 2011 fiscal year, the logistics cost of van customers was as high as 263 million yuan (41 million 558 thousand US dollars), with an average cost of about 14.5 yuan per order.

Perhaps this is enough to prove that Feng Da is indeed a competitive logistics company.

However, the large-scale expansion of product line in 2011 has not only failed to help the actual sales growth target, but added more "bleeding points".

The most direct consequence of the increase in product category is the sharp expansion of the workforce.

In January 2011, the number of employees was 5000, while in July, the number of employees was over 10000.

The average wage of van customers is more than 4000 yuan. In this case, the monthly cost per customer is as high as about 20000000 yuan.

By the end of June 2011, Chen had begun to reflect on the strategy of "category expansion". In July 30th, Chen announced through "open letter" that due to excessive expansion, there were loopholes in management. In order to improve efficiency, customers decided to use the "end elimination system" and lay off 5%.

Up to now, the number of employees is still around 8000.

However, the above declaration materials also showed that from July 2008 to June 2011, the cumulative losses of 3 years were only about 600 million yuan ($95 million), which is not as exaggerated as the "4 yuan accumulated loss in the past 4 years".

In fact, for this widely circulated "fan guest financial data", the old age explicitly questioned, that is, "loss 2 billion".

In the evening of December 20, 2011, Chen told the correspondents: "I have so much financing. Before 2011, the total financing of the 5 round of customers was 192 million dollars, which was 1 billion 214 million yuan." how can I get so much money? This account is very simple. If I lose so much, I dare to sit here and chat with you. "{page_break}

Hard choices

In the history of van guest, from 6 to July 2011, it may become a memorable key point in the future.

At that time, it was experiencing the biggest setback in the 4 years since its founding and began to reflect on it. At that time, it completed a significant sixth round of financing (F round).

The declared materials show that as of the end of June 2011, although the total assets of the customers were as high as 2 billion yuan (316 million 500 thousand US dollars), their cash and cash equivalents were only 650 million yuan (102 million 500 thousand US dollars), while the total liabilities were as high as 1 billion 500 million yuan (238 million 280 thousand US dollars).

It is not just "loss" that causes the cash flow of customers, but the sharp increase in inventory caused by "category expansion" is the main culprit.

At the end of June 2011, accounts payable amounted to $1 billion 153 million ($182 million 280 thousand) in the total liabilities of van worth up to $1 billion 500 million.

But in July 2011, the completion of the sixth round of financing was temporarily alleviated.

In December 8, 2011, when there were four questions from the outside world, Chen announced that he had "completed F round financing 5 months ago": the amount of financing was $230 million, and investors included Temasek, CITIC industry fund, Kerry Group and IDG, and the funds had been fully accounted for.

An investor in the venture capital (micro-blog) pointed out that the main purpose of Chen's announcement of F round financing in early December was not to respond to doubts but to "soothe the suppliers".

"At present, customers are unable to borrow money from banks, so they have a relatively long time in the supplier's account (which takes up suppliers' funds).

But recently, there are too many negative customers. Suppliers have given them a lot of pressure.

At that time, F investment was announced to stabilize suppliers' minds, fear suppliers to reduce their accounts, or to pay customers as early as possible.

The above declaration material shows that after the completion of the F round of financing, as of September 30, 2011, the cash and cash equivalents held by Van customers have increased to 1 billion 520 million yuan (US $239 million 540 thousand).

However, its inventories continued to increase to $1 billion 445 million ($228 million 580 thousand) and accounts payable increased to $1 billion 631 million ($258 million).

After the completion of the F round of financing, the pressure on the aged may not be reduced.

In the aforementioned investment circles, investors will surely have the requirement of "listing as soon as possible".

"The pressure of investors in the first 5 rounds is not so great, because the valuation of every customer is rising, and the most difficult thing is the F round investors."

A former customer said that at the beginning of its establishment, it had a 80% stake, and its shareholdings may have been diluted to about 23%.

Perhaps, the listing of all customers has been confirmed in the F round of financing.

The above declaration material shows that during the period from 7 to September in 2011, a share price of $37 million 700 thousand (239 million yuan) was added to the management cost of the customer, which is also regarded as a sign that "everyone is officially launched."

As a result, anyone who had originally declared "the first half of 2012 to go public" came out with the news of "offering prospectuses to the SFC" in October 2011.

In November 11th, Liao Bin, CEO, announced that everyone had submitted a listing application in November 5th, and that it could be approved and listed in December as soon as possible in November 11th.

However, in the above-mentioned investment circles, it is not the best time for anyone to go public.

"The sales and business models of van customers are on the top." however, according to the usual practice, the valuation of the F round is about 3 billion to 3 billion 200 million dollars, so the valuation of IPO is at least 4 billion 500 million dollars.

But this valuation, the investment bank may not be able to sell it at the moment.

Everyone wants a better valuation, unless it is hot again, but this is too uncertain.

If customers do not want to sell at a low price, there seems to be only one option for the old age: continue to make sales of large customers and continue to push up the valuation of customers. (the most widely used valuation method for electric business enterprises in 2011 is the sales volume of RMB 1 yuan, which should be valued at US $1), and then wait for the next opportunity to raise funds or to go public.

The former customers also said, "capital structure has been determined, the valuation of all customers can only go higher and higher, go up and do the industry first", "no customers can not expand."

This is a road of no return and can only go forward.

However, as we continue to expand, we must better manage the cash flow of customers and effectively control the amount of losses, so that customers can become more healthy.

In December 2011, when asked "where is the boundary of financial security in the rapid development of van Tong", Chen said, "I haven't counted it yet. You have raised a particularly good question."