Luxury Electric Vip.Com "Ice Breaking" Tour

Vip.com's customer unit price is difficult to raise, and the margin of gross margin is limited. How should we adjust the business mode and reverse the loss situation in the supply chain mode?

On the evening of March 23, 2012, vip.com Holdings Limited was officially listed on the NYSE. As the first successful Chinese stock market in 2012, vip.com carries some non market and non capital content. After all, the Chinese stock market experienced a crisis of integrity in 2011, and the window for overseas listing was basically closed.

No more than half an hour, the stock price began to dive down, the first day closing dropped more than 15%, and closed at $5.5, a full drop of $1. But then, vip.com, the main online retailer of clothing, bags, shoes and accessories, has taken the ice breaking tour. Its first performance has not been easy.

The profit margin of "limited time discount"

Since the third quarter of 2011, short selling agencies have been hunting for Chinese concept stocks: financial fraud, prospectus exaggeration, poor profitability, and board infighting. Although it has been "bloody listed", vip.com still can not evade the above accusations. Financial problems and board issues are easy to avoid. However, poor profitability has become an indisputable fact. According to vip.com's earnings report, its net losses in recent three years were 1 million 380 thousand US dollars, 8 million 360 thousand US dollars and US $156 million respectively. Among them, the net loss in the fourth quarter of 2011 was 63 million 520 thousand US dollars, a substantial increase over the previous few quarters.

Although vip.com's breakthrough in the US is not surprising, its market performance on the first day of its opening is still reflected that the overseas capital market is not optimistic about the prospects of China's electricity supplier.

Unlike Taobao, Jingdong and other large and full range of electricity providers, vip.com focuses on subdivision, mainly clothing, bags, shoes, accessories and so on. Three years ago, vip.com relied on angel investment to raise 30 million yuan RMB to start a business. In the first half of the year, it was positioned as a luxury discount without orders. After that, it was converted into a public fashion product with sales of only 200 yuan. It also established a business model of "brand discount + limited time snap + genuine insurance", that is, "flash buying" mode. In second years, it was launched by small scale, with more than one thousand daily, Sequoia Capital settled in 20 million dollars, increased purchase and promotion efforts, and Japan launched a IPO overseas tour.

Vip.com's "flash buying" mode is composed of the purchasing team responsible for establishing cooperation relationship with the brand players, purchasing the supplier's inventory products at very low price, purchasing the 10%~15% deposit only, and then promoting the sale on the website in the form of flash buying, special sale and so on. After the activity is completed, the unsold products can be pushed to the supplier (within 15 days after the end of the promotional activities).

The returnable system makes vip.com relatively low requirements for operating capital, quick turnover of inventory, and conducive to short-term high growth, but this does not change the fate of its loss. Lu Zhenwang, an e-commerce observer, points out that vip.com's losses are precisely due to the particularity of the flash. The high cost of the supply chain in the flash mode led to the low price of both the unit price and the gross profit margin. According to the financial data of vip.com in 2011, the average passenger price was 196.74 yuan, the gross profit margin was 19.1% yuan, that is, 37.58 yuan. At the same time, vip.com needed to spend 6.7% yuan (13.2 yuan), logistics cost 19.9% (39.15 yuan), labor cost and other 5.2% (10.23 yuan). The total cost was 31.8%, that is, 62.58 yuan, that is to say, at present, the net loss rate is about 31.8% yuan, and the net loss rate is about B2C.

Uncertain prospects for making money

In view of the prospect, vip.com executives elaborated several important measures to improve business and turn losses into profits in the roadshow. The first is to improve the pricing capability by improving the bargaining power with suppliers to improve the gross interest rate. Secondly, by raising funds to build the storage center and increasing the utilization rate, the logistics cost will be reduced. Then, through word-of-mouth dissemination, the old customers will be re purchased to raise the ROI (ROI), thereby reducing the marketing cost. In addition, we will also control the cost of administrative expenses and increase operating leverage.

It is almost impossible to raise the unit price of passengers. The mode of time limited shooting itself means lower unit price, unless it goes. Luxury goods Route, but the mode of luxury electronic business platform has been tried and wrong by vip.com, and a series of problems have been exposed. Chen Longfei, a business man, doubts the way vip.com can improve its profitability.

US researchers share the same model analogy analysis. They believe that vip.com's independent B2C business will accumulate its own users. After reaching a certain scale, it is possible to achieve profitability in the future, but this process will not be too easy, and there will be limited space to raise gross margins. The analyst said that the centenary TJX is a brand discount giant, similar to vip.com, for fashion and home fashion. brand With an annual revenue of 21 billion 900 million US dollars and a gross margin of about 25%, assuming that vip.com's future product positioning and business model remain unchanged, it is still a discount business for fashion home fashion brands. It is not easy for gross margin to achieve TJX level, accounting for about 12%~15% of warehousing and logistics costs, about 3%~5% of the market. Marketing Costs, about 2% of technology and content costs, about 3% of administrative expenses, and operating profit margins may be only about 1%~2%. The premise must be that vip.com can maintain user growth and digest inventory products in time, and further introduce more brands to form snowball effect.

At present, the price of vip.com is difficult to raise, and the margin of gross margin is limited. How can we adjust the business mode and reverse the loss situation in the supply chain mode? The industry is generally cautious about its actual strategy and implementation effect.

As a pioneer in the overseas capital market this year, whether vip.com's future can make money is not only related to the life and death of vip.com, but also directly related to the clothing business platform and other segments of the market.