Vips post 4 q12 presentation
- 1. February 2013 Vipshop Holdings Limited Investor Presentation
- 2. 1 Disclaimer This presentation contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as Vipshop’s strategic and operational plans, contain forward-looking statements. Vipshop may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (“SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Vipshop’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Vipshop’s goals and strategies; Vipshop’s future business development, results of operations and financial condition; the expected growth of the online discount retail market in China; Vipshop’s ability to attract customers and brand partners and further enhance its brand recognition; Vipshop’s expectations regarding demand for and market acceptance of flash sales products and services; competition in the discount retail industry; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Vipshop’s registration statement on Form F-1, as amended, filed with the SEC. All information provided in this presentation is as of the date of this presentation, and Vipshop does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
- 3. 2 China's Leading Online Discount Retailer for Brands Vipshop
- 4. No large discount retail chains or branded outlets Massive retail opportunities in China 3 Massive discount retail opportunities Immature offline discount retail infrastructure Constant supply of excess inventory Total estimated retail sales of US$3.8 trillion in 2013(1) Total apparel retail sales were US$151.9bn in 2011(1) ; apparel inventory accounts for approximately 50% of total apparel market(2) Total discount retail was US$23.6bn in 2012 with a 56.2% 12-15E CAGR(1) Note: (1) Data from Frost & Sullivan report; assuming 1 US$ = 6.2301 RMB. (2) Data from BCG report “The World’s Next E-Commerce Superpower”. Huge consumer demand
- 5. Consumers in China are skipping outlet model and going directly online for discounted branded products Online: the future of discount retailing in China 4 Note: (1) As 2012 year end, including 1,867 Marmaxx stores and 374 HomeGoods stores in the US, from 2012 Company Presentation (2) As of February 2013, including 1,091 dress-for-less stores and 108 dd’s DISCOUNTS stores in the US, from February 2013 Company Investor Overview (3) As of February 2013, from Company Website (4) As of February 2013, from Company factsheet 2,241stores(1) 1,199 stores(2) 67 outlets(3) 38 outlets(4) China's offline discount retail are extremely underdeveloped ChinaU.S. Large Off-price retailer Outlets None
- 6. 5 China: A more attractive market opportunity Broad universe of popular brands for mass market Limited upfront deposit Most products can be returned to suppliers Need to pay for inventory upfront Products can not be returned to suppliers Well established online presence and capabilities Largely rely on third party platforms to build online presence Market positioning Mostly focused on high-end and luxury markets China U.S. Discount / outlet retail channels saturated for mass market merchandise Lack of well-developed discount / outlet retail channel Competition from offline channel Brands’ own online presence Working capital requirement Broader addressable market Better business model Result
- 7. A unique player in China’s e-Commerce landscape 6 Market place General B2C Cosmetics Broad based Platforms Vertical focused players and online retailers Grocery Online discount Shoes/bags3C Apparel • Partner with leading brands by selling their excess inventory at discount prices • Unique business model partnering with brands has no direct competition
- 8. 7 Rapid increase of new active customers Rapid increase of repeat customers High and stable rate of orders from repeat customers ( in thousands) ( in thousands)( in thousands) Highly engaged and loyal customer base 255 1,330 3,312 538 1,296 2010 2011 2012 4Q11 4Q12 New active customers 804 6,681 20,457 2,771 8,026 927 7,269 21,919 3,005 8,752 86.7% 91.9% 93.3% 92.2% 91.7% 2010 2011 2012 4Q11 4Q12 Orders placed by repeat customers Total orders Orders placed by repeat customers 155 903 2,625 644 1,861 276 1,491 4,110 934 2,586 56.2% 60.6% 63.9% 69.0% 72.0% 2010 2011 2012 4Q11 4Q12 Repeat customers Total active customers Repeat customer as % of total customer
- 9. Preferred discount channel for popular brands 8 One-stop solution for brands Professional team with deep brand knowledge Fast inventory monetization Minimal brand dilution Clear industry leader(2) Note: (1) Number of our brand partners is a cumulative number since 2009, which includes primarily brand owners, and to a lesser extent, brand distributors and resellers. (2) As measured by total revenues in 2011, the number of registered members as of June 30, 2012 and the number of monthly unique visitors in December 2012, according to the Frost & Sullivan Report. Brand partners growth over time(1) Product categories Travel Accessories Home goods SportswearCosmetics Children HandbagsFootwear Apparel Shoppers are not loyal, but our brand partners are. 411 1,075 2,759 2010 2011 2012 2010 –2012 growth by 6.7x
- 11. Relationship with brands Understanding of consumers Business intelligence system Over 250 merchandising staff Excellent merchandising 10 Brand selection Sales management capability Consumer insights Customized marketing Sales events optimization Over 5,800 brands Deepening brand partnership 1 2 3
- 12. 11 Differentiated logistics system Extra process on top of traditional B2C e-Commerce (1) Sales cycle Short Long Traditional B2C e-Commerce Volume of throughput Large Small Note: (1) Comparison on per same-size warehouse basis. Customized and more complicated logistics and warehousing system Sales process No. of SKUs handled Relatively fast Much more Relatively slow Relatively few
- 13. Highly customized and seamlessly integrated IT system for flash sales 12 Support huge traffic spikes Customized ERP system Warehouse management system CRM system Time Traffic 12am 10am 12pm 12am
- 14. High entry barriers 13 First Mover Advantage Business model Operational expertise Economies of scale1 2 3 4 Vipshop is well positioned in China’s online discount retail market
- 15. 14 Visionary management team with strong execution Donghao Yang Chief Financial Officer 12+ years experience in finance Previously CFO of Synutra International Inc (NASDAQ: SYUT) and Tyson Foods (NYSE: TSN) Greater China MBA from the Harvard Business School Maggie Hung Senior VP, Merchandising 20+ years experience in merchandise retail Previously VP of Grand Pacific Mall and GM of Grand Ocean Department Store in Nanjing Bachelor’s degree from Ling Tung University Yizhi Tang Senior VP, Logistics 10+ years experience in logistics industry Previously logistics department head of Tesco in northern China, and Senior Director of logistics department of Dangdang.com (NYSE: DANG) Master’s degree from Sun Yat-Sen University Eric Ya Shen Co-Founder, Chairman, CEO 18+ years experience in consumer electronic products distribution Previously Chairman of Guangzhou NEM Import and Export Co., Ltd. EMBA from Cheung Kong Graduate School of Business Xian Feng Cai VP & GM, Shanghai Branch 19+ years experience in retail industry Previously GM of IGA Distribution PTY LTD Bachelor’s degree from University of Melbourne Mr. Daniel Kao Chief Technology Officer 16 + years experience with leading e-commerce and Internet companies in the US and China Previously director of site operation and quality engineering at eBay Inc Bachelor’s degree in computer science from Iowa State University Arthur Xiaobo Hong Co-Founder, Vice Chairman, COO 12+ years experience in consumer electronic products distribution Previously Chairman of Societe Europe Pacifique Distribution Alex Jiang Senior VP, Business Intelligence and Customer Relationship Management (CRM) 20+ years of experience in China’s retail sector Previously VP of Dangdang.com (NYSE: DANG) and Founder / Director of E-elephant Consulting Company Limited Bachelor’s degree from Chongqing Business School Xiaohui Ma VP , Online Marketing 10+ years experience in marketing and media Previously editor-in-chief of SINA Bachelor’s degree from Communication University of China
- 17. Phenomenal growth 16 Net revenues (US$ in millions) Total orders (in thousands) 927 7,269 21,919 3,005 8,752 2010 2011 2012 4Q11 4Q12 684.1% 201.5% 191.2% 32.6 227.1 692.1 105.2 299.6 2010 2011 2012 4Q11 4Q12 597.1% 204.7% 184.8%
- 18. 17 Steady margin expansion Quarterly gross profit and gross margin (US$ in millions ) Strong and defensible margins: • Brands often sign exclusive deals to minimize brand dilution (>730 exclusive brands) • Brands only liquidating excess inventory (limited quantity = inability to price shop) • Brands want to efficiently monetize excess inventory and have little price sensitivity 4.9 7.4 10.0 21.0 21.4 29.6 34.8 68.7 17.0% 18.3% 19.0% 20.0% 21.2% 21.8% 22.3% 22.9% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Gross profit Gross margin
- 19. Continuous investment in logistics infrastructure to drive long term growth 18 (US$ in millions) Fulfilment expenses (Non-GAAP) 1 Note: (1) All numbers are shown on a non-GAAP basis and excludes the impact from share-based compensation expenses 6.0 8.4 11.4 19.4 16.8 20.5 21.6 37.3 20.9% 20.7% 21.7% 18.4% 16.6% 15.1% 13.9% 12.5% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Fulfilment expenses (non-GAAP) Fulfilment as % of net revenue
- 20. Tremendous operating leverage and historically low marketing expenses 19 Note: (1) All numbers are shown on a non-GAAP basis and excludes the impact from share-based compensation expenses (US$ in millions) General and administrative expenses (Non-GAAP) (1) (US$ in millions) Marketing expenses (Non-GAAP) (1) 1.7 2.3 4.6 6.6 5.8 6.6 7.3 12.4 5.7% 5.7% 8.7% 6.2% 5.8% 4.9% 4.7% 4.1% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Marketing expenses (non-GAAP) Marketing as % of net revenue 1.0 2.9 3.7 4.2 3.9 4.3 4.6 5.0 3.6% 7.2% 7.1% 4.0% 3.9% 3.2% 2.9% 1.7% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 G&A expenses (non-GAAP) G&A as % net revenue
- 21. 20 Note: (1) All numbers are shown on a non-GAAP basis and excludes the impact from share-based compensation expenses (4.2) (7.1) (10.8) (11.2) (6.5) (4.2) 0.6 8.1 -14.6% -17.6% -20.6% -10.6% -6.4% -3.1% 0.4% 2.7% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Net income/loss (non-GAAP) Net margin (non-GAAP) Net margin (Non-GAAP) (1) (US$ in millions) Net margin improvement
- 22. 21 (in $ thousands) December 31, 2011 December 31, 2012 Cash and cash equivalents and held-to-maturity securities 44,955 210,570 Current Assets 158,278 381,952 Total Assets 167,435 398,917 Current Liabilities 149,146 316,334 Total Liabilities 149,146 316,334 Total Stockholder’s Equity 18,289 82,583 Current Ratio 1.1 1.2 Balance Sheet Highlights
- 24. Our future growth strategy 23 Expand warehouse capacities to accommodate increasing customer demand Greater penetration in additional cities Greater penetration in Northern, Eastern, Southwestern and Central China Increase brand partners and sales per brand Expand product category Exclusivity with brand partners Further expand into mobile and connected devices Extend partnership with social networking platforms such as Weibo and Renren Geographical expansion Product expansion Channel expansion
- 25. Major profitability drivers 24 Word-of-mouth ROI maximization Cost control Increased Operating leverage Stronger negotiation power Better pricing Gross margin Fulfillment expense Marketing expense G&A expense Distribution centers build out Capacity utilization ramp up Profitability 1 2 3 4
- 26. 25 Key investment highlights Market leadership position Strong industry growth fundamentals1 Highly engaged and loyal customer base Superior operational expertise 2 3 4 Strong management team5
- 27. 26 Thank you!