When the pursuit of high cost-effectiveness becomes a common feature among consumers, discount retail platforms begin to release their charm, highlighting their advantages in the e-commerce industry with particularly fierce stock competition.
Recently, Vip.com (NYSE: VIPS) released its financial report for the third quarter of 2023, which showed that Vip.com achieved a net revenue of 22.8 billion yuan (RMB) in the third quarter, a year-on-year increase of 5.3%; Non GAAP's net profit was 1.8 billion yuan, a year-on-year increase of 15.5%, with both revenue and net profit increasing.
It is worth noting that behind Vipshop's performance is the rising prosperity of the Outlet and discount retail industries, and the core factor is that brand discounts are very in line with the current shopping trend of people who not only need to upgrade their consumption but also value cost-effectiveness.
Several industry experts have mentioned that Vipshop, which has developed the concept of "brand special sale" and created an integrated online and offline special sale model by acquiring the outlet square of Shanshan Group, is benefiting from industry trends and has successfully undertaken this transformation.
Pan Jun, Global Commodity Consultant Director of Bain Company, said that with the economic recovery, user purchasing power is gradually increasing, and the demand for Olay is also increasing accordingly. Hong Yong, a think tank expert at the China Digital Integration 50 Person Forum, stated that Vipshop provides users with big brands and low discounts through internet platforms, adopts flexible supply chain management and logistics delivery, ensures product quality and delivery, and increases user stickiness and purchase intention through precise personalized recommendations.
The report released by the China Department Store Business Association shows that the sales scale of the Olay industry in 2022 is about 210 billion yuan, with a growth rate of 8%, higher than other retail formats. In the first half of this year, the sales revenue of outlets nationwide exceeded 130 billion yuan, which has reached 62% of last year's full year level.
Growth in active users and continuous increase in gross profit margin
In terms of the overall environment, the e-commerce industry has seen a peak in traffic and intensified competition in the existing market. Top platforms hope to attract consumers through low price strategies and subsidies, stimulate consumption with low prices, and even sacrifice some profits to retain their partners and consumers in the ecosystem. However, as the battle between top platforms intensifies, Vipshop's financial report shows that under relatively healthy market deployment, the company's order volume, GMV The number of active users is increasing.
The financial report shows that Vipshop's revenue growth is mainly due to the growth of active customers and consumption driven by the recovery of non essential consumption. In addition, the company's order volume increased by 7% year-on-year to 179.9 million, which directly drove Vipshop's GMV to increase by 13.1% year-on-year to 42.5 billion yuan, exceeding brokerage expectations. In terms of active users, Vipshop's data for the third quarter was 42.5 million, an increase of 3.5% compared to 41 million in the same period of 2022.
At the financial report conference call, Vipshop executives revealed that with the increase in active users, Vipshop's Super VIP Membership (SVIP) growth is also impressive. Vipshop currently has 6.7 million SVIP active users, a year-on-year increase of 17%, and has maintained growth for multiple quarters, contributing 45% of online consumption, "SVIP's ARPU (average user contribution revenue) is also good, and we will maintain this group of loyal users and leverage their advantages."
It is reported that since the beginning of this year, Vipshop has taken a series of measures to improve user experience, including continuously optimizing after-sales service products, creating a worry free consumption environment, and strengthening the construction of user feedback channels. At the same time, in the third quarter, Vipshop will provide SVIP with Tencent Video, Bilibili membership "Buy 1 Get N Joint Card" and other benefits, and carry out Super V Brand Day around the hot topics of the Asian Games to strengthen member value perception, further enhance member deep trust, and promote the continuous expansion of the platform's high-value user base.
The financial report shows that Vipshop's average customer price in the third quarter was 236 yuan, an increase of 6% compared to the same period last year. Industry insiders say that as we enter the fourth quarter, which is already the peak season for e-commerce, and the cooler weather is favorable for the clothing industry, Vipshop's business is expected to further expand.
It is worth noting that, in addition to the performance in terms of active users and total transaction volume mentioned above, Vipshop's net profit margin increased from 7.4% in the same period last year to 8.1%, mainly due to the increase in gross profit. In the third quarter, the company's gross profit margin increased from 21.7% in the same period last year to 23.6%, while the overall expense ratio remained basically unchanged. This data indicates that Vipshop's profitability is continuously increasing.
At the financial report conference call, the management of Vipshop pointed out that due to the improvement of efficiency and favorable category combination, the company has achieved strong profit margins. Now, the company's gross profit and net profit structure are very healthy. "We still have room in terms of net profit, including the fourth quarter and the whole year of next year. We have achieved precise accounting in market investment, and we will not hesitate to invest any money that should be invested, and cherish every penny that should not be invested."
After Vipshop released its third quarter report, Citigroup raised Vipshop's ADR rating to buy, with a target price of $20. At the same time, securities firms such as CITIC Securities, Guotai Junan, CITIC Securities, CITIC Securities, and CICC have also given Vipshop ratings of "buy", "increase", and "outperform the industry".
The prosperity of the discount retail industry has improved, and Vipshop will undertake the transformation
Since the beginning of the year, the performance rebound of the Olay business model has been closely related to the overall recovery of the consumer market. The government's series of stimulus consumption policies, such as coupon issuance and shopping festivals, have effectively boosted consumer confidence. These policies not only enhance consumer purchasing power, but also increase their attention to discounted shopping. The physical Olay expands its reach through online platforms, and online platforms also expand their reach through offline platforms The physical store provides a rich range of products and experiences, further enhancing sales performance Tang Shuyuan, Chief Researcher of the Understanding Era Digital Research Institute, said that Vipshop has demonstrated strong performance, demonstrating its competitiveness in the specialty sales field and effectively meeting consumers' demand for high cost performance consumption.
Deloitte's "2023 China Consumer Insights and Market Outlook White Paper" shows that 41% of respondents listed "what I buy is what I truly need" as one of the three most suitable consumption concepts, followed closely by "I am happy to find the brand and product with the highest cost-effectiveness." 36% of respondents chose this option, highlighting that rationality and pragmatism have become the mainstream consumption concept of consumers.
Looking at the global market, outlets from different regions have shown significant anti cyclical performance. It can be said that the key to maintaining the vitality of Outlets lies in its ability to cater to people's consumption psychology and constantly evolve adaptively. In the United States, it is T J. Maxx, in Japan, has become Don Quixote, while in China, a country with a highly developed e-commerce industry, Vipshop, which has launched the concept of "brand specials," has taken on this transformation.
It is reported that in addition to strengthening the user mentality of "online specials", as early as 2019, Vipshop acquired 100% of the shares of Shanshan Commercial Group for 2.9 billion yuan, laying out its offline Aolai business.
If we focus on the third quarter, Vipshop will launch new columns such as Vipshop Olay, Vipshop Night Market, and Trend Intelligence Bureau to create a high-quality content ecosystem for users and increase platform accessibility. In terms of enhancing the richness of product brands, the platform has introduced hundreds of fashion trends and high-end brands since the beginning of this year. With more high-quality brands entering, platform wearable GMV continued to maintain double-digit growth in the third quarter. In addition, by strengthening brand cooperation, the number of customized products on the platform is increasing month by month. Recently, the platform has further increased the supply of customized warm clothing products, providing users with more differentiated and high-quality products at a high price.
When it comes to a series of measures taken by Vipshop, a board member of a clothing listed company with sales of 3 billion yuan last year said that Vipshop has become an important channel for the company. Compared to live streaming e-commerce platforms, company investors also recognize Vipshop's tone of doing special sales.
The first half of 2023 Chinese consumer survey released by Boston Consulting Group (BCG) shows that in the next 12 months, the middle and lower class consumer groups will continue to lean towards cost-effective channels, and the attractiveness of channels with price advantages will greatly increase. Among them, compared to the past 6-12 months, the Olay/Discount Store as the preferred channel index has increased by 68%.
It is worth noting that while the top e-commerce platforms are emphasizing cost-effectiveness, can Vipshop continue to maintain differentiation and advantages. When discussing the above topic, Tang Shuyuan analyzed that Vipshop's acquisition of goods from brand merchants and establishment of long-term and stable cooperative relationships are its important moat. This model also makes Vipshop an important channel for brands to recover funds. Faced with the rapid changes in the e-commerce environment, Vipshop needs to constantly innovate and adjust its strategy to cope with the increasingly fierce market competition.
Pan Jun further stated that Vipshop will continue to bear the dividends brought by the recovery of the Olay business model. Firstly, it should pay attention to strengthening the positioning of brand special sales to meet consumers' pursuit of high cost-effective brand products; The second is to provide consumers with personalized shopping experiences and enhance user stickiness through data analysis and personalized recommendations; The third is to establish a good cooperative relationship with brand merchants, obtain more differentiated good products and discounted prices, and maintain a competitive advantage.