Read the only product prospectus: Analysis of the reasons for the loss of electricity and profit space

February 18, the only product will submit an IPO application to the U.S. SEC, read the only product prospectus, with this set up only 3 years of start-up companies to analyze the loss of the cause and profit margins, is a good case.

The essence of meager profit

The main costs of a typical Business-to-consumer website include procurement costs, operating expenses, human expenses, and so on. Combined with the only product will be established since the financial situation analysis.

Only product will be established in August 2008, the table in 2008 financial data is August 22 December 31, when the official operation has not started, the largest expenditure is the administrative costs of a total of 226,000 U.S. dollars, should be the cost of forming a team. The second is the warehousing and logistics of 84,000 of dollars in expenditure, the only product will be basically no need to distribute the list, so it should be the initial cost of the rental storage.

After 2009 only goods will begin to increase procurement of goods, into the normal operation, we look at what the appliance business needs to spend.

Procurement costs, the only product will be the basic business model for brand cleaning inventory, 2009-2011 only goods will be the procurement costs of 2.576 million, 29.374 million, 183.8 million U.S. dollars, the total revenue ratio of 91.8%, 90.2%, 80.9%, for the largest expenditure. Early only product will not form Word-of-mouth, the user is not much, orders are also less. Most of them from the brand agents to take goods, can not direct contact with the brand, which led to its higher cost of procurement, gross margin is very low, 2009 and 2010 gross margin of 8.2% and 9.8% respectively. Such gross margin, want to make money hard.

Operating expenses, including warehousing logistics, marketing, technology and content, administration, ETC., 2009-2011 respectively 1.609 million, 11.574 million, 76.331 million U.S. dollars, accounting for 57.4%, 35.5%, 33.6% respectively.

In particular, 2009-2011 only Goods will warehouse logistics costs are 610,000, 5.809 million, 45.478 million U.S. dollars, accounting for the total revenue ratio of 21.8%, 17.8%, 20% respectively. Among them, distribution and sorting costs are 300,000, 4.3 million, 29.4 million dollars respectively. Warehousing Logistics expenditure is the only product will be the bulk of the operating expenses, and with the expansion of revenue and increase in size, probably maintained at about 20%. The prospectus also says the cost of warehousing logistics will remain a significant expense for the company.

As of the end of 2011, only 2,934 employees, including logistics and distribution department staff of up to 1854, this and only in recent years in the rapid expansion of the process of large-scale investment in the construction of warehousing logistics to improve inventory and distribution capacity.

2009-2011 Only the marketing costs of the goods will be 303,000, 2.438 million, 15.253 million U.S. dollars, accounting for the revenue ratio of 10.8%, 7.5%, 6.7% respectively.

In terms of technology and content expenditure, the expenditure of the Goods Council is generally about 3% of the total revenue.

As for the administrative costs, created in 2008 for 226,000 U.S. dollars, this is basically the start-up company's initial expenditure. 2009 for 1.609 million U.S. dollars, accounting for 23.2% of total revenue, with the rapid development since then, the cost in 2010 revenue accounted for a significant reduction to 8.7%. The increase in 2011 to 84.575 million U.S. dollars, mainly accounted for the company before the IPO option pay, deduct this part of Non-cash expenditure, 2011 administrative cost of 11.858 million U.S. dollars, revenue accounted for down to 5.2%.

In addition, the only prospectus disclosed the company's property and equipment costs since its inception, 2009-2011 respectively, 199,000, 1.514 million, 10.606 million U.S. dollars, which is also the normal operation of the electricity business, the expansion process must be the cost. Therefore, before an electric dealer "Burns" to a certain degree of heat, must take into account the actual need to spend money in a lot of places.

In summary, it can be calculated that only the 2009-2011 operating losses of 1.3807 million, 8.366 million, 32.989 million U.S. dollars (the option to add non-cash expenses of 107 million); Operating loss rates are 49.2%, 25.7%, 14.5%, respectively. (option pay for non-cash expenses is 47.1%).

The way of turning over

"A certain scale is the core of our business model," Bezos said in a letter to shareholders in 1997 when Amazon went public. "The electric dealer has the unique superiority compared to the traditional retail industry, although many Chinese electric power business is in the loss state, however, this is mainly due to the need for" high fixed cost "input, when the development to a certain scale, there is a large enough user base, its" low variable cost "advantage began to play, operational efficiency, the profit indicators will begin to improve , the Chinese electric business industry has been in such a stage after a lot of capital investment and rapid development in recent years.

Data show that more than three years since the establishment of the only product will achieve explosive growth, this development rate is the offline retailer through the store expansion can not be completed.

The reasons are as follows: first, the mode of choice, flash purchase, such as limited to buy the form suitable for the discount industry, only goods will be used in this form to stimulate consumption every day, and even make users "addicted" to cultivate a habit of consumption, and snapped up with high-frequency, large amount of characteristics, can help suppliers to deal with inventory of goods faster, but also help the goods will speed up turnover. Second, the market positioning, only goods will be from luxury to the two or three-line fashion brand, flagship two or three-line city. Third, the Internet Word-of-mouth Transmission, high discounts and low prices, genuine protection of consumers are very attractive, in the era of social networking, the power of this word-of-mouth transmission is even greater, in 2011 only the goods will be distributed in the range of 330 cities nationwide.

After the scale effect began to play, although only the goods will still be at a loss, but the revenue growth rate is higher than the procurement costs and operating costs growth, the financial indicators began to change direction.

As of 2011, only the gross profit margin (19.1%) curve is still under the operating cost rate (33.61%), so 2011 operating loss of 14.5%.

Only product will eventually turn the profit has two ways: to improve the gross margin, reduce the cost rate.

2011 only products will be the gross profit margin is 19.1%, because there is no pricing power, the possibility of raising prices to users is very small, improve the gross margin can only be through the following ways: To attract more users and consumption, increase order to reduce the purchase price; increase the dependence of suppliers by channel influence, In the cooperation of more than 1000 brands in 2011, only the goods were countersigned by more than 360 brands of discount goods network exclusive sales rights, the introduction of more high gross margin of goods, such as the reopening of luxury and new tourism channels. Next, the gross profit margin of the goods will probably raise to about 25%.

Another way to improve profitability is to improve operational efficiency and speed up operations. Only when you start working with suppliers, need to pay 10%-15% of the goods mortgage charges, and the relationship is good, do not pay this fee, but the use of consignment mode, that is, the right to return the supplier, a product sales 3-5 days after the next frame, the remaining inventory can be returned, which can speed up the pace of sales, Improve the utilization of funds, although only the goods will still be operating losses, but the operational activities generated by the cash flow has been positive.

Only the cash flow generated by the operation of the goods will be 1.366 million, 6.573 million, 1.307 million USD in 2009-2011 respectively. Operating cash outflow is the bulk of the inventory expenditure, the inflow is the bulk of the supplier's accounts Payable, 2009-2011 Inventory expenditure/Payables respectively 1.43, 1.17, 0.80, indicating the further improvement of supplier relationship.

From the inventory turnaround days, the only goods will be 2009-2011 respectively 114, 56, 77 days, 2011 years inventory turnaround days in the rebound mainly because of support for sales growth needs, and additional inventory. Only goods will inventory turnover days far lower than the established electricity quotient, such as Dangdang is 136, 148, 145 days respectively. This is to say that only the quality of the team supplier management ability is strong, on the other hand, and industry attributes, such as TJX can keep the inventory turnaround days in 60 days. Only goods will TJX business from the line to the line, and the use of "flash purchase", Inventory fast Forward, a cycle of about 40, 50 days, capital operation efficiency is higher.

Only the rapid development of products in recent years has accumulated a certain own users, the scale effect is obvious, the supply chain relation improves, the purchase cost reduces the gross profit margin to raise, the turnover speed accelerates, moreover the commodity variety also more and more, the purchase and the organization on-line promotion experience also more and more rich, these can make the only product will attract more users, forms the virtuous circle, The future size and gross margin have increased space.

How much more can the operating cost rate of the product be reduced?

With the increase of the scale and operation efficiency of the products, the proportion of the total operating cost to the revenue is decreasing, among which the cost of technology and content, administration and marketing is obviously lower, and the administrative cost is reduced from 23.2% in 2009 to 5.2% in 2011, The cost of marketing has fallen from 10.8% in 2009 to 6.63%, and these two costs account for a further drop in the future.

And the only goods will be operating costs the most is warehousing logistics costs, 2009-2011 Warehousing Logistics costs accounted for 21.8%, 17.8% and 19.89%, high, the future can be profitable to a large extent to see if the cost can be lowered.

In terms of the average cost per warehouse logistics, in recent years, the scale effect of the distribution to each single logistics cost is declining, and only the 2011 warehousing logistics costs A significant increase in the main reason is that it in Jiangsu, Sichuan, Beijing, the establishment of Warehousing logistics Center (previously only in Guangdong has a storage center), The total area of these three new storage centers is 82,000 square meters.

If the new storage center fully operational, only goods will be the future efficiency of warehousing and logistics will be improved, in addition, only the goods will be distribution to the third party to do, but in 2011 in North wide and so on has also begun to build a distribution team to improve distribution efficiency and quality of service.

can take Dangdang warehouse logistics cost comparison, Dangdang 2007 warehousing logistics costs accounted for 19.2%, 2008 to 15.77%, 2009 to 13.81% and achieve profitability, currently stable at about 13%, This is a relatively mature independent electrical business site warehousing logistics costs (Dangdang revenue scale of 3.6 billion yuan, 2011 Storage Center area of up to 340,000 square meters). In contrast, only the goods will be the current storage logistics costs accounted for a larger decline in space.

How to make more money in the future?

Similar to the only product will be independent of the consumer electricity dealers have to accumulate their own users, to a certain scale, the future can be achieved profitability, but this process will not be too easy.

Assuming that its future product positioning and business model does not change, clothing is still home fashion brand discount business, gross margin can be achieved TJX level (25%) has been difficult to calculate 12%-15% of warehousing logistics costs, 3%-5% of the marketing costs, about 2% of the technology and content costs, 3% About the administrative costs, operating margins may be only 1%-2%.

And the only product will be in the brand discount industry in China is in the rapid development stage, the competitive pattern is undecided, the variables are still more.

Only in recent years relying on "low-cost + authentic" attracted a lot of users, but this user stickiness has not become a strong enough moat. Only continue to improve system execution, strengthen the first advantage, the upstream supply chain and downstream consumers are glued, only the product will itself as a brand to clean up the intermediate channels of inventory will be sufficient stability.

The author is Snowball finance I, U.S. stock analyst