Vipshop: Cautiously optimistic about second-half recovery, customer acquisition investment will increase.

The following is the summary of the 1Q23 conference call of Vipshop. For financial report analysis, please refer to "Vipshop: Small is Beautiful, Better than Big and "Declining"?"

I. Management Remarks

The first quarter's performance provided a good start for 2023. We seized the opportunity in the post-epidemic consumption recovery, and clothing products maintained a good trend. With the gradual increase in social activities and holiday and seasonal shopping needs, customer data also maintained strong growth.

In the first quarter, the number of SUPERVIP members increased by 15%, contributing 42% of online GMV.

In terms of products, we focus on delivering a sense of freshness and fashion to customers. Therefore, we will continue to expand cooperation with high-quality brands with high cost performance, continue to improve our product category supply, and continuously optimize the product portfolio provided to VIP customers.

User growth, especially the growth of high-value users, will be driven by a series of comprehensive upgrades. Our goal is to allow VIP users to enjoy the process of purchasing target products.

II. Q&A

Q: Consumer sentiment in recent months? May GMV trend, how to look forward to the whole year?

After the Spring Festival, the recovery of wearable products was good, mainly due to the increase in post-epidemic social activities, which led to a strong growth in demand for clothing, and the trend continued in April and May.

Q: Strategy for this year's 618?

This year's 618 period will be extended to about a month. Vipshop will use good products and deep discount prices to benefit consumers. Therefore, the promotion of 618 is similar to the usual approach, and we are actively preparing for it.

Q: In addition to the post-epidemic dividend, how do you expect long-term growth? Will it achieve faster growth than the e-commerce market?

We are optimistic about the trend for the whole year, believing that the continued behavior of consumers after the epidemic will give retail e-commerce a dividend.

In the long run, e-commerce competition is still fierce, and other platforms are attracting users through subsidies and promotions. Vipshop insists on doing a good job in brand special sales. Although the scale is small, based on better products, prices, and experience, we strive to be outstanding. We are quite concerned about industry competition and will continue to work hard.

Q: Thoughts on profit margin in the first quarter?

We have confidence in the high-quality development of the company, and both internal management refinement and investment control are more effective than before.

Q: Q1 SUPERVIP quantity and GMV contribution ratio? How many long-term active users can be converted into VIP users?

The number of SUPERVIP is 6.3 million, yoy+10%, contributing 42% of GMV. The company has more than 85 million annual active users and more than 200 million registered users who have the opportunity to become loyal users. This year, we will continue to strengthen SVIP, expand its scale, increase its rights and interests, and improve its frequency, as they have high loyalty and contribution. Q: What is the outlook for revenue growth in the second half of the year?

1. In terms of users, user growth has turned positive and the overall trend is good. The company will increase investment in user growth and has already mastered scientific methods that can quickly recoup costs. This year, there is confidence in gaining more users, and there is also sufficient market expenses to support user growth.

2. In terms of goods, the company will increase the richness of product categories, support cross-category purchases, and hedge against wear and standard products in different seasons. A whole set of strategies will support healthy growth.

Q: In the face of competition in the e-commerce industry, peers are increasing investment to improve price competitiveness. Is the company more cautious about its judgment of the industry? Any changes in strategy?

The company insists on its own business model, supports well-known brands with traffic, and strictly requires prices in product selection. It strengthens differentiation in the customization of exclusive products for well-known brands and tries to create differentiated value for users as much as possible.

Compared with live-streaming e-commerce, shelf e-commerce has a richer SKU and users value the value of the product itself. The company will focus on improving product strength.

Q: What is the budget situation for market expenses in the second quarter when investment is increased? What is the marketing expense ratio for the whole year?

There is no need to worry about market expenses, as customer acquisition is scientific and costs are controllable. The market expense in Q1 is about 3 percentage points and will not increase to 5 or 6 percentage points. The growth will be within 10%, possibly becoming 3.2 or 3.3, which is generally scientific.

Q: What are the driving forces behind the accelerated growth from the perspectives of user groups, brands, categories, and regions?

Categories: The main force of growth is the strong growth of wearable brands (women's wear, men's wear, children's wear, and sports are all good, and accessories and bags are also rising), and standard product categories do not have strong wear.

City: First-tier cities are slightly higher than other cities, but not much stronger.

Q: What is the growth situation of categories and user scenarios behind the faster growth of GMV than revenue and the progress of 3P business?

Apparel is growing fast, but the return rate is high. The usage rate of "worry-free service" is also higher during the current growth peak, which leads to GMV growth faster than revenue.

The proportion of 3P has not changed much and is currently relatively restrained in order to provide users with higher quality products.

Q: Have you observed consumer downgrading on the user side? Will the selection strategy be changed? Will the same brand reduce the selection of price ranges and follow this trend?

There is currently no evidence of consumer downgrading. The average customer price is between 200-300, and the proportion of high-value goods is not high. It is impossible to judge whether consumers have become more cautious in high-end consumption. Currently, there is no obvious change in user behavior on the platform.

Q: What are the driving forces behind user growth? What are the main customer acquisition channels?

The customer acquisition methods are similar to before: 1) Recently, efforts have been made to improve accurate customer acquisition; 2) Optimize the personalization and products of new customers to improve the conversion rate of new customers; 3) Embedding film and television works and advertising on social media to accumulate brand momentum. The whole set of strategies is committed to achieving sustained customer acquisition under controllable costs.

Q: What is the company's new buyback plan?

The company has confidence in its development. Currently, the stock price is not high, so it will continue to repurchase for a long time to increase the share and value of investors.

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