Q4 2019 Earnings Call
Welcome to the VIP shop Holdings limited fourth quarter and for you.
This conference call at this point like to tend to close to Miss Jesse.
Yes.
She shops, they looked at the Investor Relations schools.
Thank you operator.
Hello, everyone and thanks for joining me actually shop fourth quarter and for your 2019 earnings Conference call.
I will read the safe Harbor statement.
During this conference call.
I'll make forward looking statements, leading the meeting of the private Securities Litigation Reform Act 1995, and based on our current expectation assumptions estimate.
Projections about to shop Holdings limited and its industry.
All statements other than statements of historical facts, we made during the call are forward looking statements.
In some cases these forward looking statements can be identified by words or phrases such as anticipated. The leap continue estimate expect.
It's four are likely to make sure.
Sure well a potential or other similar action.
These forward looking statements speak only as of the D.
And are subject to change at any time and we have no obligation to update these forward looking statement.
Joining us on today's call her Ericsson.
Our co founder Chairman and CEO and don't call young our CFO.
This time I would like to turn the call over to Mr. action.
Good morning, and the good evening, everyone will come at the center for joining old fourth quarter and the full year, two sorta Nike Inc. earnings Conference call.
During the fourth quarter, two sort of 19, we delivered strong financial results and the story the operating performance.
Our customer metrics continued to show strength.
During the quarter total active customer school nicely at 19% year over year.
No no active customer for the full year, two soda Nike increased by 14% year over year.
Between 69 media.
These are the result, Oh, sorry, the customer retention and improved customer speaking these.
In two soda Nike repeat customers.
And it gives you a co two X two customers increased to 80% from 76% Inc. 2018.
We were able to achieve a disease success due to our folks on these calls going to handle.
The fourth quarter 2019.
It was really to the categories contributed to over 70% Colaw what Cogen b.
Since the fourth quarter two started an 18, we have spent though local time and effort being improving our merchandising.
Offering desirable to talk to our customers at the deep discount.
Has paid dividends to our business into sort of 19.
Going forward, we remain committed to the execution of our merchandising strategy.
The enhancing our product offerings.
In November that can be 19, we discontinued our deliver unique opportunity the bypassing dream and to begin to work with excess express.
As a result, I would deliver series has improved and our delivered cost.
Has come down.
Loading.
The best thing Inc. has seen the overall customer experience on our pets.
For example in December 29.
Oh, the old free shipping threshold from two Sullivan from 200, either RMB.
Who see the RMB.
And then because I know free.
We also upgrade the benefits for our Super VIP.
Oh pulpo existing benefits [noise].
The known received an additional 2% hole.
These changes will encourage customers to shop with Us mall.
Further enhancing.
Custom stick in these.
Currently we are exploring some short term impact from the normal CLO virus outbreak, which has an exit our cells in the first cotto to starting today.
Pedal pedigree wasn't especially in Texas.
Because customers are not leaving their home as much.
<unk> decreased because the demand for apparel.
We are working closely with our suppliers.
To get through this difficult time together.
The good news is we have seen some signs of recovery.
Much and the believe customs demands the world rebound quickly once as a virus is contained.
We continue to have full confidence in the strengths, our Chinese economic and as a long term growth potential in trying to just come to retail markets.
At this point, let me handle was a cotwo CFO dual how young so that he may discuss our strategy in more detail and the goal our operational and financial results [noise].
Thanks, Eric and Hello, everyone.
The fourth quarter.
Oh 2019 with solid topline growth.
Exceeded our expectations and extraordinary profitability, despite having one time costs related to the discontinuation up in new.
During the quarter, our non-GAAP net income attributable to VIP shops shareholders increased by 111.4% year over year to 1.9 billion from 914 million in the prior year period.
Our non-GAAP net margin a true attributable to be up you shop shareholders the quarter increased to 6.6% from 3.5% in the prior year period.
The meaningful improvement in profitability is mainly driven by gross margin expansion.
In the fourth quarter of 2019 gross margin increased to 23.9%.
20.6% in the prior year period.
These strong national resolved a made possible our focus on a power related categories, which continued.
Attributed to over 70% or total do you have to be in the fourth quarter of 2019, our deep discount channels from China and quite job contributed to a 45% of our online GMB during the quarter further increasing from 42% in the prior quarter.
We're confident that as long as we continue to work with our suppliers collaboratively and offer desirable product at a discount or customers. These positive trends can and will continue.
Looking ahead, we remain committed to balancing our growth and profitability we will explore.
We will explore reinvestment opportunities that enhance our customer experience and help our suppliers worked with us more effectively.
We're confident in the long term outlook of the company. This by short term turbulence has caused by the double Corona buyers [laughter].
Now moving on to our quarterly financial highlights before I get started elect to clarify that all financial numbers presented today already and then maybe about and all the percentage changes referred to year over year changes unless otherwise noted.
Net revenue for the fourth quarter of 2019 increased by 12.4% [noise] 29.3 billion from 26.1 billion and the prior year period, primarily driven by the growth in the number of total active customers.
Gross profit for the fourth quarter of 2019 increased by 30% to 7 billion.
5.4 billion in the prior year period.
Gross margin increased to 23.9% from 20.6% in the prior year period.
[noise] fulfillment expenses for the fourth quarter of 2019 were 2.1 billion, that's compared with 2.1 building in the prior year period as a percentage of total net revenue.
So when expenses decreased to 7% from 8% in the prior period, primarily attributable to the change in fulfillment just to arrangement.
Marketing expenses for the fourth quarter of 2019 decreased to 944 million somewhat point 1 billion in the prior year period.
As a percentage of total net revenue marketing expenses decreased 2.2% from 4.3% in the prior year period.
Acknowledging and content expenses for the fourth quarter of 2019.
362 million, some 533 million in the prior period.
As a percentage of total net revenue technology and content expenses decreased to 1.2%.
2% and the prior year period.
General and administrative expenses.
Fourth quarter of 2019.
Point 7 billion, that's compared with 821 million in the prior year period.
As a percentage of total net revenue general and administrative expenses were 5.9% as compared with 3.1% and the prior year period, primarily attributable to a severance payment.
652 million and other provision of assets.
154 million related to the discontinuation of can dream.
As well that an impairment of 200 million related to our tight and help me out warehouses.
Goodwill impairment loss for the for fourth quarter of 2019 was 278 million as compared with.
Zero in the prior period, primarily attributable to the goodwill write down in June.
Our income from operations for the fourth quarter of 2019 increased by 76.9% to 1.8 billion from one building in the prior year period.
The margin increased to 6.1% from 3.8 present in the prior year period.
Non-GAAP income from operations, which excluded share based compensation expenses.
In addition of intangible assets, resulting from business acquisitions, and goodwill impairment loss increased by 93.7% 2.2 billion from 1.1 billion in the prior period.
Non-GAAP operating income margin increased to 7.4%.
4.3% in the prior year period.
Our net income.
Terminable to be up you stopped shareholders for the fourth quarter of 2019 increased by 111.4% to 1.5 billion from 689 million in the prior year period.
Martin attributable to VIP shot shareholders.
The 5%.
2.6% and the prior year period.
Net income attributable to VIP shops shareholders for diluted he has increased to two point 14 arm b from one on B in the prior year period.
Non-GAAP net income attributable attributable to VIP shop shareholders, which excluded shared based compensation expenses.
Well impairment loss and loss of investments amortization of intangible assets, resulting from business acquisitions text effective amortization of intangible assets.
Talking from business acquisitions, and best investment gain a revaluation of investments excluding dividend tax effect of investment gain a revaluation of investments excluding dividend. That's sure applause an investment of limited partnership that is accounted for as an equity method G.
Increased by 111.4% to 1.9 billion from.
114 million in the prior year period.
Non-GAAP net margin attributable to VIP shops shareholders increased to 6.6%.
3.5% in the prior period.
Non-GAAP net income attributable to VIP shops shareholders per diluted he has increased to two point.
84, RMB from 1.33 RMB in the prior year period.
[noise] as of December 31st 2019, our company had cash cash equivalents.
<unk> cash of 7.7 billion and short term investments of 3.1 billion.
Fourth quarter 2019, net cash from operating activities was 6.1 billion.
Looking at our business outlook for the first quarter of 2020, we expect our total net revenue to be between 17.1 billion RMB and 18.1 billion.
Presenting a year over year decline of approximately 15%.
20%.
Early sector in the short term impact from the normal Corona virus outbreak.
These forecasts reflect our current and preliminary view on the market and operational conditions, which is subject to change.
With that I would now like to open the call skewing it.
Thank you.
Gentlemen, I'll begin the question answer session sleep questions. Please press star one I get tell it sounds like you need.
Yes at the request that isn't it sounds like <unk> and to be about is a chance to ask please limit yourselves to only one question.
Once again ask your question please spend on one.
Sounds.
First question comes from Tonight, So much Chung of Jefferies.
Uh huh.
Hi offense management bought picking my question's Ambrish everybody is in what how I'd say.
I have a question regarding the supply all of these conduit apparels occupant. The fact that problem no I would be to business. So about a four offline I should we expect that would be up at the point is coming up how will you wouldn't go off rapidly and that would be our local brand.
Got it.
I will wants to part of it but in Saudi Arabia is kinda about perils after it over and mice.
<unk> question, it's about a margin up in public about the GP margin based mentioned.
Let them central improvement on a year on year basis, how should we look at the GP margin trends.
And the net profit margin trend over the long one thank you.
Thank you Thomas.
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Yeah.
Yes lots of offline stores were closed.
During the outbreak some stores have retired we opened recently, but because a lot of people are not going out as much the business, it's still not.
Stellar for the apparel retailers. Therefore, we are working closely with our suppliers and we'll continue to work closely with them.
Help them somewhere in the treat to our platform.
Ed Thomas Let me take your second question regarding on margins.
Well, yes, you're right our gross margin improved.
Both that margin gross margin improved substantially Q4 on a year over year basis, and so the gross margin improvement I think the biggest reason behind that is.
The increase of apparel in our category mix.
As we said earlier, you know more than 70% of our GMB is now coming from apparel related categories.
And apparel tends to have a higher margins than other categories and Oklahoma net margin side, you know, we've been able to improve on a net margin.
The only because in our improvement on gross margin, but also.
Our efforts.
Reducing the cost and while that those efforts was obviously.
The discontinuation of our own can gene operations.
So now we're working with a should unfold.
They have a much.
Better service quality and also at lower cost so going forward, we'll continue to focus on our core category, which its apparel to make sure that we have a decent gross margin and also we will continue to.
Make heifers wherever possible to lower our.
Costs, So we're confident that and the in the long term.
Our gross margin and not margin levels are gonna be sustainable.
Thank you once you get asked the question at this part along your telephone and please limit yourselves to only one question and it's I mean my next question comes to the 19, along with credit Suisse. Please go ahead.
Hi, Thank you management and congratulations on very strong fourth quarter I had a quick question because I don't understand that the company actually we met some of the logistic game to lower though should be shipping threshold.
Wondering how should we look at the border side going forward because waterside.
Probably will be impacted and whether the gross order frequency I can actually be able to offset some of them shop on any can you probably share some thoughts on the along that line. Thank you.
Thank you.
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You know your thoughts we just as Sean.
He now we made lots of changes.
Regarding our consumer experience, specifically, we lowered the shipping threshold. Some 288 RMB 88 on me we also offer free return.
The the whole purpose of doing it.
So that customers can buy more easily.
However, they want and whenever they want.
And therefore I from our perspective.
Customer like customer, what and they will buy more frequently even in the ticket size and lower compared to before we do believe that over time, there ARPU to maintain and even from.
Thank you next question something like that in the World <unk>. Please go ahead.
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Sure Hi, Geodigital.
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Okay number two when she is going to salvage of critical mass or is all women, which has a mill so he or she she's just when she when it's all support Ellen Shushing Xianshou woman's undergo walking home shoppers.
I mean, she so you'll notice that what you're doing I don't really shi young.
We have extended.
Guaranteed I would still live streaming format in the past.
We haven't had a lot of successes and therefore, it's not a core.
It's not a core mission for us and we're not going to invest heavily into live streaming at this moment, either we do believe that does.
It's all works better with <unk> item and more standardized category.
Peril, because we have so many S.K. you, we actually think it's plentiful to just offer the best pricing and a company the pricing and the quality of the products with the pictures and bid.
A display of product information and therefore, it is our focus to continue to.
So care product on that a deep discount instead of focusing on these new formats Center.
Life changing for now.
Thank you. My next question is something kind of add way Chang with JP Morgan. Please go ahead.
Or send own hog, just the Susan devore them and just only when he Oh. My question is about the offline retailers, except extension and the investment.
The first strong profit Rhino plus or pay student passing the offline for the online outlets and also the offline stores et cetera, especially considering the.
That makes the Tricia Rhino and also our related capex or the regarding this thank you.
Do you need to Lynch issue than even though she shops.
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Since on the whole, it's all form a gun has somebody one or two sue woman so to the change out yet uses that well done in Mosul should that would mean guide that you back to us is out there.
No problem the shutdown I see your machine Weeklys.
You see that put on the morsel.
Hi, John as opposed to switching can make the seeping y'all somebody else will do quite as it wasn't just be dealt with.
Book on Fox, which is something that jump what are the chin number which is being the production and see what she's a Google we layouts also called the <unk> bought them, but all I could just as you know the trade up yet what was the Sean young you'll see all you could you got your income there's certainly more somebody album tranche.
Andre the offline piece and it was important piece, that's where our long term strategy. A we've just gotten started and then turn the business quite recently and we think it takes time, that's left to learn and explore inc.
Both the offline outdoor segment as well at the outlets. We do believe that it takes time for us to learn about the model and therefore, we are not going to invest very heavily very fast and done we do believe that we need to have a profit making business. So it's not.
To invest heavily.
Sorry online toss it into the offline segment, we will continue to look for opportunities.
The outlet business as well as adjusting our business model for us.
Thanks.
Thank you once again for your questions piece, best Taiwan and limit yourselves to only one question at the time next question is something I know ameche outlets Citigroup. Please go ahead.
Hi, I'm, good evening central somehow and Jesse Congrats on the result, and thanks for taking my questions are my question just related to the died and could you describe the situation that you saw in January and then how much the difference Watson Fabory was this January a if you could.
He flight Mundo month on month over month changes or a yellow will get changes.
And how has that been for the past <unk>.
So much and then could you will shabby bus your expectation on the recovery program in April May and when would you see things to fully normalized I'm just to make sure <unk> a demand issue right if not the logistic bought an active and you I do you think sinful. Thank you.
Thank you Alicia.
I do and keeps ashes Lynn.
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Well, the Sony sensors, we thought and the same isn't that she's a woman tolls on your Truecars the mobile usage has.
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Sure you used to the to where each you know just social woman she says.
You know, we couldn't say who are the shopping but what we really saw something quick.
Our plan our original plan for the first quarter was significantly impacted finds occur on abided starting from late January early February I business plan was.
Affected.
The worst impact happened in February, but we're already starting to see some recovery in March so the situation right now is better than what we've seen in February we do believe that it's gonna take some time for things to normalize.
So at this moment it sorry.
Best estimate that things will recover likely in the second half of the second quarter.
Thank you. My next question is something I know run as Kim of Goldman Sachs. Please ask your question.
Thank you. Thank you shouldn't doing I don't want Jesse.
My question would be on maybe can you talk about your Internet finance business, because we do see some free cash flow impact from from this business, but what are the outstanding balances, maybe you could share usually and would you consider any potential fundraising go different spinning off then okay <unk> updates on that business. Thank you.
Yes.
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You want to shouldn't gene targets assisting telephony itself.
<unk> dosage, so as much as some of that which are going away.
Well I will depend on you guys just your thinking on.
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Oh, no knowledge regarding the Internet finance business.
We have started to work with thanks, Tony 19 late last year and I'm working with them. So that they outsource essentially we outsource the capital and Oh, no no financing to them and we provide the traffic as a traffic platform and currently it occupies around something cheap.
One to 2 billion RMB off our cash flow. So its IDBD significantly from the peak up around five to 6 billion at some point so from our perspective, we'll continue to offer this service to the right, but it won't occupy our cash flow.
Much than in the future likely even less than what were seeing right now.
I was just to summarize the open check what you're doing that.
And no plans to spin off or.
Oh were good investments outside Investor site.
Thank you we have my next question from <unk> Morgan Stanley. Please go ahead.
Oh since only on don't just Oh, Thank you for taking my question.
My question is.
Surely a follow up you can solve your margin side. So it's a central mentioned that helps you strong demand all brands to do that these bulking up right. Now. So is there any challenge that we can you know for that you pro module because there's room demand all the brands. So we don't need to do a lot off you know marketing.
Events and at the same time, they can't give higher you know this call in terms of the you know the south. So this will further helped to being pulled the overall margin during the second quarter, all sort of <unk> Oh I have a very quick follow up in terms of the Jim Jim Besides the Oh, we can't see yup.
The gap between the JV growth and the the ER product sells one piece a revenue growth actually is narrow the India.
In the fourth quarter doesn't mean that the three p., Jim <unk> or the proportion Oh, yes actually decline. So yeah, just a quick follow up on that thank you.
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Any regarding your two questions.
And regarding margins.
We are actually on long term partners with most of our suppliers and right. Now we are working with them closely to help them to get to this difficult situations on situation together. So it's.
It's not our intention to increase our take rate in missing by him and he said we might be lowering our take rate or getting subsidies in certain situations to help them get through this time and work collaboratively for a long term a win win situation. Therefore, we don't anticipate meaningful.
Moving on margins he 2020 because those.
In the tree.
Increasing the market I regarding your second question the gap between GE and again rather than you.
Marketplace contribution increased only slightly year over year in the fourth quarter compared to last year's fourth quarter. This is because we started to shift a lot of the product from a one key into sleepiq, starting the quarter of 2080, and therefore the comp is a lot more similar this in.
Fourth quarter compared to the first three quarters.
As far as how we view the marketplace, we will continue to.
Two.
Expand our marketplace that only adding more products into the platform as needed.
Thank you once again to give us a chance to ask me Seepages helps the only one question at a time.
My next question it seems that I'd imagine Kim of Macquarie. Please go ahead.
Great. Thank you for the chance does question as you guys lowered your free shipping threshold than somebody wants to get a sense of what kind of behavior that you saw in January as a response to that and I just want to also within about double check whether the satisfaction rates for.
[laughter] delivery has been a on par with what you've been doing with your own than the past. Thank you.
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I do my signing our first question.
Please.
We should think threshold.
Summer.
The actions were very positive so they they like us.
The shopping they they shop with us more frequently longer time, then compared to before and also higher conversion rate.
Across the board.
Similar to yours has improved and we're seeing that from the feedback on the platform as well.
Secondly regarding the experience of.
Thanks, Pat we actually do think that assets has offered better customer experience on the delivery side, then teaching before and the cost. They offered it's also very reasonable.
Actually during the buyers situation they still continue to be very reliable partner, ensuring that our packages get delivered in February. So we do think that working with them is very very right.
[noise]. Thank you next question, it's something I know, Charlie Chan of China Renaissance.
<unk>.
Hi managements.
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Users. So this is like I feel better solids use a number close in the past few quarters about 20% water. So I'm thinking how do you think this trend or the total addressable markets that we can reach basically how big is you can grow in terms of using members and also the new.
<unk>.
Additionally, users where are they from other.
Markets when different years from different geographic area, so different income levels and so home always be approved by all of the new users.
Different from users. Thank you.
Thank you Charlie.
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Charlie putting your questions.
After we've lowered the free shipping threshold, we're seeing a few different types of users.
First type is our existing loyal customers.
Because the free shipping threshold is much lower they buy more with us and buy more frequently and the second time, our Oh users, who shop with us less frequently before and now we're seeing them being more active they no longer need to buy a lot of product seen one order to get free shipping and the third type is completely new.
A new customers.
For these customers before sometimes they have difficulties, making the first purchase with us given that actually should pick that showed up to 88 was quite high up and now it's much easier for them to make their first purchase so across the board I wear Seymour dynamic trends in mid December profile.
Regarding where they're coming from a we haven't seen too much different from our old customers. So it's not like there specifically cummins on the lower tier cities that rather plasterboard intense.
Quite similar to existing pools of customers.
We do believe that given the Chinese.
Our net users and the ecommerce either.
A massive pool, and where owning a small percentage of that market and we have a lot of opportunities to continue to grow and expand our market share.
Thank you.
My next question from that I know enhance Chong Keybanc capital. Please go ahead.
Hi, Thank you for taking my question I hope everyone is a well.
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Well, what student retention rate and also the purchasing behavior like that he keeps agile frequency.
40, new customer we acquired last year, not because we have very good year in terms of for new House make when do you guys here and then falloff that that is.
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Warehouses and then do we do we are we going to do more.
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Uh Huh regarding our two question.
First once a week, we want high quality customer and therefore, we spend a lot of efforts last year to attract high quality customer.
We were very pleased that new customer retention was doing a better every quarter.
Sequentially last year, so were seeing quite good results in terms of retention and this is.
This is this holds true for both new customers as well as existing customers customers are the main driver for future growth. So we do believe that offering them things such as lower fishing threshold and so on and better customer experience will make them.
More oil and improve their thinking is on our platform and secondly regarding our plans on the warehousing side I currently we have seven warehouses domestically and find warehouses overseas.
Plentiful.
Only use and we don't have any plans to expand our oh warehousing capacity.
[noise]. Thank you once again for those who is asking questions. Please limit yourselves to only one at a time.
Next I next question is something I know choice to of Bank of America peacefully.
Good evening actions own them, a little higher the Kathy I have one question. My question is regarding the <unk> the reinvestment into a disappointing mentioned in his opening remarks can we have more colors in terms of the company's plan. How you are going to in that and in what area.
And also a is the company going to increase the percentage off like product actually and the and the though like you know from procurement model I eat up with prepayment compared to the previous like relatively light there were found at Beaumont, though thanks for the colors.
Good morning.
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Choice or we are.
Looking to work very collaboratively with our suppliers and encourage I encourage them to give us more supply and more good quality supply.
Extend our market share so a in certain areas, we will look to give a subsidy to our suppliers but of course these have to be key suppliers and we'll be very selective with where we start money to expand our market share or our share with these key suppliers.
Thank you. My next question is something I know, Saudi Chantest CLS <unk> East coast.
Hi, I watch Allison's only I'm. So he didn't miss utility was students activities income.
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This question is actually on the use of wells, who actually so very saw the use of growth of 19% young during the fourth quarter, but he's actually done with a meaningfully reduce some for marketing be show both year on year and Q on Q.
Absolutely I am actually do you feel like 15% year on year. This shows that our differentiated merchandising she's actually continuing to gain recognition for my customers. So from the countries. Just now it seems that we are very committed to drive I'll use of growth and buying frequency further going forward. So I'm wondering if management because she.
There are some thoughts on the sales and marketing ratio trends I'm going forward I. My final question is a housekeeping question Oh. This is our second quarter old consolidating Sasha. So just wondering if if management can share say the financials contribution saying in terms of you know how much of it it's a in the other revenue and then in terms of the GMV contribution.
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That certain channels are more effective than other especially for our business. So going forward in terms of how we look at the trend for marketing expenses, it's either going to stay at the current level or be a slightly lower thought we won't be sending to aggressively marketing front to drive customer acquisition any change.
Let me take your second question regarding science, Oh, so kind of so a very small compared to overall scale are generally wise I think south on his about 4% to 5%.
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Is less than 1%.
Thank you Yeah. My next question something like a JV of you'd be S. Please go ahead.
Thank you.
Going even though what would we go through the can tune d., so I'm going to win here to see a reward senior and eating a tick.
Sure, Jim Koch with Triple a woman.
Hi, sorry, Bob just what's onto the pinedo some be took almost no push the just the took a once you've done some cheetah to go through this I'd be a triple how will you eating the two we told them.
Well. Thank you. So my question is about a GMB mix or post di di virus outbreak period. Once we normalize how do we how do we see de GMB mix, especially in terms of apparel were picking that should go up and then also in terms of one p. versus threepi.
Or are we going to shift more towards threepi into future. Thanks.
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So I'll just section.
Jerry our apparel contribution currently is around 70% and we do believe that it's a reasonable level.
For us to be given that our customers have other.
You know.
Demand for a different products, such as cosmetics and maybe a certain certain customers also by FMCG and so on something.
That takes us to our marketplace plant, we are actually doing most of the category expansion if needed due on marketplace. So our marketplace contribution might increase slightly but not aggressively for example, I know marketplace contribution might be at around 6% and if we do add more categories the marketplace.
It might go to 8%, but not a lot higher than that.
When we choose our marketplace suppliers, we actually are quite.
Quite strict in terms of the quality service and so on that they offer and products that they offer so.
Overall, we aim to offer eat a more comprehensive customer and good customer shopping centers on our platform.
Thank you we have like next question from that I know John Joy of Dilo.
Please go ahead.
Huh.
Thank you very much for taking my question I've a question on your user growth I think you know this is kind of on but kind of a follow up but if you look at the user growth. It's been very strong can you kind of give us on some detail about like you know whether the cooperation with Tencent has help at all we know Oh, you know like how would that will evolve and you're coming on importers.
And also on the less developed areas given that you probably know lowered the threat showed is that going out cannot help on penetrate into the that's developed areas. Thank you.
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Yeah, It was quite bullish football.
China regarding our two questions on the first question Tencent MGT contributed to around 22% of our new customers in the fourth quarter.
In the past quarter it was around 23%.
But four or five how we look at customer acquisition our goal.
Our merchandising to attract customers so that they come and look forward desirable product set of deep discount and they want to come back and shop with us again.
Regarding where our customers are coming from or how how much we're focused but not specifically focused on the lower tier cities of course is with lowered free shipping threshold and makes it easier for them to shop with us and we welcome affords us where these customers to shops on the.
From our perspective, given that our ticket size is still quite high it hasn't turned though as much since we've lowered the free shipping threshold, we don't believe that it it's specifically attracting lower tier customers.
That's attracting customers across the board.
We don't believe that our ticket size would drop significantly to something like 50 to 60 RMB future either.
Thank you, ladies and gentlemen that concludes our kidney session no magneti comments back with the percentage you continue.
Thank you all for taking the time to join US and we look forward to speak to do next quarter. Thank you.
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