Luxury e-commerce-Secoo's third-quarter financial report seems to be overdue!
On the evening of December 28, Beijing time, Secoo announced its financial report for the third quarter of fiscal year 2020 before the US stock market on that day. Stimulated by the earnings report, Secoo's stock price fell 4.9% after the market. As of the publication of the US Stock Research Agency, Secoo Group reported 2.33 US dollars per share, with a total market value of 165 million US dollars.
It can be said that Secoo's performance in the past year or two has been poor, as can be seen from its revenue performance and number of active users. With leading e-commerce platforms such as Alibaba and JD.com also continuing to develop luxury goods business, Secoo's future path seems to be increasingly difficult. What information can investors get from this latest financial report of Secoo?
The revenue slump in the third quarter continued, and the number of active users declined or the main reason
With the epidemic hitting high-end consumption of luxury goods, China is becoming a competitive arena for luxury goods merchants. Boston Consulting BCG and Tencent previously released the "Chinese Luxury Consumer Digital Behavior Insight Report", according to the report that the global luxury market will be hit hard by the epidemic in 2020, and the Chinese market, which is the first to recover, is expected to grow by 20-30% in 2020.
According to the latest third-quarter financial report data released by Secoo, Secoo’s revenue was 1.37 billion yuan, compared with 1.31 billion yuan in the previous quarter, an increase of 4.6% from the previous quarter; compared with 1.94 billion yuan in the same period last year, it was a year-on-year increase. A decline of 29.4%. The world-leading growth rate does not seem to have played a major role in promoting luxury e-commerce Secoo. Luxury sale is the core business of Secoo. This business revenue accounts for more than 90% of Secoo's total revenue and is Secoo's main business.
Compared with the revenue data in the first and second quarters of this year, the revenue in the third quarter rebounded slightly, which is related to the recovery of the domestic consumer market. However, from the comparison of year-on-year data in the third quarter of last year, Secoo's revenue decline is still more obvious.
The US Stock Research Agency believes that the year-on-year decline in Secoo's revenue data this quarter is largely a continuation of the previous decline. To a certain extent, it is "old wine in new bottles", and more discussion seems to be nothing new. Judging from the development of the past two years, the sluggish revenue growth of Secoo Group may be related to the following factors.
The "2020 (Part 1) China Cross-border E-commerce Consumer Complaint Data and Typical Case Report" released by Net Economics, ranked third in the report on Secoo's complaints. According to consumer rights protection cases, refund issues, delivery issues, product quality, and online counterfeit sales are the main issues for cross-border e-commerce complaints during the first half of 2020.
According to statistics, on the consumer adjustment platform, Dian Su Bao, the complaint feedback rate of Secoo was only 51.61%, and its composite index was only 0.332, and it received a purchase rating of "not recommended to place an order". Secoo's lack of attention to consumer complaints also affected the growth of its active users.
In the first quarter of this year, the number of active users of Secoo experienced a “big dive” from the previous quarter, which is related to the decrease in consumer spending caused by the sudden epidemic. From the year-on-year data of the past seven quarters, the number of active users of Secoo has increased year-on-year. It has been showing a downward trend year-on-year.
For e-commerce platforms, the number of active users is an important indicator that affects revenue. The decline in the number of active users has also caused Secoo’s revenue to show a sluggish trend. How to strengthen the user retention of the platform in the future will be faced by Secoo. Difficult problem.
Net profit fell by more than 60% year-on-year, "smashing money" strategy or overdraft development potential
According to the third-quarter financial report data, Secoo’s net profit for the quarter was 22 million yuan, a year-on-year decrease of 64.5% compared with 62 million yuan in the same period of the previous year; compared with the previous quarter’s 7 billion yuan, a month-on-month increase 214.3%.
After experiencing a loss in the first quarter and a meager net profit in the second quarter, Secoo's net profit increased by more than 200% in the third quarter. The US Stock Research Agency believes this is the biggest highlight of this financial report.
However, from the cost point of view, it may be possible to see some "clues" to the increase in Secoo's net profit from the previous month. The cost of sales of Secoo this quarter was 58 million yuan, a 47.7% drop from 111 million yuan in the same period last year. Compared with the quarter-on-quarter increase in revenue in the first and second quarters of this year, the cost of sales fell in the third quarter. It can be seen that the quarter-on-quarter increase in Secoo's third-quarter net profit was partly due to the reduction of sales costs.
Secoo's profitability will become the focus and focus of the capital market and investors in the future. Based on the seven quarterly net profit data, Secoo’s net profit performance is still relatively unstable, and the reasons behind this are related to the strategy adopted by Secoo.
During this year's "618" period, Secoo launched the "Distribution of 200 Million Bonus" campaign, which was quite effective in emulating Duoduo's "10 billion subsidies". But unlike Pinduoduo, whether Secoo's volume and cash flow performance can support the 200 million bonus subsidy is a problem in the eyes of the US Stock Research Agency.
The financial report shows that as of September 30, 2020, the company has 794 million yuan in cash, cash equivalents and restricted cash. As of June this year, Secoo had cash, cash equivalents and restricted cash of 1.203 billion yuan. The cash flow reserve decreased by 400 million yuan in three months, which shows that Secoo's cash flow situation is worrying.
In view of the decrease in the number of active users on the Secoo platform, Secoo's 200 million bonus is clearly robbing users. The competition of luxury e-commerce is becoming increasingly fierce, and leading platforms such as Alibaba and JD.com are also working on this business.
In the 10 minutes before November 11, the turnover of JD luxury goods increased by over 500% year-on-year, and the turnover of over 130 luxury brands in the first 30 minutes increased by 100% year-on-year.
On November 1, the sale of luxury goods on Tmall was only 10 minutes away, and the transactions of Balenciaga and Coach that participated for the first time exceeded the whole day of this year's 618; the transactions of brands such as MK, MCM, and Qeelin exceeded the whole day of last year's "Double 11" .
In the breakout battle of grabbing users, spending money to grab more users' attention is the usual strategy of e-commerce platforms, and Secoo cannot avoid it. It's just that compared with the e-commerce giants, Secoo really can't stand the toss of burning such money, and this also casts a shadow on Secoo's future development.
Secoo VS The RealRea, can foreign monks teach the "truth" of making money?
Comparing Secoo Group with The RealReal, an American second-hand luxury goods e-commerce company, it may be possible to see the current shortcomings of Secoo Group, and to explore the differences between the two in business and many other aspects to help Secoo Group’s future Development may provide some direction. As of now, The RealReal stock price is US$20.84 and the market value is US$1.846 billion.
In terms of the development strategy adopted, the strategy adopted by The RealReal is an online + offline collaborative development approach. In addition to online luxury transactions, The RealReal San Francisco store has added new services such as luxury appraisal and valuation. Customers in the store can complete luxury valuations, sell or buy luxury goods consigned by the seller.
From the perspective of Secoo Group, its offline business is currently lacking. Almost all of its business comes from online. For luxury products with high premiums and low purchase frequency, it may be necessary to simultaneously roll out offline stores, which is also an important part of consolidating online business.
Secondly, the drainage of users is also one of the problems. The strategy currently adopted by Secoo Group seems to be on its own, and has not cooperated with leading e-commerce platforms or luxury brands, which has caused many difficulties at present.
On the contrary, although The RealReal has not cooperated with large e-commerce platforms such as Amazon and eBay, it has adopted the method of cooperation with top luxury brands.
During the period from October 7, 2019 to January 31, 2020, the registered members of The RealReal can enjoy a free personalization at any one of the 18 Burberry boutiques in the United States for every Burberry product consigned on the platform shopping experience.
To sum up, in the context of different vertical e-commerce development environments in China and the United States, The RealReal's development strategy can only provide a reference. Finding a suitable development path may be the most important problem currently facing Secoo. This is not an easy task, and there is not much time left for Secoo.
Source of the article: US Stock Research Institute, please indicate the copyright for reprinting.