蘭亭集勢 (LITB) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Q4 2014 LightInTheBox Holding earnings conference call.

At this time all participants are in a listen-only mode.

There will be a presentation followed by a question-and-answer session.

(Operator Instructions).

I must advise this conference is being recorded today March 9, 2015.

I would now like to hand the conference over to your speaker for today Mr. Tip Fleming.

Please go ahead, sir.

Thank you, operator.

Hello everyone and welcome to LightInTheBox's fourth-quarter and full-year 2014 earnings conference call.

The Company's fourth-quarter and full-year earnings results were released earlier today and are available on the Company's IR website as well as on the newswire services.

Today you will hear from LightInTheBox's Chairman and CEO, Mr. Alan Guo, who will give an overview of the Company strategies and recent developments followed by Mr. Robin Lu, the Company's Chief Financial Officer, who will discuss financial results in more detail.

Before we proceed, I would like to remind you of the Company's Safe Harbor statement.

Please note that the discussion today may contain certain forward-looking statements made under the "Safe Harbor" provisions of the US Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

To understand the factors that could cause results to be materially different from those in the forward-looking statements, please refer to the Company's form 20-F filed with the Securities and Exchange Commission on April 28, 2014.

We do not assume any obligation to update any forward-looking statements except as required under applicable law.

With that, I would like to turn the call over to LightInTheBox's Chairman and CEO.

Alan, please go ahead.

Thanks, Tip.

Welcome everyone to our fourth-quarter call.

We are pleased to report a strong finish to the year as our quarterly net revenues rose 42.4% year-over-year and topped the $100 million mark for the first time.

We made significant progress in each of our major operating metrics year-over-year as we continued to benefit from the implementation of our strategic plan over the past few quarters.

I would like to go through some of the important achievements from the quarter.

Mobile commerce and increasing of our mobile penetration remained a top priority for us.

In the fourth quarter, revenue from mobile platforms increased 88.5% year-over-year, accounting for 29.7% of our total revenue, compared with 20% a year ago and 26.5% during the third quarter [2013] (corrected by company after the call).

We launched new versions of our app on both iOS and Android platforms which include new and innovative features such as real-time personalized product recommendation engines that aid us in increasing our conversion rate.

We believe that mobile commerce is not simply about migrating users from PC to mobile, it is also about seizing opportunities for disruptive innovations.

Aside from optimizing the user experience for our existing mobile offerings, our mobile R&D center is also working hard on identifying other disruptive innovations for the future as well.

Revenue from repeat customers continued to grow and reached 44.2% of our total net revenues.

This was due to improvements in customer satisfaction and adjustments made to our CRM system which led to better customer engagement.

Looking at our categories, we continue to gain strong momentum in our apparel business as we expand our supplier base, offer an expanded portfolio of products to consumers, improve supply chain efficiency, and better leverage social media.

As of today we have attracted 8.1 million Facebook fans globally, which help us create a loyal customer base through word of mouth.

Our open platform strategy continues to progress smoothly.

We have a strong collection of initial retailers, including hundreds of brands that are now available.

We believe that over time our third-party seller platform will become a meaningful additional revenue stream for us and improve our traffic utilization.

Global logistics continued to be a major bottleneck for cross-border e-commerce globally, a bottleneck that we think we can eliminate.

We made good progress in our overseas fulfillment center initiative by doubling shipments sequentially from our European fulfillment center in Poland.

We also officially launched our North American fulfillment center early this year.

Our survey data continues to show significant improvements in customer satisfaction when packages are delivered directly from an overseas fulfillment center.

We also launched a cross-border logistic open platform which allows other people to leverage our global logistics infrastructure.

We believe customer satisfaction is crucial for our long-term success.

In addition to our overseas fulfillment center initiative, we also extended our return policy from 14 days to 30 days.

While we made great operational progress during the quarter, we now face unprecedented macroeconomic challenges caused by rapid foreign exchange rate fluctuations, something we have never faced before in our corporate history.

Approximately 63% of our revenue came from Europe, and all non-US dollar markets accounted for approximately 75% of our revenue during the quarter.

Most of our expenses, however, are in US dollars and RMB.

When compared with the same period last year, the euro has declined over 20% against the US dollar.

So during the quarter, these foreign exchange rate fluctuations obviously hindered our financial performance, and we expect to continue to impact our business in 2015.

We believe these circumstances require us to act quickly to significantly improve our operational efficiency in order to adjust to the evolving currency reality and counter balance its negative impact.

We will do so without sacrificing our long-term business prospects by continuing to invest in our core initiatives, including mobile ecommerce and open platform.

We are convinced that by quickly implementing appropriate measures today, we will emerge with even stronger market positions when currencies stabilize and economies improve.

I will now turn the call over to Robin, who will take you through our 2014 fourth-quarter and full-year financial results.

Thank you, Alan.

Let me first quickly review the current macroeconomic issues affecting our business -- which Alan also just touched on.

We saw a faster pace of deterioration for most currencies versus the US dollar.

While the combination of a number of different stimulus policies and lower oil prices is freeing up consumer spending globally, starting with the increasingly robust US economy, the euro economy seems to have turned a corner and looks on its way to recovery.

We think it will take some time for discretionary spending to increase substantially.

All of this strongly impacted our financial performance in the fourth quarter and will continue to have an adverse effect in the coming quarters.

As Alan mentioned, we are taking action to mitigate the impact of these challenges.

We know speed of execution is key and we are moving quickly.

We started these initiatives in the middle of Q1 2015, so the full impact will not be found until Q2.

As I review our financial results, let me remind you about a few things.

I will mainly only comment on our fourth-quarter numbers.

You can refer to our earnings release for the full-year numbers.

All numbers quoted are in US dollars.

And all percentage changes refer to year-over-year, unless otherwise noted.

Net revenues increased by 42.4% to 112.1 million, primarily driven by fast growth in our apparel category, increasing contribution from repeat customer purchase and mobile purchase, and steady growth in other general merchandise.

Not including the $8 million unfavorable impact from year-over-year change in foreign exchange rates throughout the quarter, non-GAAP net revenues would have been $120.1 million.

Total orders grew 53.9% year-over-year to 3.1 million and total number of customers who made a purchase in the quarter increased by 45.7% to 2.3 million.

Repeat customer purchase accounted for 44.2% of total net revenue, up from 37.3% a year ago, where mobile revenue as a percentage of total revenue increased to 29.7% from 20% year-over-year and 26.5% from the third quarter of 2014.

Revenue in the apparel category was up 97.7% year-over-year to $41.7 million, reflecting our continued success in building out this category.

As a percentage of total net revenues, apparel revenue was 37.2%, compared with 26.8% a year ago.

Revenues generated from other general merchandise increased by 22.2% to $70.4 million.

Geographically, revenues from Europe increased by 37.2% to $70.5 million, representing 62.9% of total net revenues.

Revenues from North America increased by 90.1% to $24.9 million.

Revenues from North America accounted for 22.2% of total net revenues.

Revenues from other countries increased by 17.2% to $16.7 million, representing 14.9% of total net revenues.

Gross profit was $39.5 million, up 28.4% from the same quarter last year and gross margin was 35.2%, 1.8% lower than last quarter's gross margin of 37%.

Not including the $8 million unfavorable impact from year-over-year changes in foreign exchange rate throughout the quarter, non-GAAP gross margin would have been 39.5%.

If we assume the same exchange rate as the third quarter of this year, gross margin would have been 38.6%, which excludes $6.2 million unfavorable impact from quarter-over-quarter exchanges in foreign exchange rates throughout the quarter.

Fulfillment expenses increased 60.9% year-over-year to $7.6 million, primarily reflecting the increase in sales volume and number of orders fulfilled, as well as the ramping up of our overseas fulfillment center.

Fulfillment expenses per order were $2.47, slightly up from $2.38 last quarter.

As a reminder, fulfillment expenses also include payment processing fees.

Selling and marketing expenses were $28.8 million compared with $24.7 million reflecting our efforts to grow customer base and market share.

As a percentage of total net revenues, selling and marketing expenses were 25.7%, an improvement from 31.4% a year ago and 25.9% from the third quarter of 2014.

The performance reflects our commitment to optimize online marketing efforts and diversify traffic acquisition channels.

Selling and marketing expenses per order improved to $9.4 from $12.4 a year ago and from $10.2 from the third quarter of 2014.

G&A expenses were $11.7 million or 10.4% of total net revenues, compared with $12.3 million or 12.4% of total net revenues last quarter.

G&A expenses include $4.2 million in technology investments compared with $4.1 million in the third quarter of 2014.

In total, operating expenses as a percentage of revenue was 42.9%, down sequentially from 44.3% and down from 46.9% a year ago.

On a non-GAAP basis, which excludes the foreign exchange impact of $88 million of net revenues, approximately $0.4 million in share-based compensation expenses and one-time expenses, non-GAAP loss from operations was $0.2 million in the fourth quarter of 2014, compared with non-GAAP loss from operations of $6.4 million in the fourth quarter 2013.

Non-GAAP net loss attributable to ordinary shareholders was $0.5 million, compared with non-GAAP net loss of $5.8 million in the fourth quarter of 2013.

Non-GAAP net loss per ADS was $0.01 compared with net loss per ADS of $0.12 in the same quarter last year.

As of December 31, 2014, we had cash, term deposit and restricted cash of $83.4 million, equivalent to roughly $1.71 per ADS.

On December 16, 2013, we announced a share repurchase program to repurchase up to $20 million of our ADS.

On December 16, 2014, we extended our existing share repurchase program for an additional 12-month period through December 15, 2015.

As of December 31, 2014, we had repurchased a total of $11 million of our ADS.

For the first quarter of 2015, based on our estimates of foreign exchange depreciation against the US dollar, we expect net revenues, to be between $89 million and $91 million, representing a year-over-year growth rate of approximately 9% to 12%.

This forecast reflects the Company's current and the preliminary view on the market and operational conditions, which are subject to change.

This concludes our prepared remarks.

At this point, we are ready to take some questions.

(Operator Instructions).

Bo Pang, Oppenheimer.

This is Bo asking a question on behalf of Ella Ji.

So first of all, congratulations to your very strong quarter.

So my question is basically regarding two aspects.

The first one is guidance.

So we noticed there is a sequential decline on the first quarter's guidance.

So we understand that there is an impact, a negative impact from the foreign exchange so we wonder excluding the impact, how will the guidance look like?

Do you see the weakening demand from Europe and the currency continuing to be a situation?

Yes, this is Robin.

Let me take this question.

Actually going to the Q1, we see the continuous or even faster pace of currency fluctuation against the US dollar.

Specifically in this guidance, we forecast about $5 million to $6 million of the currency change.

So that means not include the currency change, the guidance will be up like $5 million or $6 million in general compared with -- my changes compared with Q4.

Does that answer your question?

Yes.

Just one follow-up, how does management see the trend going forward beyond Q1?

Are you talking about the exchange rate or the operations?

The exchange rate.

Actually for the exchange rates, of course we are not the Economy Institute forecasting exchange rates.

But anyway as of today, we didn't say the recovery of the exchange rate in almost all the currencies against the US dollar.

Thank you, management.

I just have a follow-up on margins in 2015.

So just want management to provide some color on the trend, especially on the budget planning on your fulfillment infrastructure and also the branding campaigns as well as the investments on the mobile development.

Thank you.

Actually I can answer the gross margin question and then I put the two other questions to Alan.

For the gross margin activity I will give you some comparisons.

You remember as we announced we have 37% gross margin in Q3 and 35.2% gross margin in Q4 which is about a 1.8% drop on a GAAP basis.

For this one, we break down, it is 1.8% that we can see.

We have an active 3.4% due to the currency change.

Then we have another negative probably 0.8% from product mix change.

And additionally we have a positive 2.4% above our present strategy and our benefit from the expanding sourcing scale.

So that means from the operation side, we in Q4 we do see regard with the implementation of our strategy in the past few quarters, we do see our performance improvement in the gross margin.

I will take the other questions.

We think the message we just articulated is really about the Company is going to respond very quickly to the drastic change of the major currencies.

We think our current focus really our short-term focus really switch to improve operational efficiency from many different angles starting with more automation, seeing operations, even better management in our marketing spending, better utilize our existing overseas warehouse infrastructure.

We don't plan to establish any new ones this year given the circumstances.

We will hold down very tight in headcount management and controls and also utilization, improvement of our existing laborers.

That being said, there are certain areas we will continue to invest, particularly mobile commerce and open platform.

Our mobile commerce, our primary investment will be on software R&D because we think that the innovations in the mobile user experience is the primary key to have a higher customer lifetime value and interim profit.

In terms of open platform, our primary investment goes to seller acquisition.

We are expanding our seller acquisition team so that we will acquire more sellers this year than ever which will lead to our more variety product offerings and more competitive product offerings among the third-party sellers.

So those are the two areas we think we are going to continue to invest but other than that we are going to be extremely disciplined on controlling other costs and efficiencies in our business.

Just one point I want to clarify with you just asked with Robin.

When we say there is a $5 million of estimated ForEx impact potentially in Q1 this year, that is on top of the $6 million impact that already happened in Q4 and we actually calculate that $5 million based on the currency exchange rate as of today.

So the actual impact will depend on how the currency exchange rate develops through the whole March.

So just one clarification so you know those two $6 million and $5 million are on top of each other.

George Askew, Stifel.

Thanks very much for taking the questions.

Just on the mobile business that you referenced, as you ramp your mobile revenue and customer base, what does that mobile customer look like, that cohort look like relative to the other customers on things like repeat orders and order size and things like that?

And are they buying apparel which is where you are seeing the real growth?

This is Alan.

Yes, we actually have an internal cohort analysis for the mobile app customers.

Qualitatively we definitely see the higher cohort value for a fixed period of time compared with a PC Web user versus app user.

I think our primary goal of launching new features and optimize our user experience has actually increase that cohort value.

So it is still an increasing number.

We have been tracking it and folks are increasing over time.

And secondly, you are right that there is a very different choice of categories when people come to mobile app versus PC because traditionally on the PC Web, we had a lot of customers actually came from Google so they were very explicit on what they intended to buy such as floor sets or chandelier or a wedding dress or (inaudible).

But our mobile when we have this installation of the app there was not a clear indication which direction, i.e., category the consumers are looking for.

So initially we will recommend a different set of categories to consumers and based on their click through behavior, we will actually narrow down with their short-term interest and push more product.

We do see from our data that there is definitely more frequent purchase buying behavior, apparel business, fashion apparel also on the small gadgets and accessories.

Okay, good.

That is helpful.

And then of course I have to talk about foreign exchange here.

What was the foreign exchange impact in the first quarter of 2014 to revenue?

Say it again, George.

The foreign exchange impact to revenue in first quarter of 2014?

I'm just trying to get a sense because I know the RMB moved a little.

I can give you a background.

From Q1 to Q4 in 2014 we didn't see much fluctuation in the exchange rate and starting by Q3, we see the drop in the exchange rate.

And as you know, it accelerated in Q4 and the same thing for Q1 this year.

Okay, got it.

And then you quantified pretty thoroughly the revenue impact of foreign exchange but I know that obviously you mentioned your expenses heavily USD which I assume mostly marketing for US dollars plus RMB for labor I assume and other costs.

Can you give us a dollar amount of how much your cost increase due to those impacts?

The dollar amounts?

Yes, like the OpEx increased X amount because of the move in the US dollar and the move in RMB.

Actually for the RMB, you can see for the whole year we take the same timeline as we expect by the euro, 20% drop.

RMB only dropped like about 3% -- 2% or 3%.

So George, maybe a slightly different take on your question but kind of the direction would be I think the primary impact -- so because our reporting is all in US dollars, so the primary impact of the foreign exchange of euro and other non-USD currencies are number one, the revenue, the net revenue recognition.

And number two on gross margin.

We definitely see margin shrinking while the euro is depreciating because the same euro we received and converted into dollar will become a smaller amount in dollar which directly passing through to our gross profit.

As for the actual cost in terms of US dollar and RMB, it actually stay as the same but then it becomes a higher percentage in terms of revenue which would transfer ahead into our US GAAP bottom line.

That will be the way I look at it.

That makes sense.

And then lastly, you talked about the efficiencies that started this quarter and the marketing operating and leveraging overseas warehouses.

What is the real goal there?

Are you trying to manage margins to a certain level recognizing all the headwinds?

How are you thinking about these efficiencies?

So there are a couple of strategic objectives.

The first strategic objective is try to counterbalance the deleveraging of the cost of the G&A costs and other costs associated with it.

Like why just refer to my previous remark, while our dollar is fixed in terms of our G&A costs and others, then we will see actually a deleveraging in terms of percentage revenue.

So the first goal is to actually tighten up the operations, improve the efficiencies so that it counterbalance the deleveraging of those costs as a percentage of revenue which will improve our bottom line.

And secondly, obviously is to reduce the level of loss significantly particularly from US GAAP perspective.

That will actually we believe will actually make us become almost become a forcing function to make the Company longer-term-wise more as a lean operation and faster embrace more automations and it just intrinsically more efficient and more competitive.

Thirdly, obviously there is also our objective of optimizing cash flow as well.

We think we definitely want to have a very good cash flow and a strong balance during the turbulent time.

And lastly, we think this will actually -- all of these initiatives combined together will actually leave the Company to become more focused in terms of our strategic battles to choose, i.e., the mobile commerce and open platform and also make the Company just more agile in general in terms of because we are living in the Internet, global Internet, industry which requires a level of agility so that we quickly respond to all kinds of market change with currency fluctuation being one of them.

Okay, excellent.

Thank you very much.

Long Lin, Brean Capital.

Good morning.

Thank you for taking my questions.

I have a follow-up regarding the bottom line or the profitability of the Company.

Just wondering if you have any timeline for the company to reach profitability?

Understand that your focus is mainly on growth and so was this (inaudible) foreign exchange issue.

However, just wondering if you could see any other leverage from your business and looking beyond 2016, do you expect any like maybe in 2016 or 2017 when do you expect you will achieve profitability?

Yes, I can take this question.

Before that I should emphasize our strategy, we have a competent strategy but with the temporary shortfall of the macro environment, we will take some steps and as Alan specified with those steps we can get us more healthy in our business.

We don't guide the bottom line just as before but I should say with the initiatives we take it will be definitely the progress we can make to achieve narrowing loss and to the profitability issues.

So for that, I can give you an example from the cost structure.

Just now we mentioned most of our expenses was incurred in US dollars.

We will do some kind of like more aligned with the local currencies so that we can have the -- kind of like natural hedging about the currencies so we will do a bunch of initiatives internally to rebound and to fight with this environment.

All right, thank you.

My second question is regarding your marketing expense.

Can you talk about the mix of your marketing channels?

We see that the marketing expense reduced and you mentioned this is attributable to your optimized marketing strategies.

So I was just wondering if you could elaborate on that?

What kind of optimization or diversification and what your (multiple speakers)?

Yes, exactly.

So traditionally the Company was very much focused on targeting marketing on Google primary search marketing but gradually we started embracing other marketing channels and particularly last year I think there is two major switches.

The first switch is we focus on more marketing on mobile channels.

And secondly is we focus on more marketing on social channels.

The mobile channel marketing spending is driven by two factors.

Number one is the user adoption.

We definitely see more traffic goes from PC to mobile.

That is why we believe long-term wise this Company is really about a global mobile commerce and we are in investing on this area.

Secondly is the social marketing.

We realize there is a very natural synergy between the pay the social advertisement together with nonpaid social user engagement.

As I just mentioned in my script, we have gained 8 million Facebook fans as of today.

That was a significant increase compared with a year ago and also our fan base is very active.

Some of the fans we actually gained from the users come from our website and there is also a significant portion of those web Facebook fans we actually gained through the paid social marketing activities on Facebook.

We started with Facebook, we also started to do other channels such as Pinterest and Instagram, Twitter and so on.

We believe that there is more user engagement among social channels and also there is a natural connection between social channels and mobile channels.

We feel very strongly that our marketing dollar migration from search to what we called the new channels will eventually benefit the Company transition from PC web e-commerce Company to mobile commerce Company.

Okay, that is very helpful.

My last question, just wondering if the management can give some color on the Company's newly launched logistics open platform?

If you can talk more about the platform and what kind of impact will this platform on the Company maybe like (multiple speakers) and then revenue contribution or any impact on margins?

Yes, so I think the background of our logistic open platform is over the last seven or so years the Company has pioneered many initiatives in global logistic optimization by connecting close to 100 different carriers, backbone carriers, last mile carriers, postal services across the globe and also express shipping companies.

We do realize that there is no single carriers or service providers can do a good job across all the different geographies so we actually collect a lot of data internally with more than 10 million packages shipped so we know other than the promised time of shipments what the actual shipping time looks like for each of those service providers.

So we think those are very valuable software analysis or data.

So our intention of our open platform is to open those things to other people so that our logistic capability will transform from a capability to a business.

So you can think about this as a two way of user experience.

The first is, it is really a comparison shopping engine for any people who are in list logistics service provider.

They can put in their intended routes and weights and the size of their packages and then we have a dynamic to optimize and do a price comparison with the right quality of service.

It is similar to Kayak or Qunar in many ways but this is particularly for business package shipping.

And the second is people can actually use LightInTheBox's offerings so that they can get better rates, they can leverage our overseas warehouse to deliver their shipments.

We basically, this type of a service is similar to be fulfilled by LightInTheBox.

So those two services are both online as of today and the first one will become a portal for people to find us and some of them would actually choose our services.

That is the way we think about our open platform.

It is still very early.

We actually see very promising early adoptions.

We see many people actually call us or send inquiries but we think it is going to -- but currently we have no intentions to actually make a significant amount of profit out of this.

I think the primary focus is really ramp up the scale of the services so that it will be leveraged by more people.

And we think the scale is very important in this business.

But we feel we are actually a pioneer in this global cross-border logistic area as well as we pioneered the cross-border e-commerce many years ago and we do have a small amount of revenue coming already.

But it is still immaterial at this moment.

But yes, there is already paid customers already start to use us as our service offers.

Okay.

That is very helpful.

Thank you very much.

That is all my questions.

Sisi Lu, China Renaissance.

I was just disconnected from the call.

Actually my question is on your marketplace strategy.

So can you please give us some update on the marketplace strategy for example like how you position your marketplace versus your competitors especially in the current currency volatilities?

And possibly any target GMV contribution and probably maybe the tax rate over the longer term?

So the way that you think about our third-party platform versus our first-party retail is our first-party retail is primarily focused on try to directly working with factories so that we cut all the middlemen we have influence on the supply chain we can use data mining to tell the factories what kind of things might be interesting for the global consumers and so on and so forth.

So that is kind of our thesis for first-party retail business starting from weddings and then progressing to fashion and electronics and gadgets and small gadgets and accessories, etc.

Our third-party platform has a slightly different twist on this.

It is -- number one, it is about better utilizing our traffic.

We have never disclosed exactly a number of our traffic but qualitatively it actually has a magnitude of a million visits, a number of million visits per day on their website so there is a very important goal to increase the traffic utilization or monetization.

So the third-party part of listings will actually help us to better utilize our traffic.

That is number one.

Number two, our third-party platform really focus on emerging brands.

So we don't actually intend to work with factories and the number and the product because we think those products requires a lot of handholding, quality check and supply chain management.

Rather we want to work with small to medium and emerging brand.

First to start with Chinese brands and then we would do so with two offerings.

Number one is the third-party online marketplace.

And secondly is the flash sale business model.

And currently our primary source of third-party sellers are all from China but we will start to extend that offering to overseas sellers as well and then the overseas sellers will be able to leverage our overseas warehouse to actually sell to cross continent with their product.

We think from a choice of merchants, we will definitely focus on emerging and smaller brands.

And secondly from a category perspective, we start off with fashion.

We think this category the consumer needs infinite variety and now this year we are going to expand into other categories where we feel we will better utilize our resource for example in many lifestyle categories like [weeks] or tattoos, cosplays or toys.

We think those are great categories to switching from first-party retail to complete focus on third-party marketplace.

So those are kind of the two-pronged strategy for our third-party marketplace.

Number one is for the categories like fashion, we also want to offer first-party at the same time that we are going to have a differentiated offering on the third-party versus the first party.

The second prong is for the categories be feel it is actually better off to have 100% third-party lifestyle categories and then we are just going to switch over time to third-party 100% and then we are going to save a lot of retail management costs, supply chain management costs, become a leaner operation as a Company.

I think that is helpful.

Thanks a lot.

Just a follow-up on that, so do you have any target like GMV split between your marketplace and one-piece business over the long-term?

Actually, in general we don't explain those numbers but what I can tell you is in Q4, we see relatively fast growth in the open platform.

I think over time when those numbers become really material we will definitely actually break them down to actually make our reporting be more illustrative.

But now we think it hasn't passed the materiality test so we still want to keep it as the way we report.

Okay, great.

Thanks a lot.

Jun Zhu, CICC.

Thanks for taking my question.

I just wondered about your strategy of the marketplace, already being answered by the management.

Thanks.

Do you have another question or you are good?

No other questions just been answered by you.

Thanks.

I just want to ask about the marketplace strategy.

You have already answered.

Thanks.

Operator, we will take the next question.

Alice Yang, Macquarie.

This is Alice Yang from Macquarie.

Thanks Alan and Robin for taking my question.

I have two questions.

The first one is about your 2015 outlook.

How is the market in 2015 as you expected excluding the foreign exchange impact?

My second question is how many sellers or brands on your platform are you currently working with both on your first-party and third-party?

Thank you very much.

Yes, I can answer the first question.

We are pretty confident on our strategy to acquire market share and we do think currency issues and the slow recovery in Europe is some kind of opportunity to streamline our business and especially starting by the middle of Q1 going through Q2 and later quarters in this year and reducing, we can see some results starting by Q2.

That is my answer.

So for your second question, so we actually work with, we don't disclose the exact number of suppliers/brands but in terms of magnitude I can say we have certainly worked with tens of thousands of suppliers over time.

But we also have a funnel and a filter system where we constantly retire suppliers or brands that does not perform well including both including sales volume and also the quality and customer services that based on user feedback.

And also in least a new ones and I showed earlier this year while we are actually very disciplined in controlling cost this year, we actually are expanding our seller acquisition team.

We think by offering people more varieties and more innovative products that we are going to actually going to attract more consumers to come to buy from us and also repeat customers to actually come to buy more frequently.

One number we noticed very evident is in order for customers to come back to buy again, new products and also new merchants offering distinctively new products are very important.

So I think this year rest assured we are going to actually expand our suppliers and sellers space and also earlier on I said that we this year we are going to start to actually acquire more overseas suppliers so we are ready have a small number of overseas suppliers from Korea and Hong Kong.

We think this year we hope we are going to make some progress in bigger markets like Europe and North America, where we established our overseas warehouse and we can actually deleverage them to attract overseas sellers to be on our platform.

Thank you.

Thank you very much.

That is great.

As there are no further questions I would like to hand the call back to your speakers for today.

Thank you, sir.

Thank you, operator, and thanks to everyone for joining our call today.

This concludes the fourth-quarter 2014 earnings conference call.

If you have any further questions please don't hesitate to reach out to us directly.

We look forward to providing other updates to the business in the coming weeks and months.

Thank you very much.

Have a good day.

Thank you, sir.

Ladies and gentlemen, that does conclude our conference for today.

Thank you for participating.

You may all disconnect.