Vipshop Holdings Ltd (VIPS) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Vipshop third quarter 2013 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 would now like to hand the conference over to your first speaker today, Ms. Millicent Tu, Vipshop, Director of Investor Relations. Thank you. Please go ahead, ma'am.

Thank you, operator. Hi, everyone, and thank you for joining Vipshop's third quarter 2013 earnings conference call. Before we begin, I will read the Safe Harbor statement.

During this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, assumptions, estimates and projections about Vipshop Holdings Limited and its industry. All statements, other than statements of historical fact, that we may make during this call are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as anticipate, believe, continue, estimate, expect, intend, is/are likely to, may, plan, should, will, aim, potential, or other similar expressions. These forward-looking statements speak only as of the date hereof and are subject to change at any time, and we have no obligation to update these forward-looking statements.

Joining us on today's call are Mr. Eric Shen, Chairman, the Company's CEO and co-founder, and Donghao Yang, the Company's Chief Financial Officer. At this point, I would now like to turn the conference call over to Mr. Eric Shen. (spoken in Chinese)

Hello, everyone. Welcome to our third quarter 2013 earnings conference call. We are pleased to report another good quarter, our strong revenue growth, and margin expansion.

Total active customers increased by 132% year over year, to 4 million, and total orders increased by 116% year over year, to 11.7 million. This grew 146% year over year increase in our total sales, to $384 million. Moreover, despite the third quarter traditionally being a slow season, we were still able to continue to expand our gross margin, and increase our overall profitability.

At the same time, we continued to make improvements in scale, where (inaudible), merchandising and the mobile capability, further enhancing the foundation of our discount retail platform. Looking ahead, we will continue to strengthen our market leadership and expertise in online discount retail, and the capture of the robust growth of online retail sector in China. We are very confident in our ability to leverage our success and to embrace future opportunities, and are committed to ensuring Vipshop is a long-standing leader in China's discount retail market.

At this point, let me hand over the call to our CFO, Donghao Yang, so that he may discuss some new growth trends, as well as this quarter's financial achievements.

Thanks, Eric, and hello, everyone. We're extremely pleased about our solid financial and operational results. As Eric discussed, although the first quarter is a seasonally slow season, we were still able to expand our gross margins to 24.2%, thanks to the pronounced scale effects in our growing business.

Moreover, since we achieved positive non-GAAP net income one year ago, we have continued to successfully increase our profitability, achieving [2.9%] (sic -- see Company press release) non-GAAP net margin this quarter. We believe these results are a testament to the strength of our reputation as a channel for brand partners to monetize overstocked products, and for customers to purchase discounted quality products, as well as our improving ability to control costs and achieve greater operational efficiency.

Moving on, I would like to update you with our progress in some key growth area initiatives. I'd like to start by highlighting some of the progress we have had on the mobile front, a key initiative we have been rolling out for the past two quarters.

Our mobile sales as a percentage of total revenues have increased to 15% in the third quarter, up from 12% last quarter, as discussed in last quarter's earnings. Strong growth on this platform is due to two key underlying factors. First, the nature of the flat sales model, as well as (inaudible) for mobile shoppers, making quick, on-the-go decisions. And second, our improved aesthetic interface provides users with an easy to use and reliable way to quickly purchasing product. Such improvements have further helped the increased overall customer interaction, and keeping it on our platform.

We will continue to invest in [build], moving out, and refining this platform and place a greater focus on improving the integration of our partners' e-payment solutions in order to increase order initiatives within (inaudible).

In addition, in order to keep up with our rapid growth, we're moving forward with expanding warehouse capacity. We recently moved our North China warehouse from Beijing to a more spacious facility in (inaudible), and also relocated our Chengdu warehouse to another facility for the same purpose.

These (inaudible) initiatives have further (inaudible) approximately 290,000 square meters of warehouse capacity across our four regional warehouses in China.

Looking beyond 2014, we recently commissioned (inaudible) to construct one 130,000 (inaudible) meter, build a huge warehouse facility, which we will lease in (inaudible), a city near Shanghai. We are planning to commence construction on two additional warehouses in early 2014 in Guangdong and (inaudible), providing us another 300,000 square meters, and allowing us to increase overall warehouse capacity to 700,000 square meters by 2016. The Guanxiao and (inaudible) facilities will be built (inaudible) and we estimate we will require a CapEx of approximately $200 million over the next two years, which is an important investment to allow us to increase the scale of our operations as we continue to see clear demand for products over our platform, and encourage efficiencies of our logistics for both incoming and outgoing inventory.

This expansion in our fulfillment system will also allow us to further strengthen our procurement and warehousing management expertise, which we believe will remain as one of the key barriers to entry and competitive advantages our Company enjoys over our competitors, and any new entrant.

To conclude, we believe that our strong internal capability and multi-faceted growth strategies, coupled with large macro trends of middle class (inaudible), and (inaudible) in China, is (inaudible) optimally to achieve sustainable long-term growth.

Now, moving on to our quarterly financial highlights. Before I get started, I'd like to clarify that all the financial numbers who are presented today are in US dollar amounts, and all the percentage changes refer to year over year changes unless otherwise noted.

Now, our total net revenues for the third quarter of 2013 increased by 146.1%, to $383.7 million. This tremendous growth was primarily driven by a 131.7% increase in the number of total active customers, to 4 million, and a 115.6% increase in the number of total orders, to 11.7 million.

Gross margin for this quarter further expanded to 24.2% from 22.3% in the prior year period, and gross profit increased by 167.4% to $93 million. This improvement was driven by the increased scale of our business, leading to greater bargaining power with our suppliers. Moreover, as we discussed earlier, we continue to see improvement in operating margins as a result of the improved economies of scale and the increased operational leverage.

More specifically, fulfillment expenses increased by 103.2% to $44.1 million in third quarter of 2013. As a percentage of total net revenues, fulfillment expenses decreased to 11.5% from 13.9% in the prior year period. This cost reduction was primarily due to the successful implementation of our distributed warehouse strategy, as well as our ongoing shift to high quality regional and local couriers, both lowering our fulfillment costs, and shortening delivery times to our end customers.

Market expenses increased by 137.7% to $17.4 million. As a percentage of total net revenues, market expenses decreased to 4.5% from 4.7% in the prior year period. (inaudible) long-term marketing spending on [planned] advertising, (inaudible) our (inaudible) in July, we will remain focused on word of mouth referrals.

Going forward, we continue to take a disciplined approach to managing our market expenses, leveraging the benefit of this low cost solution, which brings a higher ROI.

Technology and content expenses increased to $9.6 million, as a a percentage of total net revenues. Technology and content expenses were 2.5% compared to our 2.1% in the prior year period. This increase reflects our accelerating efforts to improve our IT infrastructure and build our mobile e-commerce platform to better support future growth.

General and administrative expenses increased to $11.9 million. As a percentage of total net revenue, general and administrative expenses decreased to 3.1% from 4.1% in the prior year period. The cost reduction reflected the Company's continued cost control efforts and increased operational leverage.

Driven by the growing scale of our Company's operations, improved gross margin, and cost control, income from operations increased to $12 million in the third quarter of 2013. This is compared to a loss from operations of $3.3 million in the prior year period. Operating income margin was 3.1%, compared to an operating loss margin of 2.1% in the prior year period.

Non-GAAP income from operations, which excludes share-based compensation expenses, increased to $15.1 million, compared to a non-GAAP loss from operations of $1.2 million in the prior year period. Non-GAAP operating income margin increased to 3.9%, compared to a non-GAAP operating loss margin of 0.7% in the prior year period.

Our net income for the first quarter of 2013 was $12 million, compared to a net loss of $1.5 million in the prior year period. Net income margin increased to 3.1%, from a net loss margin of 0.9% in the prior year period. Net income per diluted ADS increased to $0.21, from a net loss per diluted ADS of $0.03 in the prior year period.

Non-GAAP net income increased to $15.1 million, from a non-GAAP net gain of $0.6 million in the prior year period. Non-GAAP net income margin increased to 3.9% from 0.4% in the prior year period. Non-GAAP net income per diluted ADS increased to $0.26 in the third quarter of 2013 from $0.01 in the prior year period.

As of September 30, 2013, the Company had cash and cash equivalents of $279 million, and held to maturity securities of $202.7 million. For the third quarter 2013, net cash from operating activities was $98.6 million.

Looking at our business model -- looking at our business outlook, for the fourth quarter of 2013, we expect our total net revenues to be between $580 million and $590 million, representing a year over year growth rate of approximately 94% to 97%. These forecasts reflect our current and preliminary view on the market and operational conditions, which are subject to change.

With that, I would now like to open the call to Q&A.

Ladies and gentlemen, we will now begin the question and answer session. (Operator instructions)

Your first question comes from the line of Alan Hellawell of Deutsche Bank. Please ask your question.

Thank you so much. Congratulations on another strong quarter. Two questions. First of all, is -- we had generally thought about a 25% gross margin target over the next year or two, and it's ever clear that you're getting very, very close to that. Should we, at this point in time, be considering a higher gross margin to the business? And if you could add a little color on that.

Secondly, would love to get some more input as to how we might think of modeling the marketplace business as a third party business, in terms of scale and in terms of impact on margins. Those are my two questions. Thank you.

Okay, well, thank you very much, Alan, for your question. Well, the first question was related to gross margin. You are right. We (inaudible) long-term sustainable gross margin levels was going to be around 25%, and we were at 24.2% in Q3 this year. We're not far away from our long-term sustainable goal.

That being said, we believe that there's still room for us to improve on gross margin, but the (inaudible) is going to be limited, because the current level of 24.2% is already a pretty high gross margin level, and we believe that in the long run, we're going to focus both on top line growth, and gross margin improvement, meaning, we will not only focus on gross margin improvement. And gaining more market share, and [improving] our top line, that would be our other focus.

As for your second question, marketplace, we are not disclosing our gross merchandise value in Q3, and we're not giving any guidance in the coming quarters. The reason for that is because our direct shipping business, meaning our vendors are shipping directly the products to our end customers, that business is still very small, and compared to our overall business at scale, it's still pretty immaterial.

And also, that direct to shipping business was only started back in April this year. It's still a very new initiative. And in the future, once it gets to a material level, we will disclose or give guidance to that business.

But overall, the reason why we feel this (inaudible) in business was because we want to move from some of our non-core products categories -- for example, some electronics products, and also, some bulky stuff, like home goods, that are very costly or difficult to move around. And we want to move those products to our direct shipping business, so that we can improve efficiency, we can expand our product offering, and lower our costs.

Got it. Thanks a lot.

Thank you.

Our next question comes from the line of Alex Yao of JPMorgan. Please ask your question.

Hi, good evening. This is (inaudible) calling on behalf of Alex. Thank you for taking my questions.

I actually have three questions. My first question is on your market (inaudible) business model. I know you won't say any guidance on the business model, but how many partners, third party partners do you have on the market-based platform so far? Can management say this?

Sure. So I think we will take your first question. I will just translate it to Eric. (spoken in Chinese)

(interpreted) So, (inaudible), I think we launched the third party platform model in April this year. So at the moment, that number is standing at around [a few] hundred.

Okay, got it. Thanks. My second question is on revenue side. We see stronger growth in the third quarter, and you mentioned in your opening remarks it is primarily driven by the traffic growth. I'm just wondering what it is also some (inaudible) from the increase of orders (inaudible).

And also, can management comment on your user acquisition strategy in the fourth quarter and the next year? And what are your projections on user traffic growth in 2014? And what is your projection on the channel acquisition costs per user basis? Thanks.

Let me take your second question. You are right, in Q3, the top line growth were mainly driven by the increase with number of active customers and number of orders, as well as increase on average order size. In Q3, our average order size was close to [$33], not significant increase compared to a year ago.

Your second -- your first question, well, we're going to continue to do what we have been doing successfully, to acquire active customers, meaning by -- primarily by where the market follow, by offering great (inaudible) to the customers who believe that they will -- keep coming back, and share the experiences with their friends. So that is basically our primary strategy.

And new active customers -- acquisition cost trend, well, our costs for acquiring new customers have been coming down consistently in the past [four] years, and we believe that trend is going to continue, as we keep reaching investment, it's focusing our resources and energy on improving our operations (inaudible) capabilities, and providing ever-better customer satisfaction.

Okay, got it. My last question is actually a housekeeping question. Can management share the vertical categories (inaudible) in your (inaudible)? Like, what is your top contributing categories, and what percentage of revenues from apparel or bags you -- something like that? Thanks.

Well, our biggest product category is apparel, it's about 60%, 6-0%, as our (inaudible) revenue. And then we have home goods, about 11%, 12% of the total. And cosmetics, about 10%, and some other smaller categories. For example, children, about 5%.

Thank you.

Thank you. (Operator instructions) Your next question comes from the line of Gene Munster of Piper Jaffray. Please ask a question.

Hey, good evening, and congratulations. A couple questions. One is just in terms of traffic trends the first half of the December quarter. Any sort of -- I know you gave guidance, but just general thoughts on that?

And second, can you just talk a little bit about how we should think about your warehouse capacity, and how much capacity you have to support what growth rate? So, do you feel that the current capacity that you have will support a 30% growing business, 60%, 20%? Any sort of context around warehouse capacity relative to the growth rate would be helpful. Thank you.

Okay. Thanks, Dan, for coming to the call, and for your question. So let me take your first question.

Traffic in the first half of the fourth quarter, well, we are not disclosing that number. But Q4 is generally our strongest season in the year. So, as you can imagine, traffic has been going up, compared to the first three quarters, because it's seasonally, the strongest season.

Your second question, we are trying to build, or expand our warehouse capacity, ahead of time, because it really takes time for us to build Company warehouse facilities, starting from negotiating with the government and acquiring the land and building the structure and putting in place the equipment, and etc. So, it usually takes about 12 to 15 months to complete a large facility of about 100,000 square meters.

So, according to our current CapEx plan, (inaudible) additional 300,000 square meters Company warehouses in the next three years, so we are very confident (inaudible) our warehouse space. It will be pretty sufficient to support our growth through the next three years.

Thank you. Your next question comes from the line of Eric Wen of China Renaissance Securities. Please ask your question.

Hi, thanks, [Shen-do and Yang-do]. Congratulations on a very good quarter. I have two questions. First question is, if Yang-do can share with us the latest data on the key customer rate? And I also have one more question.

And my second question is, second question, I noticed that our cash flow was very strong this quarter, and especially on accrued liabilities, this seems to be some very strong cash inflow in third quarter. Can the management outline to us what's going on with this line of balance sheet items, and what is the cash flow outlook going forward in the next three quarters? Thanks.

I'm sorry, Eric. I didn't get the first question. Could you please repeat?

(spoken in Chinese) key customer rate, (spoken in Chinese) general trend, (spoken in Chinese), operating cash flow, (inaudible) strong. (inaudible) accrued liability (inaudible) balance sheet and liability item (spoken in Chinese), overall operating cash flow (spoken in Chinese) quarter (inaudible).

Okay. Your first question, I think we need to go back and take our numbers and get back to you.

(spoken in Chinese)

So, Eric, to answer your question and on the repeat purchase rate, if we look at it from two angles, if you look at the repeat purchase rate on the customer (inaudible), it was [17.4%] in Q3 this year. If we were looking at the orders (inaudible) key customers, that number was around 91% for Q3 this year.

(spoken in Chinese), what was the trend compared to the Q2 and Q1, it is continue to rise, or it is actually flat and now coming down?

(spoken in Chinese)

Ah, okay.

(interpreted) So, Eric, to answer your question, that repeat purchase rate was actually quite stable over the past few quarters. If you look at Q2, for example, it was 75%, versus 74% -- sorry, 75% for Q2, and 74% for Q3 this year. And 75%, again, for Q1 2013.

Ah, xiexie.

Our next question comes from the line of --

(multiple speakers) question regarding cash flow, well, our business model has always had a very favorable cash flow, because the vast majority of products we got into, we don't need to purchase up front. So we believe our strong cash flow situation is going to continue going forward as our top line continues to grow fast.

Thank you. Your next question comes from the line of Jiong Shao of Macquarie. Please ask your question.

Oh, thank you very much for taking my questions. I have a couple as well.

The first question is going back to the platform business. I noticed that you have $2.5 million revenue in the Other Income category in Q3. I was wondering, is that the (inaudible) revenue from your platform business? If it is, it looks like it's mostly profit, so it should have a nice impact on your margins. And if that's the case, how you think about your previous margin guidance, because now you have a new platform business, where you get much higher margin business. Just any sort of directional source, it would be helpful. That's my first question.

Okay. Well, thanks, Jiong, for carrying your questions. Well, yes, in essence, there is a line item Other Revenue. That is actually the revenue from the direct shipping business. And as I explained earlier, it's still very small, and it's very early stage. And we don't know whether or not it's going to have a very significant impact on our future margin profile, so as of today, we still believe that our long-term gross margin sustainable level is going to be around 25%.

It's helpful, you are right, but we still don't know yet whether or not it's going to be very significant in the long term.

Just a quick follow up on this. Do you have any kind of target in mind on your plan in a couple years how big contribution this platform business is going to be in terms of the revenue contribution?

Not really, because it's only a complementary business to our main business, as we discussed earlier. We only moved our non-core product categories and the bulky stuff which is difficult to ship or costly to ship to our direct shipping business. It's so small, and it's not part of our core business. And it's still very new, so it's very hard for us to make any meaningful forecast.

Okay. Okay, thanks for that. And second question I have is on fulfillment costs. It's nice to see you making progress in this quarter in particular. I think your fulfillment costs as a percentage of revenue [grows nicely] quarter over quarter, to 11.4%. You had a couple of reasons for that decrease for the leverage. Going forward, should we continue to see the improvement in the fulfillment cost line? And if any -- any metrics you can share, in terms of the per order or per shipment fulfillment costs, that would be helpful as well. Thank you.

Okay. Well, as I said earlier, we have done a lot of things to target -- reduce the fulfillment expenses as a percent of revenue. And also, the increase in average order price in Q3 helped with that (inaudible) expenses (inaudible) revenue.

Going forward, it's really hard to forecast. Again, here, in China, in the labor costs and transportation costs, especially in gasoline costs, are all going up. And we believe that there is still room for us to improve on our (inaudible) expenses, that it's going to be pretty limited, because there are these (inaudible) factors that would impact on that cost.

Okay. That's helpful. Thanks. Thank you very much.

Welcome. Thank you.

The next question comes from the line of Weibo Hu of Goldman Sachs. Please ask your question.

(spoken in Chinese) Eric and Donghao (spoken in Chinese) composition of the exciting earnings and this (inaudible) in the last quarter. And just two questions. And the first one, that -- as Donghao just mentioned, our longer term, the sustainable gross margin may be the (inaudible) percent, and (inaudible) longer term targets or the strategy maybe to gain more and more market share. So, I just want to know, can you explain more about this strategy? Do we -- to attribute strategy by the category expansion, or should we (inaudible) item? And also, can you share more inside on the fierce competition (inaudible) e-commerce market? Yes, that's the first question.

Okay, Weibo. I think Eric can take this question, but let me first just translate that. (spoken in Chinese)

(interpreted) So, we're going to answer your question, how to grow the market share, how to grow the pipe. So, as you know, we currently have a very, very tiny market share of the overall B2C market here in China. And as Vipshop has demonstrated our capability (inaudible) to become the specialized discount retailer here in China, primarily for (inaudible) fashionable goods.

So one thing I want to make it absolutely sure is that we continue to do our core products, especially apparel, cosmetics, handbags and shoes through the principal B2C business model. We really want to focus on customer satisfaction.

And secondly, to grow the [tie], obviously, we need to attract new active customers, which leads to stronger and higher growth in our top line.

Understand. And the second question is regarding the Company's model Internet strategy. As the mobile Internet and marketing and the shopping has become increasingly important to the retailers, so do we have any plans in this area? And how much resources do we plan to invest, also including the CapEx in this area?

I think maybe Eric can take the first half of the question on the mobile situation, and our current behavior, and then Donghao can talk about the CapEx in the second part. (spoken in Chinese)

(interpreted) So, actually, mobile is very well suited to the flash sale business model, because it enables customers to shop any time, anywhere. It's very convenient, and it has become the trend.

As for the recent quarter, sales from mobile has increased to about 15%, up from 12% in the second quarter this year, and 3% in the first quarter this year. And we do have a lot of hopes that by the end of this year, and even going forward, that percentage will go even higher.

Well, (inaudible) mobile, right?

Yes, or the total IT system, or the IT invest [capture]?

Okay. Well, I see that CapEx, compared to (inaudible), how (inaudible) is really not more significant (inaudible) but we have IT department is actually (inaudible). And we're trying to hire the top talent from across the country and maybe (inaudible) where we see. That's the biggest (inaudible) in terms of (inaudible).

Okay, so if we go back on the mobile, the model strategy, so do we have any plan to invest in this -- how to say, in this area, in terms of the investment -- yes?

Sorry, Weibo, can you repeat your question?

Yes. (spoken in Chinese)

(interpreted) So, in terms of the CapEx, and also the investment components for the mobile strategy, may need two components. First, it's still continue to hire good talent who are specialized in this area, and who has track record and highly experienced, to be able to contribute to our current infrastructure upgrade, and continue to create more products and to be more (inaudible). And secondly, is how to commercialize the mobile, to make sure that our products and the mobile strategy are actually compatible, to make it more popular among our customers. So we may need two areas, is of people, and then infrastructure, including service, and so on and so forth.

Okay, fine. (inaudible) Thanks.

Your next question comes from the line of Evan Zhou of Credit Suisse. Please ask your question.

Hi, good evening, Eric, Donghao and Millicent. Congrats on a strong quarter. My question is mainly about our long-term revenue growth outlook, and specifically in 2014. Actually, can you share with us the top three priorities that you think you guys will be focusing on in 2014? And the major areas of opportunities, or maybe areas of resources that we maybe want to focus on for (inaudible) our long-term growth going forward.

Okay, Evan, I think we can take this first question. (spoken in Chinese)

(interpreted) Okay. So, to summarize, perhaps two areas that we would like to focus in the next year, first of all, is to continue to increase our plan visibility among consumers here in China, continued to attract more new active customers. And secondly, continue to invest in our warehousing infrastructure, including IT systems, to ensure that our warehouse -- you know, infrastructure is upgraded, and continue to provide a better customer shopping experience.

Yes, that's very helpful. Just a very quick follow up on the user acquisition side. So I think maybe can Shen-do maybe share with us some of your specific, how do you guys plan to do that? Specifically, I think Vipshop in general has already been growing very well in terms of the popularity, and definitely, much more well-known, compared to the previous (inaudible) year. So I think we'd like to know if management has (inaudible) identified specific areas of user acquisition, or do we have any specific -- to target for specific sector of users? I would think we are kind of (inaudible). That would be very helpful. Thank you.

(interpreted) So a few areas to highlight here. First of all, in terms of our customers, we are actually serving the entire nation, whether (inaudible) second tier, third tier and fourth tier. They are all important to us. And we are actually -- you know, continue to go after further penetration of our all tiers here in China.

And secondly, we will continue to use the watermark referral strategy. This has always been proved very effective and very efficient, and has been able to contribute to lowering our marketing spending dollar.

And thirdly, of course, we will continue to look at more branding, because branding is very crucial to our long-term development.

But one thing we want to make sure is that when we apply, or when we allocate budgets for marketing, we are going to be very (inaudible). In other words, as a percentage to top line, marketing spending for next year will be lower, compared to that of this year. So yes, Evan, to summarize what Eric just mentioned.

Great. That's very helpful. Thanks for the comment.

The next question comes from the line of Ming Zhao of 86Research. Please ask your question.

Thank you very much. So my question is about (inaudible) today, on November 11th (inaudible). When you (inaudible) your guidance, obviously you know the figure from (inaudible) on the (inaudible), which is (inaudible). My question to you is, do we have any confidence on that figure?

Also, I'm trying think about this kind of consumer behavior, and buying a lot of stuff on one day. Would there be any impact to (inaudible) in fourth quarter and beyond? (inaudible) that. Just wanted to hear your thoughts about this. Thank you.

Okay, thank you Ming. (spoken in Chinese)

(interpreted) So, Ming, (inaudible) as a (inaudible) quickly summarize Eric's comments. First of all, I think I would say, as you know, China's figures online shopping day. And we have indeed -- you know, I'm not sure shopping trends is attracting more and more consumers to engage e-commerce is actually putting a lot of the off-line retailers through a lot of difficulties, but it's actually growing the pie of the online shopping. So from this regard, (inaudible) benefits from the (inaudible).

And for yesterday's sales, we actually recorded (inaudible) you know, record high in terms of sales and traffic. So a lot of people are concerned whether -- once the consumption is (inaudible), whether the (inaudible) shopping spree will be negatively impacted, but the answer is no, because judging from our experience, when we look at today's sales versus the things, say, last month, we actually recorded 20% of growth in terms of top line. So we still hold very confidently, and feeling very strong for our Q4 sales.

Thank you.

Your next question comes from the line of Andy Yeung of Oppenheimer. Please ask your question.

Hi, Eric and Donghao, (inaudible). Congratulations on another very strong quarter. I have actually a couple of questions around your mobile operations. (inaudible) of your [shoppers], can you share with us some additional innovators on the mobile operations, such as the mobile sales, repeat customer rate, and [other factors] for mobile? And also, you said (inaudible) between your customer acquisitions or (inaudible) customer (inaudible), between your PC and mobile?

Okay, so, thank you, Andy. (spoken in Chinese)

(interpreted) So Andy, in terms of the traffic, from mobile, it's actually higher than 15%. We notice that the conversion rate from mobile is actually (inaudible), although we have been making improvements, it's still slightly lower, behind -- compared to (inaudible) PC. In terms of the repeat purchase rate, and you know, (inaudible), it's very much a similar to that from the PC end.

Another, additionally, that we noticed, that -- is that from Monday to Friday, a lot of consumers are actually shopping from their office, and over the weekend, (inaudible) traffic from the mobile actually had (inaudible) spike.

Great, thank you. And just a follow up on that. For your customer acquisitions, do you do anything differently on the mobile side versus your PC side? Do you (inaudible) customer?

(interpreted) So, we actually use different media or channels for calculating after -- for accounting (inaudible) customers from -- on PC and mobile. But in terms of the acquisition costs, it's actually lower from the mobile end, as I said, compared to that on the PC end, because we have significant amount of organic traffic to our mobile channel.

Okay, thank you. Helpful. Thank you so much.

Thank you.

The next question comes from the line of Alicia Yap of Barclays. Please ask your question.

Hi, good evening. Thanks for taking my questions. My question is regarding your future product mix, in terms of the categories. If you look out like, let's say, a few quarters, would there be any meaningful change of the category contribution percentage? And will we consider -- kind of move our sourcing value chain to a higher end product, or some brand that's -- even higher brand products? Any plans for us to work even closer to some overseas suppliers? Thank you.

(interpreted) Okay. So, Alicia, in terms of the product mix, or the category, Eric is then saying that there will be a significant change, although we'll continue to add more categories based on the customer's needs, and based on our development stage. But I think what he is saying is for apparel, it will continue to play a dominant role, will continue to contribute around 50% to 60% to our top line. So you wouldn't be seeing overnight significant change in our product mix.

And secondly, we have been doing a lot of initiatives to improve our average (inaudible). We have been (inaudible) with higher end or premium kind of products, that actually offer higher average ticket size, and actually improve the very popular amount our customers.

So it's in our interest, also in the customer's interest, to work with the [sector], more popular and desirable products with better SKUs. So this has always been our goal, to continue to optimize our plans and portfolio, whether it's domestic good products, or whether it's international, or if it's SKUs.

Okay, great. Thank you so much. Congratulations.

Thank you.

Thank you. Ladies and gentlemen, due to time limitations, we have to close the call. At this moment, I will turn the call back to Mr. Donghao Yang, CFO of Vipshop, for closing remarks.

Well, thank you all for taking the time to join us, and we look forward to speaking with you next quarter. Thank you.

Okay, thank you.

Bye, bye.

Ladies and gentlemen, that concludes our conference for today. Thank you for participating. You may all disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.