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Chinese E-Tailer Trying to Bypass Intermediaries

Posted on Monday, Mar 31st 2014

According to a Euromonitor International report, worldwide e-tail sales are projected to grow 17.7% annually over the period 2012 through 2015 to be worth $849 billion in 2015. Analysts believe that as Internet penetration improves globally, e-commerce transactions will also grow. Additionally, this growth is also benefiting manufacturing countries such as China, which has now become a major producer of consumer goods for global brands as well as home grown smaller products. iResearch estimates that the Chinese consumer goods export market will grow 16% annually to $1,983 billion in 2015. Online retail in China is dominated by Alibaba. But there are other vendors as well who are helping consolidate the fragmented small firms in the country to enable them to sell their products in international markets.

LightInTheBox’s Offerings
Beijing, China-based LightInTheBox (NYSE: LITB) is a leading online B2C retailer for lifestyle consumer products. The company operates two key portals, lightinthebox.com and miniinthebox.com that enable consumers to purchase products manufactured by China-based firms at an attractive price. The company sources products directly from China-based manufacturers and is thus able to deliver impressive pricing on their products.

LightInTheBox focuses on three key categories: apparel, small accessories, and gadgets. Using smart analytics and data-driven tools, they are able to offer customized products at economic prices as they deliver optimal marketing, merchandising, and fulfillment costs. The company is rapidly adding to their product listing and recorded more than 205,000 product listings in December 2012. They were witnessing an addition of more than 17,000 new product listings each month.

LightInTheBox is a completely online retailer with no physical store presence even in the international markets. In fact, their web site is available in 17 languages worldwide. They advertise their products through online marketing platforms including Google and Facebook and have also established specialized social marketing teams that keep developing interactive campaigns to engage online users.

LightInTheBox’s Financials
LightInTheBox has seen strong growth in revenues over the past few years. Revenues have increased from $6.25 million in 2008 to $200.01 million in 2012. They, however, still continue to report losses. Losses have narrowed from $0.50 per share in 2008 to $0.20 per share in 2012.

Recently, they reported Q4 2013 revenue of $78.8 million, an increase of 22%. Expenses continued to rise and they ended the quarter with a loss of $5.6 million compared with earnings of $1.7 million a year ago. Revenue for the year grew 46% to $292.4 million while losses increased marginally to $4.8 million from $4.2 million a year ago.

By region, Europe contributed 28% of their revenue for the quarter at $51.4 million. South American markets are growing rapidly and reported a 25% increase to $6.3 million. Revenue from North America grew 9% to $13.1 million.

For the current quarter, LightInTheBox expects to generate revenue of $78 million-$80 million.

Till last summer, the company was venture funded with $35 million in funding from ZhenFund. In June 2013, they went public and raised $79 million by selling 8.3 million shares at $9.50 each on the NYSE under the ticker LITB. They planned to use the funds towards investment in fulfillment and technology infrastructure, product expansion, and sales and marketing efforts.

The market had strong expectations from this Chinese stock when it listed. It soared to a high of $23.38 in August 2013. Since then though, disappointing quarterly results have sent the stock reeling. It is currently trading at $6.63 with a market capitalization of $328.4 million.

The trend is definitely interesting, though, of Chinese manufacturers and e-tailers bypassing intermediaries.

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