A new strategy shakes top Chinese e-retailer Jumei

March 18, 2015 04:59 PM

Moving away from operating marketplace had an impact on the bottom line of Jumei International Holding Ltd. in the fourth quarter of fiscal 2014. Jumei, No. 9 in the Internet Retailer China 500, still grew it business steadily in the full year of 2014, but the shift away from operating marketplace has affected its performance in the fourth quarter.

Jumei’s gross merchandise volume, or GMV, decreased 3.0% to $235.2 million in Q4, which is rare among top Chinese e-retailers because the market average growth is 50% in last year. In addition, Jumei’s gross profit percentages of net revenue decreased from 42.6% to 30.4% in the Q4 year over year, according to Jumei. Overall, Jumei’s GMV increased by 30.9% year-over-year to US $1.07 billion and its active customers increased 26.7% to 13.3 million in 2014, the company says this week its Q4 2014 earnings statement. The GMV for Jumei includes consumers’ purchases from the company and from other merchants on Jumei’s marketplace.  

Jumei sells skin care products, such as brands products of Lancôme and Estee Lauder’s through its site and its mobile apps. Before 2014, the company also opened it site to other merchants to sell products.  

Chinese media has reported that fake products flourished on Jumei marketplaces in 2014 and it made Jumei close its marketplace for beauty products. Jumei had no choice because it is hard to completely stop some merchants selling fake products on marketplace, the company says.  

To provide authentic products to consumers, Jumei says its top priority is to procure beauty products directly from international brands in the overseas market.

The sales of imported products on Jumei have doubled this year, the company says. China introducing free trade zones in 2013 made it much easier to get imported goods through online shopping site.

For the fourth quarter of 2014 ended Dec. 31, 2014, Jumei reported:

  • Net revenue increased 18.5% year over year to $166.0 million from $140.1 million in 2013.
  • Net income increased to $10.7 million from a net loss $25.4 million in the prior year period.

For the year ended Dec. 31, Jumei reported:

  • Net revenue increased 31% to $632.9 million from about $483.0 million in 2013.
  • Net income increased 163%to $65.96 million from $25.0 million in 2013.

Jumei expects revenues growth of approximately 45% to 50% for the first quarter of 2015, the company says.

Beauty products are one of the fast growing areas in e-commerce in China. Online beauty sales reached $3.7 billion in 2013, up from $300 million in 2010, a compound annual growth rate of 136.5%, says Frost & Sullivan.




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