LightInTheBox Holding Co., Ltd. (LITB) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Q4 2014 LightInTheBox Holding’s 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, the 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’s strategies and recent developments, followed by Mr. Robin Lu, the company's Chief Financial Officer, who will address 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 U.S. 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 materially differ 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 revenue rose 42.4% year-over-year and topped the $100 million mark for the first time. We made a significant progress in each of our major operating metrics year-over-year, as we continue 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 for the quarter. Mobile commerce, an increase of our mobile penetration remained our top priority for us. In the fourth quarter, revenue from mobile platform 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 2014. 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 engine that aid us in increasing our conversion rate. We believe that mobile commerce is not simply about migrating users from PC to mobile it’s also about seize 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 CIM 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 product to consumers, improve supply chain efficiency and a better leverage social media. As of today, we have attracted 8.1 million Facebook fans globally, which helped 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 overtime our third-party seller platform will become a meaningful additional revenue stream for us and improve our traffic utilization. Global logistics continue to be a major bottleneck for cross-border e-commerce globally. Our 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 showed -- continues to show a significant improvement in customer satisfaction when packaged our delivered directly from our overseas fulfillment center. We also launched our cross-border logistic open platform which allows other people to leveraging 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.[Audit End] 6:03 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-U.S. dollar markets accounts for approximately 75% of our revenue during the quarter. Most of our expenses, however, are in U.S. dollars and RMB. When compared with the same period last year, the euro has declined over 20% against U.S. 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 to counterbalance its negative impact. We will do so without sacrificing our long-term business prospect by continue investing our core initiatives including mobile commerce and open platform. We are convenience that by quickly implementing appropriate measures today will emerge with even stronger market position when currency stabilize and economy 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 U.S. dollar. While the combination of a number of different [indiscernible] policies and lower oil prices is freeing up consumer spending globally starting with the increase in the robust U.S. 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 we will continue to have 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 this initiative in the middle of Q1 2015 so the full impact will not be felt until Q2. As I review our financial results, let me remind you about few things. I’ll mainly only comment on our fourth quarter numbers, you can refer to our earnings release for the full year numbers. All numbers reported are in U.S. 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 static growth in other general merchandise. Not including the $8 million unfavorable impact from year-over-year changes 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, while 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-on-year to $41.7 million, reflecting our continued success in building of 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 rates throughout the quarter, non-GAAP gross margin would have been 39.5%. If we will assume the same exchange rates as a third quarter of this year, gross margin would have 38.6%, which excludes $6.2 million unfavorable impact from quarter-over-quarter changes 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 the number of orders fulfilled, as well as the ramping up 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 the 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 the diversified traffic acquisition channels. Selling and marketing expenses for other 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 are 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 first quarter of 2014, compared with non-GAAP loss from operations of $6.4 million in the first quarter of 2013. Non-GAAP net loss attributable to ordinary shareholders was $0.5 million, compared with nom-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 deposits and restricted cash of $83.4 million, equivalent to roughly $1.71 per ADS. On December 16, 2013, we announced our 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-months 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 estimate of foreign exchange depreciation against the U.S. 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%. These forecasts reflect 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, we are ready for questions now. Thank you.

Thank you, sir. [Operator Instructions] We have the first question from the line of Bo Pang from Oppenheimer. Please ask your question.

Hi. Can everyone hear me, okay?

Yes.

All right. Good evening, gentlemen.

Yes.

This is Bo asking question on behalf of Ella Ji. So first of all, congratulations to your very strong quarter. So my question is basically regarding two aspects. First one is guidance. So, we noticed there is a sequential decline on the first quarter’s guidance. So, we understand that there is impact -- a negative impact from the foreign exchange. So we wonder excluding the impact, how will the guidance look like and do you see the weakening demand from Europe and the currency continuing to be the situation?

Yeah. This is Robin. Let me take this question. Actually, when we go into Q1, we see the continued or even faster pace of currency deterioration against U.S. dollars. Specifically in this guidance, we forecast about $5 million to $6 million of the currency change. So that means not include currency change, the guidance will be up by $5 million or $6 million in general, compared -- my changes compared with Q4.

Thanks a lot.

So does that answer your question?

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

Are you talking about the exchange rate or the operations?

Yes, the exchange rate.

Actually for the exchange rate, of course we are not the economist to forecast the exchange rate but anyway as up to date, we didn’t say the recovery of the exchange rates in the -- almost all of the currencies against U.S. dollar.

Okay. Thank you, management. And I just have a follow-up on margins in 2015. So just want management to provide some color on the trend, especially on your planning -- the budget planning or your fulfillment infrastructure and also the branding campaigns and as well as the investments on the mobile development? Thank you.

I will answer the gross margin question and then I put the other question 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 the 35.2% gross margin in Q4, which is about like a 1.8% drop on a GAAP basis. And for this one, if we breakdown this 1.8%, we can see we have an active 3.4% due to the currency change. And then we have another active, probably 0.8% from product mix change. And additionally, we have positive 2.4% of our pricing strategy and our benefit from the expanded product scale. So that means from operational side in Q4, we do see regard -- with implementation of our strategy in the past few quarters, we do see our performance improvement in the gross margin.

So, I will take the other questions. We think the message we have 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 improved 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 will hold down very tight in headcount management and controls and also utilization improvements of our existing labors. That being said, there are certain areas we’ll continue to invest, particularly on mobile commerce and our open platform. On mobile commerce, our primary investment will be on softer R&D because we think the innovations in mobile user experience is a primary key to have higher customer lifetime value and in turn profit. In terms of our open platform, our primary investment will go to seller acquisitions. We are expanding our seller acquisition team, so that we will acquire more sellers this year than ever, which will lead to a more variety of 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, which you just ask with Robin. When we say there is a $5 million of Forex -- estimated Forex impact, potentially in Q1 this year, that’s on top of the $6 million impact that already happened in Q4 and we actually calculate that $5 million is based on the currency exchange rate as of today. So the actual impact that will depend on how the currency exchange rate develops through the whole of March. So just one clarification, so you know those two $6 million, $5 million is on top of each other?

We have the next question from the line of George Askew from Stifel. Please ask your question.

Thanks. 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 say 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?

Hey, George. This is Alan. Yes, we actually have internal cohort analysis for the mobile app customers. Qualitatively, we definitely see higher cohort value for a fixed period of time compared with the PC, web user versus app user. I think our primary goal of launching new features and optimize our user experience has actually increased that cohort value. So it’s still an increasing number. We have been tracking it and various folks are increasing over time. And secondly, you are right that there is very different choice for categories when people come to mobile app versus PC because traditionally on the PC, web, we were -- we had a lot of customers who actually came from Google, so they were very explicit on what they were intended to buy such as floor sets or chandelier or wedding dress I suppose. But our mobile, when we have this installation of the app that 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 what their short-term interest and then push more products. And we do see from our data that there is definitely more frequent purchase buying behavior on apparel business, on fashion of apparel, also on the small gadgets and accessories.

Okay. Good. That’s 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.

Yes. Well, the foreign exchange impact to revenue in 2014 first quarter of 2014. I'm just trying to get a sense because I know the RMB moved a little.

Yeah. I can give you a background. From the 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 then accelerated in Q4 and the same thing in 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 U.S. 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 amount?

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

Actually for the RMB, you can see for the whole year, IF we take the same 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 directional would be -- I think the primary impact -- so because our reporting is all in U.S. dollar, 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 our margins shrinking, while the euro is depreciating because with the same euro we received and converted into dollar will become a small amount in dollar, which directly passing through to our gross profit. As for the cost, the actual cost in term of U.S. dollar and RMB, it actually stays at the same but then it becomes a higher percentage in terms of revenue, which would transfer ahead into our U.S. GAAP bottom line. That will be the way I think, I look at it.

Yeah. That makes sense. That makes sense. And then lastly, you talked about the efficiencies that started this quarter and the marketing operating in leveraging overseas warehouses, what’s the real goal there? Are you just trying to get to breakeven, or are you trying to manage margins to a certain level recognizing all the headwinds? How are you thinking about these efficiencies?

So there are 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 I just referred to my previous remark, while our dollar is fixed in term of our G&A cost and others, then we will see actually a deleveraging in term of percentage revenue. So the first goal is to actually tighten up the operation, improve the effectiveness so that it counterbalance the deleveraging of those costs as percentage of revenue, which will improve our bottom line. And secondly, obviously, is to reduce the level of loss significantly, particularly from U.S. GAAP perspective, that will actually we believe we’ll actually make us -- become -- almost become a forcing function to make the company longer term wise more as a lean operation and better factor embraced more automations and just intrinsically, more efficient and more comparative. And 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 strong balance during the turbulent time. And lastly, we think, this will actually avenge all this initiative is combined together will actually lead the company to become more focused in term of our strategic battles to chose i.e. the mobile commerce and open platform. And also make the company just a more agile in general in term of, because we leaving the internet, global internet industry, which requires the level of agility, so that we quickly respond to all kinds of market change with currency fluctuation being one of them.

Okay. Excellent. Well, thank you very much.

We have the next question from the line of Sisi Lu. Please ask your question. Sisi Lu, please ask your question. I think the person has dropped out. Sir, can I move to the next question?

Yes, please.

We have the next question from the line of Long Lin from Brean Capital. Please ask your question.

Hi. Good morning. Thank you for taking my questions. I have a follow-up regarding the bottomline or the profitability of the company. Just wondering if you have like any timeline for the company to reach profitability, I understand that your focus is mainly on growth and so was this like each foreign exchange issue? However, just wondering if you could see like any other leverage from your business and looking beyond 2016, do you expect any like maybe in 2016 or ‘17 you will -- like when do you expect you will achieve like profitability?

Yeah. I can take this question. Before that I should emphasize our strategy, we will have a competent strategy but with temporary shortfall of the macroenvironment we will take some steps and as Alan specified, with those steps, we can get as more healthy in our business. We don’t guide the bottomline just as before, but I should say with initiatives we take, it will be definitely the progress we can make to achieve narrowing loss and achieve the profitability issues. So for that I can give you an example, for example, from the cost structure, just now we mentioned most of our expenses were incurred in U.S. dollars. We will do some, kind of, like more align with the local currencies so that we can have that kind of like natural hedging about the currencies. So we will do a bunch of initiatives internally to rebound 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 channel? 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 can elaborate on that like what kind of optimization or diversification and what your like for your marketing…

Yes. Absolutely. So traditionally the company was very much focused on target marketing on Google as primary search marketing. But gradually we started embracing other marketing channels. And particularly, last year I think, there were two major switches. The first switch is we focused on more marketing our mobile channels and secondly is we focused 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 traffics goes from PC to mobile that’s why we believe that long term why this company is really about the global mobile commerce and we invest on this area. And secondly is the social marketing. We realize there is a very natural synergy between the paid social advertisement together with non-paid 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 bases were active. And then some of the fans we actually gained from the users come from our website. And there is also a significant portion of those 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 engagements 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 these -- what we call a new channels will eventually benefit the company transition from PC web e-commerce company to a mobile e-commerce company.

Okay. That’s very helpful. My last question. Just wondering if you can -- if the management can get 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…

Yes.

….do you expect any revenue contribution or like sort of any impact on margins and stuffs?

Yes. So I think the background of our logistic open platform is over the last seven or so years, the company has pioneered many initiative I think, global logistic optimization by connecting close to a hundred 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 carrier or service provider can do a good job across all the different geographic. So we actually collect lot of data internally, with more than 10 million packages shipped. So we know other than the promised time of shipments, what the actually shipping time look like for each of those service providers. So we think those are very valuable software and also data. So our intention of our open platform is to open those things to other people. So that is, our logistic capability will transform from our capability to our business. So there is two -- you can think about this as two -- as a two way of user experience. The first is it’s really our comparison shopping engine for any people who want to enlist our logistics service provider, they can put in their intended routes and add weights and add size of their packages and then we’ve dynamic to optimize to a price comparison with the right quality of service. It’s similar to Kayak or Trina in many ways. But this is particularly for business package shipping. And the second is people can actually use LightInTheBox offerings so that they can get a better rates, they can leverage our overseas warehouse to deliver their shipments. Basically, this type of service is similar to fulfilled by LightInTheBox. So those two services are both online as of today. And the first one will become portal for people to find us and there is somewhat of them who would actually chose our services. That’s the way we think about our open platform. It’s still very early. We actually see very promising early adoptions. We see many people actually call us or send enquiries but we think it’s going -- but currently we have no intention to actually make significant amount of profit out of this. I think the primary focus is to really ramp up the scale of this service so that it will be leveraged by more people. And we think the scale-off is very important in this business. But we feel we are actually a pioneer in this global logistics, cross-border logistics areas 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’s still immaterial at this moment but yes there is already -- paid customers already start to use us as our service offers.

Okay. That’s very helpful. Thank you very much. That’s all my questions.

Thank you.

Thank you.

We have the next question from the line of Sisi Lu from China Renaissance. Please ask your question.

Good evening, Alan and Robin. Sorry, I was just disconnected from the call.

Good evening Sisi.

Yeah. 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 currency volatilities and possibly any target GMV contributions and probably maybe the tax rate over the longer term?

Absolutely. So the way, Sisi, you think about our third-party platform versus our self -- first-party retail is our first-party retail is primarily focused on trying to directly working with factories, so that we cut all the middlemen. We have been influencing the supply chain. We can use data mining to tell the factories what kind of things might be interesting for the global consumers and salesforce. So that’s kind of our basis for first-party retail business, starting from wedding and then progressing to fashion and electronics and gadgets and small gadget and accessories et cetera. Our third-party platform has a slightly different twist on this. Number one, it’s about better utilize our traffic. We have never disclosed the exact number of our traffic but qualitatively it actually has magnitude of million visits, number of million visits per day on our website. So there is a very important goal to increase the traffic utilization or monetization. So the third-party part of listings would actually help us to better utilize our traffic. That’s number one. 46:48[Audit Start]And number two, our third-party platform really focus on emerging brands. So we don’t actually intend to work with factories and non-branded products because we think those products requires a lot of handholding quality check and supply chain management. Rather we want to work with a small-to-medium and emerging brands. First, to start with Chinese brands and then we would do so with two offerings, number one is the third-party online marketplace and second is the flat-sale business model. And currently, our primary source of third-party sellers are all from China but we will start to expand that offering to overseas seller 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 would definitely focus our emerging and smaller brands. And secondly, from category perspective, we start off with the fashion. We think this is the category that consumers needs in infinite variety. And now this year, we’re going to expand into other categories where we feel we will better utilize our resource, for example, many lifestyle categories like wigs or tattoos or cosplays or toys. We think those are great categories to switching from first-party retail to complete focus of 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 than we’re going to have a differentiated offering on the third-party versus first party. And the second prong is for the categories we feel it’s actually better off to have 100% third party like the lifestyle categories than we’re going to just switch it over time to third-party 100%. Then we’re going to save a lot of retail management cost, supply chain management cost, become a leaner operation as a company.

That’s helpful. Thanks a lot. Just a follow-up on that, so do you have any targets like GMV split between your marketplace and one-piece business over the long term?

Actually, we -- in general, we don’t split those numbers. But what I can tell you is in Q4, we see relatively fast growth in the open platform.

Okay. Great.

I think over time when those numbers become really material, we would definitely have to break them down to actually make it -- make our reporting be more illustrative, but now we think it hasn’t passed materiality test. So we still want to keep it as the way we report.

Okay. Great. Thanks a lot, Alan and Robin.

Thank you.

Thank you.

We have the next question from the line of Jane Zhu from CICC. Please ask your question.

Thanks for taking my question. I just wondered about your strategy of the marketplace already being answered by the -- management. Thanks.

Jane, do you have another question or you are good?

No other questions. They’ve been answered by you. Thanks.

Okay.

I just….

Okay. Thank you. Operator, we’re ready -- sorry go ahead.

Sorry. I said I just want to ask about the marketplace strategy, you have already answered. Thanks.

Okay. Thank you. Operator, we’ll take the next question.

Thank you, sir. We have the next question from the line of Alice Yang from Macquarie. Please ask your question.

Hi. 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 forex exchange impact? My second question is how many sellers or brand on your platform are you currently working with both on your first party and third party? Thank you very much.

Yes. I’ll answer the first question. We are pretty confident on our strategy to acquire the market share and we do think currency -- currency issues and slow recovery in Europe. It will give us some kind of opportunity to streamline our business and especially starting by mid of Q1 going through the Q2 at later quarters in this year and we do think we can see some result starting by Q2, that’s my answer.

So for your second question, so we actually work with -- we don’t disclose the exact number of suppliers/brands, but in term of magnitude, I can say we certainly work with tens of thousands of suppliers over time. But we’ll also have funnel and filter system where we confidently retire suppliers or brands that does not perform well including -- both including sales volume and also the quality and customer services that are based on user feedback and also at least new ones. And I shared already 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 can actually 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 come back to buy again, new products and also new merchants offering distinctively new products is very important. So I think this year rest assured, we’re going to actually expand significantly in our supplier and seller space. And also already, I said that this year, we’re going to start to actually acquire more overseas suppliers. So we already have more number of overseas suppliers from Korea and Hong Kong. We think this year we hope we’re going to make some progress in bigger markets like Europe and North America, where we established our overseas warehouse. And we can actually leverage them to attract overseas sellers to be on top of -- to be on our platform.

Thank you. Thank you very much. That’s great.

Thank you.

Thank you.

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 thank you 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 for the business in 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.[Audit End]