21st Century Business Herald, 1/10/12
Chinese B2C online shoe retailer Letao has revealed that it obtained USD 30 mln in fourth-round funding in December last year, led by an unnamed firm. Ceyuan Ventures, DT Capital Partners and Tiger Management, which participated in the company's three previous rounds of funding, also participated.
Letao VP Chen Hu has said that with this investment, if marketing costs can be kept under control in 2012, Letao will be able to continue operating for another 3-4 years even if the company fails to achieve profitability in the meantime.
Chen added that achieving profitability in 2012 was not a requirement put forward by investors this round, however the company has pledged to plan its budget and undergo corporate restructuring in an effort to do so.
Letao will reduce ad spend in 2012, Chen said, while increasing its number of marketing partnerships and gross profits from its self-owned brands in order to compensate. He said the company will also expand its investment in m-commerce, and increased reliance on mobile traffic will in turn transform the company's operations. "Turning profitable won't be difficult," Chen said.
Gross profit margins on shoes from third-party manufacturers are approximately 30% in the e-commerce shoe vertical space, and above 50% for self-owned brands. In addition to the 20% difference in margins, Chen said, Letao is also able to set prices for its self-owned brands, adding that while these only account for around 10% of shoes sold through the Letao platform, this figure will gradually increase with time.
Chen also said that Letao hasn't written off partnerships with other B2C e-commerce sites, noting that the company recorded several hundred thousand RMB in sales just a month after partnering with Hangzhou-based Taobao Mall in September 2011. That figure is small in comparison to Letao's overall sales, Chen said, but B2C platforms are able to drive significant traffic to Letao.
Editor's Note: For more information on this topic, please see "Letao Obtains USD 30 Mln in Third-Round Funding," MD 1/04/11 and "Letao Cuts Ad Spend by 80%," MD 11/29/11 issues.