Could Baozun Be Heading for Profit

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Baozun based in Shanghai aims to be a springboard for companies wanting to launch into ecommerce from China and beyond, and provides a full raft of services including strategy, operations, warehousing, technology, marketing and customer management advice. It raised US$110 million from Baozunits initial public offering on the New York Stock Exchange, and began trading on NASDAQ in late May 2015.

This makes Baozun the second China-based technology company to take a U.S. listing in 2015, after Groupon copycat WOWO raised US$40 million in April. Baozun’s relative success may have something to do with its CEO Vincent Qiu speaking perfect English. He was positively purring when he assured investors the capital would go to “increasing sales and marketing staff, and expanding the e-commerce branding service into international markets like Taiwan and Southeast Asia” with Japan set to follow.

Still No Money for Jam on Baozun Bread

Despite a 20% market share including Microsoft, Phillips and Nike, Baozun has yet to convert US$289 million annual revenue to profit. Its US$28 million net loss in the previous 12 months comes as a surprise to many analysts – especially as China’s ecommerce market appears likely to bounce up to $379 billion by 2017 from a $130 billion 2014 base.

But Serious Backers are Staying with It

Despite ecommerce market setbacks following revelations of counterfeit goods flooding stock, Bouzun attracted a solid spread of investors on the New York Stock Exchange keen to participate in the initial public offering. Alibaba now holds 18.2% of it. Similarly minded corporate strategic investors took up most of the other shares, with the only significant venture capital partner being Infinity I-China Investments with 6.6%.

And Competition is Knocking on the Door

Bouzun has positioned itself strategically as the intermediary between global brands and Chinese online consumers. Its model is intellectually simple, it clones easily, and competition will follow as it moves into profit. I wish it luck. Let’s see how it goes.

About Author

Social Brand Watch (SBW) is a collection of experts in digital, mobile and social media in China. SBW was created to complement Resonance's China Social Branding Report, a bi-weekly report focusing on modern marketing methods of the world's top brands in China.

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