China’s Zappos Letao is raising US$ 30 million in Series D from investors including Ceyuan Capital, DT Capital Partners and Tiger Fund which all participated in the company’s previous fundings. Letao didn’t mention who led this round of financing though.
Letao could live well for another three or four years without making any money by counting on their reduced operating cost, according to Hugo Chen, Vice President of Letao. Investors didn’t urge the company to make profit in 2012, but they’re targeting the goal with new moves in this year like business structure restructuring.
The Beijing-based company’s arch-rivals include OKbuy, S.cn and Yougou. OKbuy got investments from Tencent, leaning on Taobao S.cn has done something, Yougou is backed by Belle, the No. 1 woman’s shoe retailer in China. None of them made a penny in last year, and frankly, the whole online shoe selling business hasn’t been able to make profit in China yet. We can do the math, gross profit for the sector is between 20% and 30%, after subtracting logistic costs (accounting for 10% of per customer transaction), marketing expense (30%, up to 50%), everyone is bleeding money.
And year 2012 will still be seeing them ferociously competing against each other. Yougou and Okbuy will be keeping expanding to scale up as it seems to many that size matter in Chine ecommerce battlefield, while Letao will try to retrench as well as restructure to (probably) make some money without growing (or bleeding money) too fast.