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Freda Duan Profile picture
@FredaDuan
Dec 30, 2021 • 8 tweets • 3 min read • Read on X
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1/ Some takeaways on global e-commerce:

E-commerce’s business looks super simple (for 3P, just GMV * take rate), but a lot can be learned on the key assumptions:

- GMV (gross vs. net)
- Take rate (gross vs. net)
- Upside from Ads (%? when?)
- LT profitability (5%? really?)
2/ Big Picture

- E-comm is a $5trn market globally
- Est. 30% is 1P
- Online penetration varies: US 16%; China 30%; LatAm & SEA: 10-15%
- Growth varies

- #1 market leader typically captures 50% (AMZN 40%; BABA 60%) of the market but can enjoy 2-4x the amount of profit dollars
3/ Big Picture (con'd)

1P vs 3P

1P:
- 3C + FMCG
- Brand matters, consumer preferences are uniform
- Win on quality, price, and service (logistics) quality; not on SKU variety

3P:
- Beauty + Apparel; Suitable for long-tail merchants
- Easier to scale; win on selection/variety
4/ GMV

A. Read the footnote
Most include unsold, unsettled, and returned items.

B. Special cases
- Live-streaming (LS) e-comm: high return
- PDD: inflated bc “No shopping cart”+“team order”

Rule of thumb: 20% discount average from GMV to NMV. 40-50% for PDD, 40% for LS e-comm
5/ Take Rate

GROSS take rate can be very misleading...

- Some include fulfillment/logistics/payment processing as a part of take rate vs. some don’t…

- Some treat sales incentives as contra revenue vs. others treat them as marketing expenses…

Use NET! Do the adjustments...
6/ Take Rate (cont'd)

Rule of thumb:
- Commission: C2C (low), B2C (high); 3C (low), beauty and apparel (high)
- VAS: payment (50bps) + logistics/fulfillment – by default is a zero margin pass-through (!)
- Ads: high margin

Be careful of what's driving the take rate increase...
7/ Ads

- Super high margin😍
- Mostly performance ads
- Not available until 1) clear market leadership is established, 2) market is mature/ merchants are educated
- Most platforms hit 1% with $50B+ of GMV
8/ LT Profitability

5% EBIT/ GMV has been the "magic number" most marketplace names (incl. 3P e-comm, food delivery and ride railing) have guided towards

Is it really achievable?🧐

Most mature e-comm platforms seem to be at 2-3% today

(end)

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More from @FredaDuan

Freda Duan Profile picture
Jan 10, 2023
CPCA released Dec-22 and FY22 China NEV and PV sales.

In FY22, China’s domestic NEV sales reached 6.5M units (+98% of YoY). Penetration reached 28%.

China accounted for 60% of global NEV sales in 2022. Image
Local brands dominate the NEV market, taking 85%+ of the market share (vs. 50% for PV).

NEV market is fairly concentrated, with BYD taking 29% of the share (followed by Wuling 10% and TSLA 7%). The PV market is more fragmented, with Top 3 OEMs (VW, Toyota, Honda) taking 25% Image
Since 1Q 2021 (BYD's market share bottomed due to competition), BYD's market share has increased from 12% (1Q21) to 32% (4Q22).

TSLA's market share (for domestic retail sales) dropped from 12% (FY20) to 7% (FY22) Image
Read 4 tweets
Freda Duan Profile picture
Dec 19, 2022
Contrarian view: China’s policy setting is an open book. Given its top-down nature, you basically get "free investment advice".

The Central Economic Work Conference is super insightful as it sets the tone for where the economy is heading.

Below are priorities set by CEWC 2022:
(For 2023)
- [No.1] Restoring and expanding domestic consumption
- “Platform Enterprises” (e.g. BABA) will be supported to “fully display their capabilities”
- Supports Property, EV, Elderly Living
- Suports private sectors; pro foreign investors

VERY Pro-market. Two highlights:
1/ Putting consumption as No.1 has far-reaching implications

Over the past 8 years, this is the FIRST time “demand/consumption” replaced “supply-side reform” as the focus.
After being depressed for 3 years, China (consumption) will take over US as the world’s growth engine.
Read 4 tweets
Freda Duan Profile picture
Nov 30, 2022
TSLA is positioned to be an outsized beneficiary of IRA (boosts both demand & margin)

Impact on EPS:
$0.4/sh. from manufacturing credit
$0.5/sh. from sales credit should TSLA choose to raise prices. Even if they don't, it could maintain prices despite cost deflation in FY23. Image
Sales Credit (to consumer)

~70% of its US sales will qualify for the $7,500 sales credit, with another 15% likely quality for $3,750.

This would give TSLA a lot of levers to pull even in a recessionary environment - vehicles are effectively cheaper, plus input cost deflation
Manufacturing Credit (to TSLA)

All the models (other than Model 3 RWD) will receive the full $45/kWh credit

$0.4/sh. EPS benefit, assuming 1) TSLA shares the $35/kWh cell manufacturing credit with Panasonic 50/50, and 2) $10/kWh realized as a direct tax credit to TSLA
Read 4 tweets
Freda Duan Profile picture
Apr 14, 2022
Impact of the Shanghai lockdown may be underestimated.

With economies already struggling w/ high inflation and slowing growth momentum, impact of this lockdown could be much higher vs. 2020

Shanghai:
- World's #1 busiest container port
- China's busiest airport (world’s #3)
US containerized imports from China accounted for 42% of total US imports in 2020, according to PIERS. The % further increased in 2021.

Demand remains buoyant (Durables spend is still ~40% >pre-pandemic) and US inventory level remains low.
Mar/Apr is a busy time of year (post-CNY restockings). The problem rn is getting goods to ports: drayage is badly impacted.

Supply chain is only as strong as its weakest link -
which SH has taken the "spotlight".

Hopes of supply chain normalization may once again be delayed.
Read 4 tweets
Freda Duan Profile picture
Mar 16, 2022
Crazy moves this week on China stocks probably mark the beginning of deglobalization in the financial market.

- (-30%) / +30% round-trip in 5 days
- No fundamental news (see below, very interesting dynamic around the delisting news)
- Overnight rebound, mostly driven by local $
- How the de-listing news got circulated was VERY odd...

The 5 names first appeared on SEC website on 3/8, but it wasn't until 3/10 when people "found it".

One sellside found it and circulated it -> HK HF community reacted overnight -> (-30%)

Classic panic selldown.
- How the market reacted was also abnormal...

De-listing concern is nothing new.
Most ADRs already have HK dual-listings.
The HK-listed names (e.g. Meituan) had nothing to do with it, but got sold nonetheless.

-> Tug-of-war between Foreign $ vs. Domestic $
Read 4 tweets
Freda Duan Profile picture
Mar 11, 2022
BNPL

EM Asia, with low credit penetration(<5% Pop. has credit cards), is naturally a very attractive market for BNPL

What’s interesting is the business model played out in a VERY different way vs. RoW

Case study: % of Rev from Merchants: Kredivo (<10%) vs global peers (80%+)
When a BNPL platform earns the bulk of rev from customers, it is essentially a credit card!

Net trx margin is double the level of global peers (5%+ vs. 1.5-2.2%):

- Higher gross rev (consumers pay more)
- Cheaper repayments: ACH-based payment rails vs. linked cards w/ high MDR
Why charging consumers not merchants:

- Close to 0 MDR
- Aggressive pricing of e-wallets + GPN/ regulations pushing to cap trx fees
- Merchants are "spoiled"
- Consumers are credit-starved (no credit bureaus/high % of temp workers) & hence willing to pay
Read 5 tweets

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