# Vipshop: A Follow-Up On Data Inconsistency

Vipshop (NYSE:VIPS) has responded to our firm's questions. In our opinion, many of the items in its response are confusing and potentially misleading, especially in regard to the Alexa data.

Vipshop states that the reason that the Alexa data on Average Daily Unique Visitors (ADUV) is incorrect is that only visitors with a "browser based tool-bar plug-in" are counted by Alexa. Visitors without this plug-in would not be recorded by Alexa. While this would explain the fact that Alexa would miss counting some visitors, we wonder if it can explain the pattern of the number of visitors missed by Alexa. For example, if Alexa missed 40% of the visitor count in Q1 2012, then we would expect Alexa to miss roughly 40% of the visitors in Q2, Q3 and Q4; all else equal.

Let's start by looking at the first two quarters of 2012:

 Alexa vs. VIPS - Avg Daily Unique Visitors (ADUV) Q1 2012 Q2 2012 Change Alexa ADUV 0.77 0.79 0.02 VIPS reported ADUV 1.10 1.50 0.40 VIPS increase less Alexa 0.38 VIPS total less Alexa 0.33 0.71 Alexa % of VIPS 70% 53% Alexa missed % 30% 47%

According to Vipshop's explanation, in Q1 2012, Alexa counted 770,000 visitors out of a total of 1.1 million -- so that it missed 330,000 or 30% of the total because these visitors didn't have the toolbar plug-in. In Q2, Alexa counted 790,000 out of a total of 1.5 million. So, of the additional 400,000 visitors in Q2 over Q1, only 20,000 had the tool-bar plug-in, and 380,000 did not! In Q2, Alexa missed 710,000 ADUVs - more than double the 330,000 that they missed in Q1. They now miss 47% of the total to only 30% in Q1.

Let's look at Q3 compared to Q2:

 Q2 2012 Q3 2012 Change Alexa ADUV 0.79 0.79 0 VIPS reported ADUV 1.50 1.80 0.30 VIPS increase less Alexa 0.30 VIPS total less Alexa 0.71 1.01 Alexa % of VIPS 53% 44% Alexa missed % 47% 56%

According to Vipshop's explanation, in Q3 Alexa counts 790,000 ADUV out of 1.8MM total - so that they now miss 1.01MM or 56% of the total. The total visitor count increases by 300,000 (from 1.5mm to 1.8mm) but Alexa picks up none of these. None of the 300,000 additional visitors has the tool-bar plug-in!

Let's look at Q4 to Q3:

 Q3 2012 Q4 2012 Change Alexa ADUV 0.79 1.06 0.27 VIPS reported ADUV 1.80 2.10 0.30 VIPS increase less Alexa 0.03 VIPS total less Alexa 1.01 1.04 Alexa % of VIPS 44% 50% Alexa missed % 56% 50%

This time the ADUV count increases by 300,000 again (from 1.8mm to 2.1mm). But -- this time almost all of the additional visitors have the toolbar plug-in. Of the 300,000 additional visitors, 270,000 are picked up by Alexa. Alexa now misses 50% of the total ADUVs.

Vipshop's response from yesterday states that:

Vipshop is dedicated to continuing open and transparent communications with investors, analysts and the public. The Company welcomes opportunities for direct dialog with all parties that are genuinely interested in gaining a better understanding of the Company's business model, operations, as well as the China's online discount retail market.

We would request that the company help explain this inconsistency in visitor traffic.

Disclosure: I am short VIPS.

Business relationship disclosure: This article has been written by a hedge fund manager at Greenwich Research Group. Greenwich Research Group is not receiving any compensation for it. Greenwich Research Group has no business relationship with any company whose stock is mentioned in this article.