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I used to worked as a senior manager in a Chinese manufacturing business. I hold a MBA degree from Australian Graduate School of Entrepreneurship. After thoroughly studied Value investment and looked into my past investment and business experience, I became more confident in stock research and... More
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  • Dangdang (DANG) Is A More Healthy Business Today

    Dangdang (NYSE:DANG) is a much more healthy business today than a year ago when I wrote an article and predicted that Dangdang would gradually reduce loss and make a profit. Dangdang loss in Q4 2012 was 122 million RMB. Dangdang was able to cut the loss in a year and made a profit of 21.7 million in Q4 2013. The stock price rose from around $4.00 then to $19.05 in early Mar, the 52 weeks highest.

    Here Are Some Highlights of Dangdang's Growth.

    · Profit is Small, but Improvement is Big - Net income was 21.7 million RMB in Q4 2013. Considering net loss was 122 million RMB in Q4 2012, the net income gap was 143.7 million RMB between Q4 2013 and Q4 2012. If we look at Revenue growth from Dangdang Market Place between Q4 2013 and Q4 2012, that was 19 million RMB, we will see 86% of the improvement was achieved from Dangdang's own retail operation. This clearly indicates that Dangdang is more efficient in its own retail supply chain management than a year ago.

    · Positive Cash Flow and Zero Bank loan - Dangdang had a positive cash flow of 273 million RBM in year 2013. Dangdang had 600 million RMB bank loan in Q4 2012, but had 0 in Q4 2013. This reflects the management was more optimistic about the operation and future of the business. The financial cost was significantly reduced when loan was reduced to 0 from 600 million RMB.

    · Improved Supply Chain Management - Inventory turnover days was reduced from 97 days to 88 days. This is another indication that Dangdang is more efficient in supply chain management.

    From above, we can draw a conclusion that Dangdang is a more healthy business today than a year ago. Behind these figures, we can give Dangdang's management credit that they did a good job to improve supply chain management and deliver the result under the pressure of loss and market competition.

    Positive E-business Market Growth

    According to forecast from, China B2C E-commerce market will have a compound growth rate of 22% from 2013 to 2017. The market potential provides room for Dangdang to grow. Dangdang now with a better supply chain management will have opportunity to improve profitability and grow the size of the business.

    Dangdang Will Focus on Apparel Business

    According to recent talk from Dangdang's CEO Guoqing Li, Dangdang will focus on catalogues which have better profitability instead of selling everything that Dangdang may not make profit from them. Dangdang has chosen apparel as its core catalogue because of its higher profit margin and much larger market volume than books since last year.

    Focus on what you are good at and focus on where there is good profitability. This is how some businesses became great businesses.

    If Dangdang does implement this strategy as a major apparel e-retailer in China, it profitability will have chance to grow steadily. This will not happen in a quarter's time, but may happen in a year or two years' time.

    Disclosure: I am long DANG.

    Tags: DANG
    Apr 28 3:41 PM | Link | Comment!
  • Will Dangdang Grow And Make A Profit?


    E-Commerce China Dangdang, Inc(NYSE:DANG). is a business-to-consumer e-commerce company that sells books, children and maternity products, apparels, general merchandise and consumer electronics through its website,,.

    Dangdang, Inc. 52 weeks low and high is $3.68 and $11.25. Its market cap is 331.20 million. Dangdang Inc. has 18 million active consumers.

    Recent Strategies are positive to the growth

    · Core Business Strategy

    CEO of Dangdang, Inc., MR Li Guoqing is clear with which categories are their core businesses. He has set books, baby products and clothing as its core businesses because of their relative high margin and market position. He focuses on Dangdang becoming the number one or number two on core businesses in the e-commerce industry.

    According to MR Li Guoqing, Dangdang's lose is a selection of strategy in order to gain a quick sales growth and market shares. They understand where they made the loss, mainly from daily-use merchandises and digital 3C products.

    · Go out and Bring in" strategy in 2012

    Dangdang, Inc. has introduced "Go out and Bring in" strategy in 2012. "Go out" strategy refers to that Dangdang, Inc. sets up Dangdang e-stores in other big e-market places. For example, from Nov 2012, Dangdang, Inc. sold books and general merchandises in, the biggest e-market place in China.

    "Bring in" Strategy refers to Dangdang, Inc. uses as a market place and attracts other stores to sell in For example Dangdang, Inc attracted 1000 apparel stores in in 2012.

    The "Go out and Bring in" strategy has been very successful since it was introduced. It helps Dangdang, Inc. to grow its sales in Q4 2012. Book sales has maintained more than 100% growth month by month since its book store was opened in on Nov 11th, 2012. The monthly sales in reached 10 million Yuan in Jan 2013.

    "Bring in" strategy greatly improved the sales of apparels. Apparel daily sales was about 10 million Yuan at the end of 2012. It grew 10 times compared with apparel sales in early 2012. "Bring in" strategy contributes net income to Dangdang.

    · Free Return Delivery to Improve Customer Service and Experience

    On Jan 25th, 2013, Dangdang, Inc. announced to provide free return delivery service in 578 cities in 25 provinces in China. This approach is to improve the customer experience and service. According to Dangdang company information, Dangdang, Inc has 21 regional warehouses in 11 cities.

    Environments are favorable to growth

    · Market Potential Will Provide Dangdang with Room to Grow

    According to, China e-commerce entered into a high growth phase in 2012. It was estimated the e-commerce in China reached to 1,304 billion in 2012. The annual growth rate was 66.2%. B2C shared 29.7% and it grew 98.1% from 2011. It is estimated e-commerce will grow 41.9% and reach to 1850 billion in 2013 and B2C will share 35.1% of it.

    From above research estimate, B2C in China will grow by 262 billion. It is estimated that Dangdang sales will share 1.9% of the total B2C in 2012. Dangdang sales in first three quarters of 2012 is 3.67 billion. The above discussed strategies will put Dangdang in a good position to grow its sales in 2013.

    · Price Wars tend to weaken

    The big players realized price war would be negative to the development of the China e-commerce industry. E-commerce industry players recognized that they need to focus more on profitability and less on market shares in 2013. The big players in the industry backed off from price war competitions at the end of 2012. This will help Dangdang focus on its own profitability.

    Will Dangdang make a profit in 2013?

    CEO of Dangdang, MR Li Guoqing, is confident that Dangdang will make a profit at some point in 2013. He also realizes the challenge in a market with price wars.

    If Dangdang will make a profit in 2013 are up to these factors, how fast it can grow its core businesses with higher profit margin, how fast it can grow net income as an e-market place and if price wars will weaken. I forecast Dangdang will gradually narrow its loss in Q4 and 2013 and has chance to become profitable in 2013.

    Disclosure: I am long DANG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: DANG, long-ideas
    Feb 27 8:01 AM | Link | 1 Comment
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