Ladies and gentlemen, good day everyone, welcome to Vipshop Holdings Limited second quarter 2021 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed, ma'am. Thank you, operator. Hello everyone, and thank you for joining Vipshop second quarter 2021 earnings conference call. With us today are Eric Shen, our Co-founder, Chairman, and CEO, and David Cui, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen. Good morning and good evening, everyone. Welcome and thank you for joining our second quarter 2021 earnings conference call. In the second quarter, we kept up our solid business momentum with core operating metrics continued to trend healthily. Our user base maintained its strong growth, driven a continued increase in total GMV. During the quarter, our total number of active cost users grew by 32% year-over-year to 51.1 million, and our total GMV increased by 25% year-on-year to CNY 48.1 billion. Our most valuable user group showed especially strong growth momentum with cumulative Super VIP membership increased by nearly 50% year-on-year, contributing about the third of the total GMV in the second quarter of 2021. These encouraging developments were the result of our relentless efforts to calibrate our strategic focus and increase operational synergies. In the second quarter, we continued to robustly execute on our merchandising strategy. Our buyer teams successfully collaborated with an increasing number of suppliers and brand partners. As a result, we have not only been able to attract even increasing amount of unique branded merchandise to be sold on our platform, but have been able to do so at Vipshop's favorite discount price. In addition to our traditional deeply discounted inventory covering extensive range of brands, we now also carry a considerable proportion of Made-for-Vipshop products. These are products specially customized for Vipshop by our brand partners. We are committed to increase the breadth and depth of our merchandising portfolio to offer users a differentiated selection of high-quality merchandise while creating dynamic price advantage for our discount sales. In the second quarter, we successfully instituted refinement at operational level. User experience is one of our clear priorities. To this end, we implemented several initiatives, including better matching of merchandising selection to target users and improving overall incentive for our most valued users. On top of this, we also leveraged effective marketing to attract more younger shoppers to our platform. Looking forward to the second half of 2021, we remain committed to execution on our merchandising strategy. We are dedicated to create value for our new and existing customers, while also increasing the value we add for our core brand partners. We believe this will solidify our leading position in China's discount retail market. At this point, let me hand over the call to our CFO David Cui, who will go over our operational and financial results. Thanks, Eric, and hello everyone. We are pleased to report a strong set of results for the second quarter of 2021. During the quarter, we delivered solid top-line growth with total net revenue reaching CNY 29.6 billion, representing a year-over-year increase of 22.8%. We also witnessed the sustainable growth momentum in business development, which is evidenced by our number of active customers and total orders growing by 32% and 30% year-over-year, respectively. Non-GAAP net income attributable to Vipshop shareholders also increased by 11.3% year-over-year to CNY 1.5 billion. In the second quarter of 2021, we repurchased approximately $301 million of our ADS in accordance with the $500 million share repurchase program we adopted in March earlier this year, showing both our confidence in the robustness of our business model and our dedication to delivering long-term value to our shareholders. Before I get started with detailed quarterly financial highlights, I would like to clarify that all the financial numbers presented below are in CNY, all the percentage changes refer to year-over-year changes unless otherwise noted. Total net revenue for the second quarter of 2021 increased by 22.8% year-over-year to CNY 29.6 billion from CNY 24.1 billion in the same period last year, primarily driven by a large number of total active customers. Gross profit for the second quarter of 2021 increased by 20.6% year-over-year to CNY 6.0 billion from CNY 4.9 billion in the same period last year. Gross margin for the second quarter of 2021 was 20.1%, compared with 20.5% for the same period in 2020. Total operating expenses for the second quarter of 2021 were CNY 4.8 billion, compared to CNY 3.8 billion in the second quarter of 2020. As a percentage of total net revenue, total operating expenses for the second quarter of 2021 were 16.4%, compared with the 15.8% in the second quarter of last year. Fulfillment expenses for the second quarter of 2021 were CNY 2.1 billion as compared with CNY 1.7 billion in the same period in 2020. As a percentage of our total net revenue, fulfillment expenses for the second quarter of 2021 decreased to 6.9% from 7.0% in the second quarter of 2020. Marketing expenses for the second quarter of 2021 were CNY 1.4 billion as compared with CNY 1.0 billion in the same period of 2020. As a percentage of our total net revenue, marketing expenses for the second quarter of 2021 were 4.8%, compared to 4.3% in the second quarter of 2020. The increase was primarily due to higher investment in advertising activities relating to customer acquisition and retention. Technology and content expenses for the second quarter of 2021 were CNY 369.9 million, compared to CNY 305.4 million in the same quarter in 2020. As a percentage of our total net revenue, technology and content expenses for the second quarter of 2021 decreased to 1.2% from 1.3% in the second quarter of 2020. General and administrative expenses for the second quarter of 2021 were CNY 1.0 billion, compared to CNY 804.6 million in the second quarter of last year. As a percentage of our total net revenue, general and administrative expenses for the second quarter of 2021 were 3.4%, as compared with the 3.3% in the same period of 2020. Income from operations before the second quarter of 2021 increased by 18.6% year-over-year to CNY 1.5 billion from CNY 1.2 billion in the second quarter of 2020. Operating margin for the second quarter of 2021 was 5.0%, as compared with the 5.1% in the same period last year. Non-GAAP income from operations before the second quarter of 2021, which excluded the share-based compensation expenses and amortization of intangible assets resulting from business acquisition, increased by 16.1% year-over-year to CNY 1.7 billion from CNY 1.5 billion in the second quarter of 2020. Non-GAAP operating margin for the second quarter of 2021 was 5.9%, as compared with 6.2% in the second quarter of 2020. Net income attributable to Vipshop shareholders for the second quarter of 2021 was CNY 1.1 billion, compared to CNY 1.5 billion in the same period last year. Net margin attributable to Vipshop shareholders for the second quarter of 2021 was 3.7%, as compared with 6.4% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS for the second quarter of 2021 decreased to CNY 1.56 from CNY 2.24 in the second quarter of the previous year. Non-GAAP net income attributable to Vipshop shareholders for the second quarter of 2021 increased by 11.3% year-over-year to CNY 1.5 billion from CNY 1.3 billion in the second quarter of 2020. Please note that non-GAAP net income attributable to Vipshop shareholders excludes a number of items, the details of which can be found in our earnings release. Non-GAAP net margin attributable to Vipshop shareholder for the second quarter of 2021 was 5.0%, as compared with the 5.5% in the same period last year. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS for the second quarter of 2021 increased to CNY 2.10 from CNY 1.92 in the second quarter of 2020. As of June 30, 2021, the company had cash and cash equivalents and restricted cash of CNY 16.5 billion and short-term investments of CNY 3.6 billion. Looking forward to the third quarter of 2021, we expect our total net revenue to be between CNY 24.3 billion and CNY 25.5 billion, representing a year-over-year growth rate of approximately 5%-10%. Please note that this forecast reflects our current preliminary views of the market and operational conditions, which is subject to change. With that, I would like now to open the call to Q&A. Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, you can press the pound or hash key. Once again, it is star one to ask a question. Please note there might be a slight pause as we compile the Q&A roster. We have the first question. This is coming from the line of Feitong Zhang from CICC. Please go ahead. Hi, [Non-English content], this is Feitong from CICC, thanks for taking my question. I have two questions. My first question is regarding to the competitive landscape. We observed some short video platforms are doing really well this year in their e-commerce business, some brands are exploring de stocking at these channels. How should we think about the competitive landscape of this stock industry going forward? Any color would be very helpful. The second question is regarding to the third quarter guidance. How should we think about the third quarter guidance? Did we observe any impact from the pandemic in July and August as we factored in our third quarter guidance? Should we expect acceleration in the fourth quarter if the pandemic gets well contained? [Non-English content] [Non-English content] Okay, let me translate the first answer to the first question. In terms of live streaming models, there are a lot of platforms that are selling through live streaming, whether it's branded or it's in season, slow-moving old inventories. I think these platforms primarily are capturing a lot of customers' attention. No matter what, the most important thing is merchandising, whether it's pricing advantages or brand advantages, that's the most important thing for customers. For Vipshop, actually we do less live streaming. What we focus most on is creating differentiated value for customers in terms of both brand and merchandise, and the pricing advantages. Despite the fact that short video platform has some impact in terms of attracting a lot of time spend from customers, but it will have just some limited impact on our own business. In terms of the Q3 guidance, there are a few factors entering Q3. We've seen consumer sentiment is not as strong amid a weaker macro environment, which was partially related to some natural disaster in certain province and the resurgence of COVID-19 here and there. Recall that we had a tough base in the same quarter of last year, as we did see some strong recovery from the end of COVID-19. Also Q3 is traditionally a light season and also live for the apparel industry. Turning to Q4, typically Q4 is the peak season where apparel ticket sizes tend to be larger, and we will run promotion events as well everyone else within this industry. Q4 should hold up relatively well as long as the COVID-19 pandemic ends at that time. Thanks, very helpful. I would like to add on something what Eric just mentioned. Number one is that, remember last Q3, we had a booming business post COVID-19. We had a larger base for this year. That's why we had a softer guidance for Q3 this year. This is number one. Number two is that we should notice that our active customer base are actually grow year-over-year 32%. That does provide a foundation for us to grow our future business. That's also a strong indicator that our business is healthy and that should help with our future growth. Thanks [Non-English content] Thank you. We have the next question. This is coming from the line of Eddy Wang from Morgan Stanley. Please go ahead. [Non-English content] I have two questions. First is regarding, can give us the breakdown of by month in the second quarter? We remember that in May, when during the first quarter earnings call, you mentioned that your guidance for the second quarter actually had been a little bit conservative. We all expect that you will have a quite strong growth. In June, actually, seems like that the sales situation is relatively weaker than expected. Can you give us more color on that? Second question is, can also give us some color about how the apparel demand actually in July and so far in August? If you look at the NBS, the retail sales data of apparel, which show a certain weakness for the apparel demand. I'm not sure whether or not this also impact our guidance for the first quarter. Thank you. OK [Non-English content] Okay. In terms of the trend we have seen in June, as you mentioned, our guidance of 20%-25%. In June, we've already seen a slower sales due to the longer promotional event for the whole e-commerce space. In the past, the e-commerce space tend to hold a one or two three-day promotional events, but it has become a month-long promotional event, and it's becoming less and less attractive to customers. Back in June, we tried to deliver some coupons to customers to encourage their spend, but it did not turn very well. We actually had some control over our marketing spend. Entering into the first one and a half months in the third quarter, we did see some weakness in the apparel category. It's not as strong as we had anticipated, but it's also not as bad as you probably have imagined. We think that it's primarily due to the resurging of the COVID-19 here and there, and we are seeing the trend moving slower than before. At the same time, we also see brand and merchandise, actually, they have very good inventory because the offline stores are not a very good immediate place to sell due to the COVID-19. Actually, they have increased inventory online for us. We have to see a couple of months to see how the trend turns out. [Non-Enlish content] Thank you. We have the next question from Ronald Keung from Goldman Sachs. Please go ahead. Thank you, Shen, David, Jessie. I have two questions and I'll translate to Mandarin. The first question is on our third quarter revenue guidance of 5%-10%. Just want to know how that user growth and ARPU is kind of put within this forecast. Just want to see whether our user growth remains quite strong or maintaining the trends in the second quarter, and would that imply kind of ARPU will decline further on a year-on-year basis? How do we see that into the fourth quarter as what we talk about as a peak season? My second would be on marketing spending, that we spent around 37% more in marketing spend in the quarter. You mentioned about some control during June in couponing, this is still quite an increase. Are we expecting more spending as we head into the second half? How should we think of sales and marketing as a percentage of revenue, which is one of the metrics which has been around 4.8% of revenues in the second quarter? [Non-English content] [Non-English content] ARPU。 [Non-English content] [Non-English content] [Non-English content] OK。 Hey, Ronald, I take on the second question regarding the marketing expenses. With respect to marketing expenses, this is probably the area that we have more discretion, and the marketing expenses we split it between new user acquisition and existing user retention. We have more discretion in terms of how we allocated the spending. As you can see in the second quarter, we grow our active customer base by 32%, and we would expect that we will continue to grow our customer base. In terms of the strategy, we will be carefully evaluate on how to execute in terms of the marketing strategies. The objective for us is to maintain our marketing expenditure at a stable level in terms of the percentage of our revenue, we would expect that number should remain stable. We would try to improve our efficiencies in terms of how we spend that dollar. Okay. Back to your question on trends. As you may have noticed that our ARPU for the second quarter decreased by 7% year-over-year. For Q3 and Q4, we don't expect similar deceleration within the decline will be much moderated. We have spent a lot of time in reactivating our old customers as well as attracting new customers. Recall in the second quarter of last year, we actually stopped spending money on attracting new customers. When entering into this year, we saw increasing number of new customers and who may need some time to ramp up their spending, so which is due after impacting the overall ARPU. We think that the general trend for ARPU going ahead will be stabilized. We are confident because we've seen very strong growth in Super VIP memberships who grew about 50% year-over-year in the second quarter. We found that they have been very loyal and spending much more than average customer. Actually, Super VIP members spend almost 10x an average customer. As long as we can grow our Super VIP members, we are confident that the ARPU will improve over time. Understood. Thank you. Thank you, management. Thank you. We have the next question. This is coming from the line of Thomas Chong from Jefferies. Please go ahead. Good evening management. I will ask questions on behalf of Chong. I have two questions. The first question is, could management share some colors about the outlook for the second half of the year and also 2022, including the revenues and the gross profit margin and net profit margin? My second question is, we mentioned about attracting young users. Do we have any updates about the initiations on user acquisition? [Non-English content] In terms of first question on outlook of the second half and beyond, we think discount sale is actually a resilient and long-term business, and many consumers have a mind share for discount sale. With our customer base continuing to expand, we are very optimistic that we're going to have a relatively stable growth outlook. In terms of net margin, we've mentioned many times we will continue to balance our top line growth and profitability, and we've been very profitable for many quarters, and in the future, we will continue to maintain a solid level of profitability. On second question on new customer acquisition, we have various customer acquisition channels. In the past, we have been leveraging a lot of traditional channels like digital advertising to acquire younger shoppers, especially those who are born after 2000. We have been seeing a very decent ramp-up in the contribution of the shoppers who are born after 2000, up by 6% year-over-year in the second quarter. In the future, we will try to be more active in exploring more innovative customer acquisition channels, such as live streaming, short video, etc., to attract increasing number of younger shoppers to our platform. [Non-English content] Thank you. Shall we move to the next question? The next question comes from the line of Nelson Cheung from Citi. Please go ahead. Hi, management. Thanks for taking my questions. I have two follow-up questions. The first question is regarding your guidance and your outlook. Looking beyond the per quarter revenue guidance and your expectation on fourth quarter, do you have any preliminary view on next year or medium term normalization growth of the discount merchandising industry? Do you expect Vipshop to grow faster than the industry growth in future? My second question is also regarding the new user profile. wondering if management can provide more quantitative colors in terms of user mix from lower tier cities, and their spending behavior from the new acquisition channel, like the short video platform. [Non-English content] [Non-English content] [Non-English content] [Non-English content] [Non-English content] [Non-English content] Mm-hmm. [Non-Enlish content] [Non-Enlish content] [Non-English content] 。 [Non-English content] [Non-English content] Okay. In terms of the industry outlook versus Vipshop, you should be aware of that we are a fundamentally solid business, and if compared to traditional e-commerce platforms, we might face greater competition. If you look at the apparel related segment, we are the number one in discount sale. We are very confident that our core competency in discount sale will outpace other peers in this particular segment. As you may know that the general e-commerce industry still grow like 20% year-over-year, but for us, we are looking for relatively steady growth for the long-term future. In terms of users and user behavior across different tiers of cities, we have been seeing very stable trend in terms of GMV contribution, user acquisition for ARPU. There is not so much changing in the user behavior of different tiers of cities. Let me add on something on this. I think we want to differentiate ourselves with other e-commerce platform in terms of that we only focusing on apparel related categories. While the other e-commerce platforms may carry many more other categories. We are confident that we have maybe the leaders in terms of how we process apparel sales and inventories. We should outperform in these categories as compared our other e-commerce platforms. Thank you very much. Thank you. We have our next question. This is coming from the line of Natalie Wu from Haitong International. Please go ahead. Hi, good evening, management. Thanks for taking my question. I'm asking the question on behalf of Natalie. My first question is the concerned about new initiatives of the company. Can management share any colors to help us understand are there any new initiatives or businesses that we are now taking a trial in? [Non-English content] [Non-English content] I ask something on this. As mentioned earlier, as of the end of the Q2, our paid Super VIP grow by nearly 50%. Super VIP members tend to spend a lot more than an average customer. It's already contributed 1/3 of our total GMV. In Q2, we actually further increased our incentives to our Super VIP members, including an extra 5% off on selected merchandises. We provided a better targeted product to Super VIP members and improved our services. In May, we also added a certain life of privileges for Super VIP members. In future, we will continue to provide more attractive membership privileges to improve their shopping experience. Hopefully that will translate to more active customers into Super VIP memberships. Okay, back to your first and second question. The first question is on the new business development. Actually, we have been very focused on our core business. We've made it clear that we are reinforce our executional merchandising strategy and everything we do centers on that strategy. We are focused on discount retail and enhance our buyer capabilities to the end. We are consolidating our long-term core competency in the discount retail market. 99% of management focus is on discount, retail and the execution of merchandising strategy. Of course, we are trying a lot of efforts in innovative areas. We've been investing to fulfill our innovation, but that's not our current priority. In terms of enhancing our user experience through some operational refinements, you have to be aware that all the consumers are looking for good brands, good merchandise with good prices and good quality, and that should be matched with good services. We've been investing heavily in bringing our user experience to the next level, including a hassle-free return or exchange, leveraging our relationship with SF Express delivery. On the other hand, we have been increasing our efforts on our front end and back end in terms of customer service. We've seen that our core metrics evaluating customer service standards like NPS is improving very significantly. In the future, we will continue to invest in our efforts in enhancing our customer service and enhancing our user experience. Thank you, management. Thank you. We have the next question from the line of Robin Liang from Daiwa. Please go ahead. Hi. Thanks, management, for taking my question. This is Robin Liang asking on behalf of John Choi. I have two questions. Given the user growth is strong over the past four quarters, but ARPU is still showing a year-over-year decline, should we expect the ARPU to ramp up in 2022 when the new users normalize and the spending from the older users that we acquired this year to ramp up their spending? Would it be first half next year or the second half of next year? Should we expect to see less couponing by that time? The second question is on regulations. Are we seeing any positive or negative impact on our company? [Non-English content] [Non-English content] Okay. On your first question on ARPU trends, we have mentioned ARPU is on a decline in the second quarter, but it's going to be at a moderate pace in the quarters ahead because it takes time for new customers as well as our old customers, which means, historically, they spend money on our platform, but recently they haven't come to spend. It takes time for these two types of customers to ramp up their spending. On a quarter-over-quarter basis, we have seen a very apparent pickup in their spending. Actually, we are not too worried about that. As long as we can grow our user base, ARPU is going to improve over time. We've also mentioned that we are going to invest heavily in our SVIP, our super membership program. We want to improve their ARPU going ahead. As their spending has contributed a third of our total net GMV, we are going to translate more customers into SVIP members, and that would help us to improve the ARPU over time. On your question on regulation, overall, we believe the recent developments in terms of internet regulations such as antitrust, and unfair competition, as well as data security, especially the ban on forced exclusivity on merchants, will benefit Vipshop to some extent. That means we will have a more open and transparent market with fairer competition. We will have more opportunity to partner with an increasing number of brands, which will further enrich our brand and merchandise selections on our platform. Generally, we are very welcoming these regulatory developments because Vipshop is going to benefit from them more or less. Thank you. Due to time constraints, that concludes our Q&A session for today. I would now like to hand the conference back to Jessie for any ending remarks. Please take over. Thank you for taking the time to join us today. If you have any questions for follow-up, please don't hesitate to contact me. We look forward to speaking with you next quarter. Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for your participation. You may disconnect your lines now.