Revolve(RVLV) - 2019 Q4 - Annual Report

Financial Performance - In 2019, Revolve generated $601.0 million in net sales, serving approximately 1.5 million active customers and offering over 500 brands with more than 110,000 unique styles[29]. - Approximately 79% of total net sales in 2019 were from products sold at full retail price, indicating effective data-driven merchandising[30]. - The average order value was $275 in 2019, reflecting the focus on premium merchandise and differentiation from mass market retailers[29]. - In 2019, net sales contributions were approximately 40% from emerging third-party brands, 23% from established third-party brands, 36% from owned brands, and 1% from other sources[43]. Digital and Mobile Growth - Mobile orders accounted for 56.2% of total orders and 53.7% of total net sales in 2019, highlighting the significant growth in digital channels[25]. - Revolve's marketing strategy drove 51% of traffic from free and low-cost sources in 2019, enhancing customer acquisition efficiency[33]. - Approximately 75% of marketing expenses are devoted to performance marketing efforts, including retargeting and paid social[48]. Owned Brands and Product Offering - Owned brands contributed 36.1% of the REVOLVE segment's net sales in 2019, with a steady increase from 20.2% in 2017[35]. - The company has developed a portfolio of 24 owned brands and utilizes proprietary data analytics to identify market gaps and emerging trends[43]. - The company offers over 45,000 apparel and footwear styles, with approximately 84% of net sales coming from apparel and nearly all from women's products in 2019[43]. Customer Experience and Retention - Revolve aims to deepen customer relationships to improve revenue retention and increase wallet share through enhanced customer experience[39]. - The company ships approximately 98% of orders on the same day if placed before noon Pacific Time, enhancing customer experience[53]. - The company is testing a loyalty program and a preferred customer program for high-value customers, offering benefits such as early access to new styles[52]. Technology and Innovation - The proprietary technology platform manages hundreds of millions of data points, optimizing merchandising, marketing, and product development[36]. - The technology platform includes a database built over 17 years with hundreds of thousands of styles and millions of customer interactions, creating a strategic asset of hundreds of millions of data points[49]. - Revolve intends to continue innovating across its user interface, technology platform, and supply chain to enhance customer experience and reduce lead times[41]. - The company has a proven history of leveraging its technology platform to expand capacity and increase service levels in a capital-efficient manner[54]. Economic and Market Risks - The COVID-19 pandemic may materially impact net sales and other operating results due to supply chain disruptions, particularly for products sourced from China[45]. - Most sales are denominated in U.S. dollars, minimizing significant foreign currency risk[369]. - Operating expenses are subject to fluctuations in foreign currency exchange rates, particularly the British Pound[369]. - Foreign currency transaction gains and losses have not been material to consolidated financial statements[369]. - Inflation has not had a material effect on the company's business or financial condition[370]. - The company continues to monitor inflation impacts to minimize effects through pricing strategies and cost reductions[370]. - There is a risk that significant inflationary pressures may not be fully offset by price increases[370].