How a top Chinese e-retailer keeps doubling its web sales
January 16, 2015 11:07 AM
Vipshop Holdings Limited, a Chinese flash-sale retailer founded in 2008, has been steadily growing its sales by triple-digit percentages, and Wall Street is cheering it on: The Chinese retailer’s value, based on the prices of its shares on the New York Stock Exchange, of $12.2 billion, is not far from the far older Best Buy Co. Inc.’s value of $13.9 billion.
The e-retailer is betting investments in mobile technology, logistics and new product categories will keep up its rapid sales growth. In the first nine months of 2014 its revenue of $2.41 billion was 130.0% more than $1.05 billion in the first three quarters of 2013; its full-year 2013 sales of $1.7 billion exceeded by 145.1% 2012 revenue of $692.1 million.
Along with sales, Vipshop has been building its customer base: it says it had 9.6 million customers at the end of the third quarter, an increase of 137% from a year earlier. Moreover, the Guangzhou-based company is booking profits as it grows.
Mobile commerce is playing a crucial role for Vipshop, which reported mobile shoppers accounted for 57% of orders in the third quarter of 2014, up from 15% a year earlier. “As a flash-deal e-retailer, Vipshop has unique advantage in mobile. Flash sales and mobile is a perfect match because they are all related to impulse buys.” Vipshop chief financial officer Yang Donghao tells Internet Retailer. “We offer many deals especially designed for mobile to encourage more consumers to migrate from PCs. To enhance our capability in business intelligence and to develop a personalized shopping system for consumers, we have opened an overseas research center in Silicon Valley in the last year.”
Yang also noted that unlike other e-retailers, Vipshop never put a search bar on its web site, as it wants consumers to browse its offers, rather than searching for a specific deal.
To deal with its fast growth, Vipshop has stepped up its investments in logistics. “We are building large fulfillment centers in three Chinese cities. For the fulfillment center in Ezhou city alone Vipshop has invested 1.6 billion yuan ($258 million),” Yang says. The company is also upgrading its warehouse management system and introducing automated technology in its fulfillment centers to cut costs, he says.
To provide unique products, Vipshop is working with many brands tooffer products specifically designed for Vipshop’s customer base. “Procter & Gamble has agreed to supply some exclusive products, such as products from its cosmetics brands SK-II and Olay on Vip.com.” says Luo Shuang, director of global sales of Vipshop, tells Internet Retailer.
More than 75% of Vipshop’s buyers are female, and Vipshop is expanding its selection of cosmetics to complement its apparel offerings. In 2014, Vipshop acquired a 75% stake in a leading cosmetics e-retailer, Lefeng.com, for $132.5 million to help it expand into cosmetics sales.
Vipshop is No. 8 in Internet Retailer’s China 500. Lefeng is No.24.