Online retailer Vipshop grows profits and user base

Top and above: Staff members work in a relaxed environment at Vipshop's Guangzhou headquarters. Photos by Qiu Quanlin / China Daily

Vipshop Holdings Ltd, the Guangzhou-based online discount brands retailer, saw 38.4 percent year-on-year growth to 12 billion yuan ($1.74 billion) net income in the third quarter of this year, according to its financial report released on Nov 22.

The published results for the three-month period also show that the gross profit of the United States-listed online flash sale operator, also known as Vip.com, exceeded 2.93 billion yuan, up 36 percent from the same period a year earlier.

The company expects its net revenue to reach between 18 billion and 18.5 billion yuan in the fourth quarter of this year.

Thanks to product quality, detailed product introductions, big data technology, after-sales services and enhanced delivery capabilities, the company has remained profitable for 16 consecutive quarters. Its active user base in China surged by 43 percent year-on-year to 20.8 million between July and September. To date, it has 300 million users across the globe.

In the meantime, the company's total sales orders jumped 34 percent year-on-year to 60.1 million orders.

Yang Donghao, Vipshop's chief financial officer, said the company has not only seen fast growth in net revenue, active users and orders in the third quarter, but has also expanded its market share.

"We will deploy more resources and manpower to develop our internet finance business. This would be practical to boost our pillar business and further improve our service range," said Yang. "Vipshop will use its profits to further increase sales and expand its market share, aiming to raise operating profit margin and maintain a stable gross profit margin."

Evolving strategies

Shen Ya, chairman and CEO of the company, said Vipshop will continue to provide more high-quality and diversified products for customers, as well as a more personalized merchandise selection to improve its service.

"Even though the third quarter is usually considered a slack season for online sales, financial figures in this period supported our strong growth momentum, thanks to Vipshop's strong operation models and its appeal to customers and brand partners both at home and abroad," said Shen.

After years of experience, Shen said the company's upgraded business strategy has effectively balanced revenue growth and marketing expenditures to ensure flexible and robust growth in future.

The company offers a special category to attract the younger generation, including brands from noted designers, which are different from the brands traditionally sold by Vipshop.

Vipshop appointed Jay Chou, a popular Taiwan musician, as its chief jingxi (surprise) officer and started a series of promotions. It has also partnered with Hannah Quinlivan, a popular model in Asia and Jay Chou's wife, in the third quarter of this year, to attract more users from the post-1990s generation.

The post-1980s and 1990s generation have become the backbone of China's online sales industry, not only because of their growing influence in the workplace, but also because of the money they spend online, according to a study released by the Beijing-based Chinese Academy of Social Sciences in July.

Vipshop is now planning to launch a major promotional event on its eighth anniversary on Dec 8. Jay Chou, its chief surprise officer, will select more than 1 million best-selling products, including fashion brands, kitchen tools, cosmetics and children's products, for extreme bargain offers next month.

"We will continue to bring innovative ideas to our users and create sustainable value for shareholders, by providing flexible services and a one-stop shopping experience for more users," said Shen.

Supported by more than 20,000 staf in its logistics service branch, Vipshop has established 2,200 service centers to provide more personalized delivery services, such as same day delivery and pickup services for returning and exchanging goods.

Internationalization

Eager to enhance its earning ability on a broader platform, Vipshop launched "cross-border cooperation" with the e-commerce and entertainment industries in March.

It also plans to upgrade its international business sector to offer more high-end and popular overseas products to Chinese customers in May.

It has already set up 12 overseas warehouses and 11 Chinese bonded warehouses to guarantee fast and flexible product delivery.

"Ensuring a stable, expanding consumer base will be another key task for us from a long-term perspective," said Yang.

He Jingtong, a professor of e-commerce at Nankai University in Tianjin, explained: "as China's e-commerce market becomes more mature, online platforms cannot simply rely on Chinese consumers spending more and more each year on the same products. They have been keen to expand their customer base and engage in cross-border e-commerce as new solutions to gain new market growth."

Vipshop launched its website in December 2008 and has so far cooperated with nearly 19,000 brands. It ranked ninth in a list of China's top 100 internet companies in 2016, which was released by the Internet Society of China and the Ministry of Industry and Information Technology's information center in July.

zhongnan@chinadaily.com.cn

Dominating the Chinese market

Brand-building, targeted consumer groups and effective promotional campaigns have pushed Chinese flash sale giant Vipshop Holdings Ltd to top positions in the industry, boosting its sales in the domestic market.

TrustData, which specializes in e-commerce and internet technology, ranked the company No 1 in selling fashion and cosmetic products in its third quarter report on the development of China's mobile internet business this year.

Vipshop also ranked second on the 2016 list of one hundred fast-growing United States-listed companies by Fortune magazine.

Their ranking uses criteria including both financial indicators, such as revenue, profit and human capital, and performance indicators, such as traffic and active users, to rate each company in the four dimensions of scale, social influence, growth potential and social responsibility.

Vip.com hosted many Chinese brands on its online platform, such as Shanghai-based Kans and Pechoin, and Beijing-based Dabao, which squared up against many European and US brands, including Estee Lauder, Olay and Elizabeth Arden.

(China Daily 11/29/2016 page14)