Vipshop

Written by  Thursday, 14 April 2016 12:15

The company’s financial performance

Founded in 2008, Vipshop Holdings is headquartered in Guangzhou, China. The company specialises in online flash sales, and their chief business is offering customers with discount branded items like shoes, handbags, clothing, home products, cosmetics and infant supplies just to mention a few. As the leading e-commerce entity in China specialising in fashion flash sales, the enterprise was listed on New York Stock Exchange in 2012. As of 2024, the company recorded profits for ten constant seasons. As per 2014, the net profit of Vipshop was $700 million with a 300% increase compared to 2013. At the same time, their market value was at $16 billion. A recent study launched bu iReasearch indicates that Vipshop is rated among the top three in “China’s Mobile Shopping Market Share" and “China’s Independent Business-to-consumer Internet-based Business Market Share".

The company’s strategy

In 2014, Vipshop launched the “Global Flash Sales” strategy. The primary goal of this new business strategy was to upgrade the company’s cross-border e-commerce platform. Under this strategy, the company makes available a fixed quantity of goods for sale for a limited period, normally at a 60-80% discount below the normal retailing price. This strategy allows Chinese consumers to buy quality brands often considered beyond their reach. Flash sales have emerged to be the basis of a uniquely profitable business strategy for Vipshop. This is because Vipshop obtains merchandise at a discount, sells them at low prices and then ships them out in bulk. This has translated into greater margins as opposed to traditional e-commerce firms; that must maintain enormous inventories in a range of products.

Positioning

Vipshop has positioned itself and maintained their competitive advantage by applying low cost-leadership. Vipshop pursues low cost by distinguishing itself primarily on the ground of price. They believe that providing low prices to customers is crucial to the firm’s future success. The company mitigates the costs of lowering prices by attaining higher sales volumes, achieving better operating efficiencies and negotiating better terms with suppliers. Vipshop ensures that they offer same quality services and products as their rivals at a significantly lower price.

Quantitative goals for market share and profitability

Vipshop has two main quantitative goals for market share and profitability; increase sales and expand market share. The company aims to increase sales by at least 20%  in the next fiscal year. Moreover, expanding market share is the key to Vipshop’s relevance and business growth. The firm will deploy various marketing strategies and tactics to achieve this goal. Such include acquisitions, mergers and introducing new products.

Differentiation

For Vipshop to distinguish against competitors, they have acquired various e-commerce start-ups such as Zappos.com and audible.com. These new acquisitions are helping them in offering high value to their clientele by applying the technology of the acquired partners at low cost. Also, Vipshop has attained scale economies through diverse product offerings which include discount branded items like shoes, handbags, clothing, home products, cosmetics and infant supplies and much more. Such product portfolio helps Vipshop maintain its low prices thus transferring the benefits to the consumers.

Critical resources and capabilities

Strategic resources and capabilities significantly impact Vipshop’s competitive advantage and long-term survival in the industry. Hence, this section explores how Vipshop’s critical resources and capabilities serve them a competitive advantage over rivals, based on the VRIO perspective. First, Vipshop’s research and development (R&D) department has proven extremely valuable. This area has guided towards innovation of mobile platforms and machine learning. Here, the aim is to use advanced analytics to Big Data to tailor retail experiences for consumers. Case in point, buyers will be able to upload pictures of products to vip.com, which inturn, automatically recognizes and suggests similar or the same goods. The technologies out of the R&D unit will also customize a customer’s landing page depending on their browsing behaviours on the e-commerce website. Such resources are considered extremely critical to achieving a unique competitive edge for Vipshop. Moreover, the company has launched various employee empowerment programs to channel and focus their staff’s expertise, motivation, innovation, knowledge, and experience. All these are the core competencies of Vipshop in terms of human resources. Such programs include Career Choices whereby the firm pays for its employees to take short-term courses in demand areas. The combination of these human resource capabilities and R&D resources assume an integral role in the long-standing prosperity of Vipshop, including the long-term competitive edge.

Unusual problems that put Vipshop at a competitive disadvantage

Vipshop reported an in-line set of financila results but guided an outlook that appears to fall short of consensus probably because of intensified rivalry from larger scale players like Alibaba. While report is a motivating factor for revenue growth, the investment fraternity if greatly divided about the growth outlook of Vipshop. One one side, the  sell-side analysts and investors, continue to show faith in the firm as a leading flash sale enterprise, capable of attracting global brands that are pursuing expansion into the Chinese market. On the other side, apparent partnerships by large scale e-commerce enterprises like Alibaba is an unusual problem because the rivalry is intensifying and investors window how Vipshop may contend against its larger competitors that have consuemr traffic, brand reputation and steady sign-ups with leading global brands like Zara. From the face value, it is challenging to view how Vipshop would differentiate from other flash sale platforms. Nevertheless, specialization in some verticals like beauty, baby and mother supplies could maintain a loyal use pool and possibly make Vipshop a lucrative acquisition target. This is because lerger e-commerce platforms are seeking to fill in the loophole on verticals where they appear weaker relaitve to their rivals. As of now, investors argue that Vipsho’s growth trajectory is in jeorpardy. Emerging downward revenue trends across key brokers as a clear sign that the market is intensely bullish concerning VIPS and more downward revisions will be obsreved given that VIPS fail to execute. As such, invetsors and analysis have already taken Vipshop out of their top picks regarding near term growth concerns and reitareted their preference for Alibaba as far as China’s e-commerce space is concerned.

 

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