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Growth In Marketing Spend Won't Rescue Vipshop

Mar. 03, 2021 11:45 AM ETVipshop Holdings Limited (VIPS)BABA, JD, PDD11 Comments
EqualOcean profile picture


  • Vipshop's market share and average unit prices have been declining year-by-year with no recovery in sight.
  • The company is gradually losing consumers in low-tier cities, and the increase in marketing expenses has not returned new active users.
  • Diverse new businesses, including finance, logistics and offline outlets, have not brought meaningful revenue and have even increased costs.
  • Vipshop has arguably the weakest long-term prospects among its peers in the Chinese market.

The Chinese e-commerce industry has recently fallen into a storm. After Alibaba Group (BABA) was involved in an anti-monopoly investigation and JD.com (JD) was fined, in January 2021 the State Administration also fined Vipshop (NYSE:VIPS) CNY 3 million for 'market regulation.' The reason is that the company used the technical means provided by the supplier platform system to obtain the information of the brand operators whose products are on the shelves of Vipshop and other companies at the same time. This affects the choice of users and limits the sales channels of the brand operators.

This is not the first time Vipshop has violated terms and been warned by the local regulatory authorities. In December 2020, it was also fined CNY 500,000 due to consumer complaints about the company's online shopping schemes. Misinformation plagued the company, including price increases and discounts, false promotions and induced transactions. From these occurrences, the company has been facing development dilemmas for a while. Although Vipshop has consistently emphasized its profitability for 30 consecutive quarters, it is still under tremendous peer pressure.

As an online discount platform, Vipshop uses its 'flash' sales as the most significant selling point. The company launches new sales activities in a limited time every day, selling selected fashion brands and limited quantities of high-quality discount products.

Speaking of the user profile, female users accounted for 69%, as discounted genuine products have a stronger appeal to them than to men. Female consumers are willing to spend more time browsing products online. Besides, around 58% of total users are aged between 25 and 34 and mainly reside in coastal areas with convenient transportation. These regions tend to have more shopping centers with logistic hubs and more emphasis on brand and quality.

The revenue generated by Vipshop app users accounted for more than

This article was written by

EqualOcean profile picture
EqualOcean is an investment research firm and information service provider focusing on China's Technology, Automotive and Consumer Internet sectors. With unique research and due diligence methodology, we provide tailored insights into a wide range of Chinese equities, empowering our clients' value-added decisions. Founded in 2014, EqualOcean is headquartered in Beijing and has offices in Shanghai, Shenzhen and New York.For more information, contact us at contact@equalocean.com.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (11)

Adambombfx profile picture
Amazing the brand loyalty VIPS has !

Excellent quality products, authentic and fairly priced ! bought at $14.58 and the customers who love VIPS products made to shoot up pass $45.00 per share.

@Adambombfx I bought around 17.- last September when the price went down a lot. But then got worried about the price shooting up without reason. Around end of January, I set up a a trailing stop to attempt following it up while limiting downwards risks. Results : everything was sold in three installments, at 44.-, 38.- and can't remember the third one. The stock is now at 24.-, which looks very tempting ! I bought back BIDU after the Archegos implosion, but not Vispshop, and I am hesitating to do so before Q1, as this article does list a few worrying patterns. I don't see how I could just ignore it as "short-seller poison pen". GLTA
Adambombfx profile picture

$22 Looks to be a good entry point for re-entry....
ivyleague1985 profile picture
@Adambombfx At $22, this stock is traded at <15x P/E multiple. An Chinese online "TJ Maxx" with reasonable growth only has <15x P/E? Either the company is a scam or the price is a scam.
All fake goods here
accumulating VIPS since low 10s and not sold yet. This article just shows how bad the SA freelance contribution model has gone wrong. Yes, anybody can be a paid lobbyist now and write stuff one or other way. I have nothing against diluting the Elite lobbyist club and giving that opportunity to every hired Pen. Point is long term Fundamentals hardly stay disengaged with Price and vice versa. I am long. I like the stock.
I bought about 6 months ago and it has been a steady climb up from the lower left to the upper right. Name me a business in China and, for a price, you could write a short seller "poison pen" article about them. BABA being destroyed by CCP. JD has all kinds of negatives, etc, etc. VIPS is the Ross Stores of China and they are the 6th largest seller. Look at the charts. If you could find a journalist somewhere, then for every big negative in the article I am sure a fair minded person could present the other side of the issue.
Very unbalanced article as many bait articles are on SA. Started accumulating shares at around 7 and it right at 40 now. From reading the article it should been precisely the opposite.
Flavinsh profile picture
@cjsmit77 You are describing 'share price'. Fair point that the share price moved as it moved. But what's next? 'Price' tells you only that information, no more about fundamentals.

Equal Ocean is describing 'fundamentals', long-term term sustainable growth potential, and competitive position.

Obviously the best would be linking both (market story vs fundamental story, market price vs fundamental valuation).
@Flavinsh The point being made was about fundamentals not price as you indicate (it apparently just went over your head).

I've been accumulating VIPS for several years. Price and fundamentals very rarely deviate from each other over that long a period of time.

So let me help you here, the author's argument that the fundamentals are truly weak totally misses the mark.

Got it now?
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