Vipshop Is A Trap

Dec. 30, 2013 11:27 AM ETVIPS
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Contributor Since 2013

TheCollins is e-Commerce Analyst, he had worked for alibaba for nine years.He is now an independent e-commerce business consultant.


Before Vipshop Holdings Limited (VIPS) listed in March 20, 2013, its capital chain was almost broken and it had to list for surviving.

it announced that its net operating income in the fourth quarter of 2009 was 299.6 million dollars, with year-on-year rising of 184.8%; the net profit attributed to common shareholder was 6.3 million dollars.

In 2013, its net operating income in the third quarter was 383.7 million dollars, with year-on-year rising of 146.1%; the net profit was 12 million dollars. This was really attractive. However, I always can't figure out where its customer base is.

Customer review

China is facing an issue of lacking trust. People prefer to go shopping on E-commerce platforms highly commended because comments from users are crucial. There are a great number of customer reviews whatever in E-Commerce China Dangdang Inc. (DANG), Jingdong, Taobao, Tmall, Yixun and Amazon China. What's sorely missing from VIPS, however, is customer reviews. In the E-commerce platforms of China, no good customer reviews, no sales. This has nothing to do with commercial modes but with Chinese shopping habits. But there is no such function for customer reviews in VIPS. There are only some linkages with good reviews about VIPS from Weibo in the corners. This can't prove anything and I could find more linkages with bad comments from Weibo.

When I was a consultant for clients, I only suggested to clients that do not provide function for customer reviews in two situations:

1. Very few orders

In such condition, it would look like very desolate in the zone of customer reviews. And it would be easy to notice if the faked customer reviews are displayed there. The faked reviews are not easy to make like making the number of orders.

2. Very bad commodities

In such condition, with very bad customer reviews, no one would like to purchase such terrible commodities.

VIPS claims that it has millions of active users and millions of orders with high repeating purchase rate up to 80%. I completely have no idea that it is on what kind of purpose with no function for customer reviews provided.

About number of customers:

I always thought that this is a personal website before it listed. Until today, people in my life have never heard this website before. I have no idea how VIPS have gotten that millions of orders by any kind of channel. I tried to analyze why users purchase staff on VIPS from the following aspects:

1. Price

Although the way is used to create the illusion by marking up the original price but marking down the selling price, for people sensitive with price would use tools like etao to judge before they purchase stuff online. I used etao to analyze the 20 commodities on its homepage, I found no advantage with its price.

2. Distribution:

For experiencing the service of VIPS by myself, I purchased stuff on VIPS twice on Monday and Saturday respectively. The speed of distribution was slower than DANG and the customers service response was not good as advertised.


Most of the commodities on VIPS are those small brands never heard before or sold on streets. (They wanted to sell luxury commodities, but quit with difficulties. I guess it might be much harder to create the faked purchase amount. )

Based on the years of analysis experiences in Alibaba, I have found no reason that customers purchase stuff on VIPS. With so large number of people shopping online in China though, the factors that determine their purchase behaviors are quite consistent. They are low price, high quality, stable distribution and good reputation. But none of them has VIPS.

Recent activities:

1. VIPS announces online shopping site for luxuries are promoted in the second quarter of 2014:

Comments: no idea what they are trying to do. This is completely different from the position of selling cheap stuff. Would you rather to buy luxuries at stalls on streets?

2. Invested about 50 million RMB to obtain the network exclusive naming right of I am a singer.

Comments: This is good for raising the reputation and bringing the flow, but it wouldn't be good to change this into orders. For customers, the most important reference indicators to decide where to buy stuff are customer reviews and price, both of which VIPS doesn't have though.

3. The large e-commerce like dang Tmall, Jingdong, Yixun etc. have opened the flash purchase sections. Facing such competition, each of the opponents is more experienced than it.

Today's news (2013/12/26)

The characteristic mode has encountered "rear-end collision". VIPS promotes luxuries purchase next year

Comments: The large platforms like Tmall of Alibaba, DANG, Jingdong etc. have all promoted the functions like VIPS, which impacts a lot at VIPS on goods resource. Facing Tmall and Jingdong, VIPS has no strength to fight back. They have to find another way to transform. It has to say the luxury purchase was such a terrible direction:

1. The positioning for VIPS is the leftover selling off. It is unacceptable to say luxury purchase to other suddenly. Chinese purchase luxury stuff for good reputation, but purchasing on VIPS is not a thing with reputation.

2. The prior positioning for VIPS is for luxury. It almost broke because of the lost of money. It goes back the old way is just for the founder's weird fantasy, with no chance of winning.

Bottom line:

Based on the consideration above, I not only doubt VIPS for now, but also for its future. I believe this is a trap made by the dealers and the listed companies.

Disclosure: I 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. I have no business relationship with any company whose stock is mentioned in this article.

This article is tagged with: Short Ideas

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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