Chinese etailer Vipshop claims to offer UK retailers more than its larger, better known Chinese rivals. Retail Week speaks to its European boss.
Founded in 2008 and now the third largest Chinese etailer after Alibaba and JingDong, Vipshop has opened offices globally to act as the middleman between international retailers and savvy Chinese shoppers.
Vipshop, which listed on the New York Stock Exchange in 2012 and boasts sales of $6.2bn (£4.7bn) in 2015, has opened its first international offices over the last 12 months in London and Europe, as well as New York, Los Angeles and Sydney.
European general manager Liang Ke told Retail Week: “At the moment we only sell out of China so the plan with these overseas offices is one, to be closer to the brands and partners we work with and two, develop relationships with brands and retailers by buying their products locally, rather than from abroad.
“Our plan is to open overseas warehouses and send products directly from Europe into China for our consumers.”
Forming partnerships and the Brexit effect
Vipshop is known as a flash Sale ecommerce platform in China, acting as a third-party seller for Chinese retailers and brands at marked down prices.
However, the etailer wants to diversify its offer by forming international partnerships with fashion, homeware, grocery and health and beauty retailers and is focused on making it as easy as possible for UK retailers to sell in the Chinese market. The etailer has launched products from UK brands including Waitrose, Whittards and Neals Yard.
As well as opening warehouses internationally, which will allow the etailer to import goods directly to China, Vipshop will cover the cross-border transportation costs and expense of delivering goods to shoppers – it runs 85% of its last-mile deliveries in-house.
“The potential issues with Europe will mean UK retailers are more likely to forge relationships with other trading countries such as China”
Liang Ke, Vipshop
“From a brand point of view working with us is really straightforward. If retailers want to ship to China themselves they can, but if not, we can handle all of the logistics, alongside the editorial and pictures that will protect their brand DNA and we’ll create their website store for them as well,” says Ke.
“The classic import model meant that the retailer would pay for the products, then pay for the import costs and tax mark-ups before going through mass and regional distributors that handle the delivery, all of which would be marked up in the consumer cost.”
Vipshop’s model, maintains Ke, is “the fastest way for retailers to get their products into the Chinese market at the lowest cost”. That allows the etailer to sell UK products to Chinese customers at similar prices that UK shoppers – a saving for the consumer who would otherwise need to buy direct from an international retailer and pay tariffs.
So, how does Vipshop, which is banking on Europe to grow its business, feel about the UK’s Brexit decision?
“We see it as an opportunity,” says Ke.
“The potential issues with Europe will mean UK retailers are more likely to forge relationships with other trading countries such as China. The currency is also interesting as it will mean that the products produced in the UK will be more affordable for us. Overall, we expect that UK retailers will be more up for doing business with us as a side-effect of potential problems with EU partners.”
Alibaba and provenance
Vipshop boasts 140 million members and notches up 18 million visits daily. Ke claims that because it manages all the products and retailer listings itself, it is in a better position to guarantee provenance to its customers and than rival Alibaba, which has urged retailers and brands to back its anti-piracy campaign earlier this month after being dogged with accusations that its websites are plagued with counterfeit products.
”From a business point of view we only work with brands and we’re quite strict about who we work with because there’s a whole issue around counterfeiting in China. We have very stringent policies about working with brands.”
“It’s not a marketplace model where anyone who wants to sell through us can, we’re selective”
Paul Tyce, Vipshop
Ke says of Alibaba: ”Because it is a marketplace a lot of people can open stores on there and you don’t know where the products are coming from. Because we manage our supply chain we’re controlling at the point of buying rather than once someone points out we’re already selling it.”
However, Vipshop head of home in Europe Paul Tyce emphasises that the company is looking for established retailers that are committed to building a long-term presence in China.
“It’s not a marketplace model where anyone who wants to sell through us can, we’re selective,” says Tyce.
“We want to be the go-to etailer for Chinese shoppers to discover brands they haven’t seen and know will be good quality, or find retailers that they have seen while travelling but can’t get back at home.”
“We have 540 million members in our database, so that gives our partners a massive level of brand awareness and marketing that they don’t have to pay for”
Tyce recognises that success will not necessarily come overnight.
He says: “We’re realistic with retailers about the time it will take to establish them abroad. It is about small steps – you think about how long it took to build a brand in your home country, why would it be different in China?”
But Ke adds is confident that, with the right partners, the opportunity for UK retailers to enter the Chinese market is immense.
“We want to work with strong retailers because we also have a lot to offer. We have 140 million members in our database, so that gives our partners a massive level of brand awareness and marketing that they don’t have to pay for,” he says.
Vipshop has followed Alibaba in opening international offices to make it easier than ever for UK retailers to access the Chinese consumer without the need for a bricks-and-mortar presence – and as 80% of the flash sale etailer’s sales come from a mobile device, it is clear there is a significant opportunity for Chinese success through the etail route.