VIP.com calls itself the third largest and fastest growing e-commerce platform in China. In June, the company launched an aggressive campaign in the US to offer prestigious fashion, beauty, home goods and sporting brands online to a shopper base of more than 300 million Chinese consumers. With its NYSE-listed parent company, VIPShop (NYSE: VIPS), VIP.com recently secured an equity stake from the owners of WeChat, a leading social media platform in China similar to Facebook, and can provide brands access to potentially one billion active users monthly. The company’s global revenue rose 30% in 2017 to $11.2 billion.
“Ecommerce is a lifestyle. Everyone in China has access to 4G technology,” explained Hillary Wang, head of global buying, VIP.com. “The number of Chinese people who shop online now totals 450 million and we have 300 million of them!”
More impressive, Wang maintains that women account for 80% of VIP.com’s client base; and women, she pointed out, control the family budget. More than half (60%) of VIP.com’s revenue comes from fashion, food, nutrition and home and beauty, with brands that include Juicy Couture, Converse, Tory Burch and Under Armor.
The company forecasts tripling its current sales of US goods into China from $2.2 billion in 2017 to over $6 billion by 2020.
“The economic power of the Chinese middle class and its demand for authentic branded goods, coupled with the explosion of our e-commerce opportunities in China, has set the stage for dramatic growth for US companies in Chinese consumer sales,” insisted Wang.
VIP.com’s business case for US brands is built on the growing Chinese consumer market, fueled by young, social-media conscious customers. Some key elements include:
• Increasing urbanization and a burgeoning middle class have helped to drive China’s annual GDP, which reached 6.9% for all of 2017, exceeding $12-trillion, or roughly two thirds of that of the U.S. China’s middle class is expected to expand from 430 million today to 780 million in the mid-2020s.
• Millennial consumers. Overall, Chinese consumer sales are increasing at around 10% per year and in 2017 totaled $5.7 trillion. Looking forward, customers 35 and younger will make up 65% of China’s consumption growth through 2020, according to the Boston Consulting Group.
• Social media as retail engine. The e-commerce potential of the Chinese markets starts with the size of its online population, more than 700 million Internet users, or one-half of the population. Chinese customers also have a greater appetite than those in other markets to use social media to see what brands or products celebrities are endorsing: 29% of Chinese consumers, as compared to 13% globally, do so, according to a PwC report.
Big Brand Awareness
Having brought companies from Europe and Australia to its Chinese e-commerce platform, VIP.com is pursuing its strategy in the US with two key benefits: its curated merchandise offerings, and a tightly- controlled supply chain that prevents counterfeiting and includes shipping and delivery in China.
VIP.com is already delivering US fashion brands such as Tory Burch, Juicy Couture, Converse and Under Armour, as well as consumer goods from Procter & Gamble and Pfizer, into the online Chinese marketplace. Now, VIP.com is aggressively marketing its platform to recognized US headquartered-manufacturers, as well as distributors, seeking secure access to the growing Chinese consumer market.
“VIP.com has significant growth aspirations in the US,” explained Wang. “We want to be a $6 billion business by 2020.”
To get there, Wang and her team hope to convince prestige beauty brands to join VIP.com. In addition, Wang expects to add more home care brands to enable VIP.com to become a one-stop-shop for consumers searching for quality household and personal care products.
“Our DNA is fashion. When you have premier brands, you look to see what else you can offer. There is category wide upgrade in China. It’s happening in soft lines and hard lines, too. There is a lot of interest in international brands, how can you wash clothes and dishes,” explained Wang. “Organic detergents like Laundress are on the rise in China. People have more faith in US brands.”
A Dynamic System
Whether the product categories are dresses or detergents, lipsticks or linens, Wang insists that the VIP.com platform is ideal to reach an increasingly savvy Chinese consumer. The site’s algorithm expands with the client to offer carefully curated items based on a user’s profile.
“If you purchased diapers for instance, we will show you our complete baby product offerings. It is very easy to find products on VIP.com,” insisted Wang. “Every day there are 26 million people on our site.”
Getting the goods to consumers is easy, too, as VIP.com has 40,000 employees in China, with headquarters in Guangzhou and offices in Beijing and Shanghai.
Wang explained that the company’s goal is to convince all of the biggest brand owners in beauty and homecare to join VIP.com. With its track record of year-on-year gains, a partnership with WeChat and a dynamic online system, VIP.com can make reaching China’s growing middle class easier and more profitable than ever.