Vip shakes up business model to better focus on user experience

Visitors scan product codes at Vip's exhibition center at its headquarters in Guangzhou, Guangdong province. Photos Provided to China Daily

A young and vibrant e-commerce site focusing on brands and first-class services, Vip.com is innovating its business model based on a user-focused strategy amid the fierce market competition of the internet era, said senior executives of the company.

Huang Hongying, vice-president of Vip, said the company has always adopted strict management standards and aims to create the biggest value for consumers from its quality products, logistics and after-sale services.

"As a self-operated e-platform concentrating on sales models and certified goods, Vip is earnest, detail-oriented and down-to-earth, despite its robust economic growth in the last 18 consecutive months," Huang said.

Statistics from the company's first-quarter financial report released on May 16 show that Vip's net revenue totaled 15.95 billion yuan ($2.31 billion), up 31.1 percent year-on-year, with net profit reaching 3.69 billion yuan.

Its number of active users and total orders increased to 26 million and 72.1 million, respectively, in the first quarter.

A newcomer to the e-commerce market in 2008, Vip has now grown into the third-largest online retailer in China, mainly covering clothes, cosmetics, maternal and infant products and furniture. It has 5,500 brands from home and abroad, and has established 10 global branches.

Shen Ya, chairman and CEO of the company, said Vip will continue to advance its user-focused strategy by bringing better shopping experiences and improving product operation capability.

He said the strategy includes introducing personalized services, new international brands and varied products.

After the release of its financial report, Vip announced it will spin of its internet-based finance and reorganize its logistics arms, as its new business model will aim to boost sustainable, long-term growth.

Yang Donghao, chief financial officer of Vip, said under the new model, online retailing, logistics and finance will be three main areas for the company's future development.

He said that the scale of China's online shopping market is expected to reach 7.3 trillion yuan in 2019, and its business-to-customer platform, or B2C, will account for over 60 percent of the whole market.

Statistics from the consultancy iResearch Consulting Group show that the number of online shopping users in China reached 467 million last year. The figure is expected to surpass 500 million this year.

"In the future, B2C will be a mainstream model compared to customer to customer retailing, or C2C, and it requires us to adopt higher standards in products and services," Yang said.

He added that the continuing expansion of B2C is a result of users' increasing attention on quality. Vip's sale-based online retailing and user strategy will always be its core business, he said.

Vip has established a purchasing team of more than 1,600 people to conduct market research, analyze fashionable trends and buy reliable products from around the world for customers.

To further guarantee the quality of services, Vip has built a customer center with a professional team of 2,000 employees.

"Some 95 percent of Vip's business is B2C and we view customer satisfaction in the whole business chain as the key to maintain competitiveness in the market," he said.

One important part of Vip's customers' satisfaction comes from the platform's directly-run logistics system, which will improve efficiency and services, Yang said.

The company's logistics system includes both warehousing and delivery, covering a total storage area of 2.1 million square meters, with 23,000 employees and 2,800 distribution stations in 31 provinces, municipalities and autonomous regions. It has five logistics centers in Guangdong, Jiangsu, Sichuan and Hubei provinces, as well as Tianjin. In the first quarter of this year, Vip enlarged its warehouses in Guiyang, Guizhou province, and Kunming, Yunnan province.

Tang Yizhi, senior vice-president of Vip, said the core competitiveness of the company's logistics lies in its high-end intelligent facilities and technologies, including automatic sorting machines and robots.

"One of the big differences between us and our counterparts in logistics is that we design and develop our own operating system based on big data," he said.

Tang said the company has a research and development team of more than 400 people specializing in information logistics and big data.

"In the future, we will present customers with a series of innovative logistics services, such as in-time free return and mobile GPS navigation," he added.

Realigning finance focus

In addition to traditional e-commerce and self-built logistics, Vip is eyeing the booming internet finance sector.

To date, the company has opened services including supply chain financing, consumption financing, online payment, financial planning, insurance and credit investigation.

After spinning this division of, Vip's financial business will retain a different strategy based on users' needs and precise big data analysis. Yang said that e-commerce firms have two big advantages in conducting financing - consumption scene and user base.

"On the one hand, our internet finance will rely on brand values and consumer characteristics. On the other hand, we will create and expand our financial platforms that are tailor-made for consumers both online and offline, through data analysis on the industry, users, risks and market trends," he said.

Yang said that 80 percent of Vip's customers are females who have high credibility, purchase rates and consumption frequency, and usually buy things for the whole family.

"To meet their demands, we will develop life insurance and health products in the future," he said.

In 2013, Vip started to offer online financing for its suppliers and launched a consumer financial product Weipinhua two years later, which now boasts 5 million users with an accumulative loan value of 11.8 billion yuan.

Last year, Vip purchased Zhejiang Beifu Technology to obtain the license for payment.

Wang Siyuan, director of the planning department of the Korean-style dress shop Hstyle, said: "I believe that Vip is a fair e-platform and has always been a vital partner for us since our cooperation began in 2012.

"Under its self-operated model, Vip pays much attention to customer satisfaction along the whole chain, ranging from logistics, finance to services, and as a brand merchant, we just need to put our resources into products and R&D."

wangjinhui@chinadaily.com.cn

(China Daily 05/24/2017 page15)