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The Chinese E-Commerce market growths immensely and will lead the way for other Asian countries in the coming years.
On the contrary to countries like the US, where you can choose between Ebay and Amazon, China has a dozen of E-Commerce websites that all bring different benefits.
When I talk with foreign companies, they’ve rarely heard about Vipshop, and maybe more importantly, VIP International. The latter one has grown hundred folds since it was established in 2014 and is currently one of the biggest marketplaces for cross border E-commerce.
In this article, you’ll learn what differentiate VIP International from other marketplaces and whether you should sell on these websites or not.
Vipshop.com and VIP International explained
Vipshop started out as early as 2008. Still, many foreigners aren’t familiar with this giant marketplace.
Previously being the highest valued E-Commerce website in China, its cross border sub-platform VIP International is currently the third biggest in terms of cross border sales.
So, what makes Vipshop and VIP International different from other big players like Tmall and JD?
First of all, these websites have a completely different sales model to competitors like Tmall and JD, as they only work with flash-sales.
Practically, this means that they pre-order your products (often from excess inventory), add a markup, and resell the products with a significant discount.
The discounts normally range between 20-80%, but can sometimes reach up to 90% during squeezed time periods.
When it comes to market shares, Vipshop has claimed almost a 40% of the flash-sale market (which is highly undeveloped with great potentials) and continues to overshadow Alibaba’s flash-sale website, Mei.com.
The growth of VIP International
China still struggles with fake products and authenticity. One of the government’s latest core messages has been directed towards E-Commerce websites and service providers to ensure that products aren’t fake.
This has led to a situation where many websites, like Tmall and Vipshop, have started to move procurement activities overseas, to products’ source of origin.
This will not only bring relief and more options to Chinese customers, but also boost collaboration with overseas brands, embassies, and to increase the presence in foreign markets.
That’s why Vipshop decided to open its own website dedicated to cross border sales in 2014, namely VIP International. The website differs from Vipshop in the sense that all products come from overseas, while you can find Chinese products on the original site.
VIP International has set up a number of buyer groups in a dozen countries, to ensure that Chinese buyers get authentic products.
Not only are the shipping lead times almost on par with products bought domestically, freight costs are often covered by VIP International, at the same time as the customers can return products within 7 days.
It’s working operatively to provide lean delivery services and has so far established 12 warehouses overseas and 11 in China.
How does the typical customer look like on VIP International?
Around 80% of the buyers are female. Also, a majority of them are born in the 80-90’s and live in “smaller” cities, referred to as third-tier and fourth-tier cities.
An outspoken reason why VIP International attracts this kind of buyers is that third-tier and fourth-tier cities don’t have as many physical stores and outlets compared to bigger cities, like Shanghai, Shenzhen, or Beijing.
Hence, there’s plenty of room for expansion in case Vipshop decides to take on other customer segments, offering new services and entering new market areas.
Thanks to being a flash-sale website, Vipshop has got a lot of valuable experience in offering short shipping lead times and lean warehousing services, which can be applied elsewhere.
A funny fact: In 2017, Vipshop broke the national record when it managed to deliver a parcel in just 13 minutes and 18 seconds after the order was placed!
What kind of products are sold on Vipshop and VIP International?
As shown on Vipshop’s website, they mostly work with international and competitive brands in the beauty, cosmetics, apparel, and jewellery industries.
Personally, I’ve not paid much attention to Vipshop as it’s not been suitable to small and medium sized companies.
Some notable brands that work with Vipshop include Calvin Klein, Armani, and Tommy Hilfiger, just to name a few.
Vipshop and VIP International market shares
Vipshop still holds a fairly small market share at 4.3%, as Tmall and JD dominates the domestic and general E-Commerce market.
VIP International, on the other hand, accounts for a bit more than 15% of the cross border E-Commerce market, just behind Kaola and Tmall Global.
Closer collaboration between Vipshop, Tencent, and JD
Tencent (the owner of WeChat) and JD (Jingdong) have undoubtedly seen the potentials in collaborating with Vipshop.
In 2017, the companies poured in a combined value of USD 863 million in Vipshop Holdings, with a goal to claim more market shares from Alibaba (read: Tmall and Alipay).
In fact, Tencent and JD have seen a bigger threat from Alibaba and Tmall recently, saying that the E-Commerce market climate is highly uncompetitive, due to Alibaba’s dominance.
With a closer collaboration with Vipshop, Tencent and JD can get access to customer information from the luxury client segment that gets increasingly bigger.
At the same time, Vipshop can boost the usage of Tencent’s payment solution, Tenpay, which competes with Alibaba’s payment solution, Alipay.
Maybe most importantly, Vipshop will have the privilege to try out new features on WeChat before other companies, such as the in-app search engine.
New features offered by Vipshop
Vipshop has rolled out a number of new services that have got much attention from foreign fashion brands. The three most interesting are:
- Support to create Chinese websites (.cn domains)
- WeChat mini-program stores
- Pop-up stores
Let’s have a look at each one of them.
The benefits of having a Chinese domain (.cn)
By having a Chinese domain (.cn), brands can drive traffic to these Chinese websites at the same time as they sell their products on different marketplaces, like Vipshop, Tmall, or JD.
Azoya Group is a Shenzhen based service provider that provide the same service and it’s a perfect way to leverage sales.
WeChat mini-program stores are shops integrated in the WeChat application.
To make it more clear, instead of going to Baidu (the biggest search engine in China), Chinese buyers can find stores directly inside WeChat, which is very convenient.
To give you some examples, with the help of WeChat mini-programs users can check everything from weather forecasts, book cinema tickets, buy clothes, transfer money to friends, and book trips inside the application.
WeChat Pop-Up stores
The concept of WeChat Pop-Up stores is very interesting in my view, even if you can find Pop-Up stores in places like Tokyo, Singapore, and Macau.
In China, these are small cashierless stores where buyers scan a QR code via the WeChat app to enter the store. The pop-up store is seamlessly setup and integrated with the WeChat app.
When customers enter a store, it gets direct access to the customer’s profile and to their digital wallet, WeChat Pay.
While inside the store, the buyers can enjoy discounted products and simply scan codes to proceed with a purchase. Interestingly, the products have so called RFID tags attached, which allows the buyers to know more about the products and the prices without the need of a sales person.
I recommend you to check this video that shows how one of Hermes’ pop-up store looks like and how it works practically.
Increasingly more brands have decided to open pop-up stores with well-known names like Fendi, Elle, Dolce & Gabbana,
How can I start selling on Vipshop and VIP International?
You normally have two options to start selling on Vipshop or VIP International:
- Work with a Tmall Partner
- Contact the company directly
As mentioned, both websites can be selective and a Tmall Partner can help you to sell in your brand.
If you want to apply directly on their websites at a start, you can simply send an email to firstname.lastname@example.org. If you haven’t received an email within 5 days, you can follow up and send an email to email@example.com.
The following information should be included when you send an inquiry:
- Your company name
- Description about your company
- Company website
- Product category
How much does it cost to sell on Vipshop and VIP International?
Vipshop and VIP International are preferable choices to many foreign brands as the products are pre-purchased.
After, the companies add high markup that’s significantly higher compared to other platforms, like Tmall Global and JD Worldwide.
This removes the hassle to deal with marketing costs that otherwise range between 5-30%, cost for IT setups, customer support, and more.
You’re not subject to any membership fees, commissions, deposits or listing fees when selling on Vipshop or VIP International.
How can foreign companies get paid on Vipshop and VIP International?
Vipshop and VIP International manage payments through their own Vipshop Payment service, but also allow transactions through Alipay.com and Tenpay.com.
Vipshop and VIP International were established in 2008 and 2014 respectively and have grown fast since.
While Vipshop pre-purchase products from both Chinese and foreign companies, VIP International is a pure cross border website that focuses solely on products bought from overseas.
Both have big plans to further expand and enhance their fulfilment and logistics services, until now, VIP International has managed to set up 12 fulfilment centers overseas.
Product categories sold on the websites include high-end products from fashion, jewelry, and cosmetic companies. This is a reason why I have personally not paid much attention to the websites in the past.
One of the main advantages of selling on Vipshop and VIP International is that they pre-purchase the products and do most of the work in terms of marketing, fulfilment, and customer service.
If you sell electronic products, for example, then JD or Tmall is probably your cup of tea, while websites like Kaola are suitable for food products.