Vipshop: From Flagship Clothing To Cosmetics

Vipshop, known as the "demon stock" of e-commerce, launched a combination of investment and acquisition at the beginning of 2014. A week ago, Vipshop announced that it would acquire 75% of the shares of Lefeng, a subsidiary of Dongfang Fengxing.

Last Friday, Vipshop announced that it would acquire 23% of the equity of Dongfang Fengxing Group with US $55.8 million, which is related to its own brand and media business.

Vipshop, known as the "demon stock" of e-commerce, launched a combination of investment and acquisition at the beginning of 2014. A week ago, Vipshop announced that it would acquire 75% of the shares of Lefeng, a subsidiary of Dongfang Fengxing.

So far, Vipshop has held the second largest cosmetics vertical e-commerce in China, and has also set foot in cosmetics private brands and related media businesses. This means that the original focus clothing 、 shoes The Vipshop of hats is vigorously entering the cosmetics field.

"In 2014, we hope that the proportion of cosmetics sales will be several times higher than in 2013." Tang Yizhi, senior vice president of Vipshop, said in an interview with reporters yesterday that if there are other qualified private brands, Vipshop will also consider investment.

For Dongfang Fengxing, it may be the best way to find a strong owner for its own brand after selling one of its main business agency channels.

　　 Why two transactions?

Dongfang Fengxing Group mainly owns its own cosmetics brand and media business. According to this transaction estimate, the valuation of the self owned cosmetics brand and media business of Dongfang Fengxing Group is $243 million.

Through this transaction, Vipshop will reach a comprehensive strategic cooperation with Dongfang Fengxing Group - to open up the front-end fashion e-commerce sales platform, the back-end fashion product manufacturing and fashion content manufacturing platform, and further improve the fashion ecological industrial chain of "from production to sales, from content manufacturing to brand building".

This is the second "hand in hand" between Vipshop and Dongfang Fengxing Group in just a week.

Previously, Vipshop had just announced that it would acquire 75% of Lefeng's subsidiary of Dongfang Fengxing with US $112.5 million. It is estimated that Lefeng is valued at 150 million dollars.

Lefeng, Jingjia Daren's own brand and media business are the three major businesses of Dongfang Fengxing Group. Why should they deal twice?

Li Chengdong, an independent e-commerce analyst, told reporters that Li Jing (the chairman and founder of Dongfang Fengxing) is a media person, and her purpose in making Lefeng is to strategically build her own brand, not a professional cosmetics channel. When the cosmetics channel enters the stage of homogeneous competition and low gross profit rate, Dongfang Fengxing chooses to sell the channel and retain its own brand and media business.

Dongfang Fengxing was originally a media company founded by Li Jing with multiple TV programs. After obtaining the A-round investment of Sequoia Capital, Dongfang Fengxing expanded from media business to private brand and e-commerce, and created Lefeng. com.

At the initial stage of promotion, Lefeng mainly focused on the agency mode, channeled through well-known brands, and promoted its own brands after the number of users reached a certain scale.

However, the agency channel mode is easy to fall into the red sea battle. Lefeng has been overtaken by the rising star Jumei Premium. According to the official data of Lefeng, as of 12:00 p.m. on August 1, 2013, the sales volume of Lefeng on the first day of the fifth anniversary of the store exceeded 122 million yuan, 15 times the daily sales volume. According to this estimate, the sales volume of Lefeng in 2013 was about 3 billion yuan. Chen Ou, CEO of Jumei Youpin, has previously disclosed that Jumei's sales are expected to be 6 billion to 10 billion yuan in 2013.

A person close to Lefeng disclosed to the reporter that the top management of Dongfang Fashion has felt very tired about the operation of the agency channel, and the private brand and media business with higher gross profit and threshold will become the focus of the next development.

For Vipshop, its focus is also the channel value of Lefeng. com. Tang Yizhi told our reporter that Lefeng has many years of hard work and rich operating experience in the cosmetics field, which can strengthen the weakness of Vipshop. In addition, Lefeng and Vipshop's user groups are highly overlapping, which is very helpful for expanding users.

However, the popular private brands and media resources of Orient also have considerable attraction for Vipshop. Shen Ya, the chairman and CEO of Vipshop, once expressed his appreciation for the private brand of Dongfang Fengxing. He believed that with the growing demand of consumers for personalized brands and personalized consumption, the talent brand of Dongfang Fengxing Group would be more popular. However, after all, this is the core resource of Dongfang Fashion, which cannot be sold at a price. Vipshop can only take a share by way of equity.

On the one hand, Dongfang Fengxing wants to sell agency channels, and Vipshop wants to quickly enter the cosmetics field through acquisition; On the other hand, Dongfang Fengxing needs to keep its own brand, but also needs to find more powerful channel support for it. Its own brand and media business also have certain added value to Vipshop, which constitutes two transactions - the first acquisition and the second equity investment. {page_break}

　　 Vipshop's expansive defense

Vipshop's two shots can be summed up in five words - expansionary defense.

This enterprise, founded in 2008, is an e-commerce company that has set foot in flash purchase mode earlier in China, that is, in the form of limited time sale, it regularly launches internationally famous brand goods, and the sales price is only 10% to 50% of the original price. At present, the products of Vipshop include clothing, shoes, bags, household goods, cosmetics, luxury goods, etc.

It is also by virtue of the flash purchase model that Vipshop will maintain profitability for four consecutive quarters from the fourth quarter of 2012. The financial report shows that Vipshop's total net revenue in the third quarter of 2013 was $383.7 million, an increase of 146.1% over the same period; The net profit was $12 million, and the net loss in the same period of 2012 was $1.5 million.

In the case that e-commerce enterprises are generally facing losses, the performance of continuous profitability has constantly boosted Vipshop's share price. In March 2012, when Vipshop was listed on the New York Stock Exchange, the offering price was US $6.5, and the closing price of the day was US $5.5, falling below the offering price. In 2013, Vipshop's share price soared, rising six times from $16 at the beginning of 2013 to more than $100. As of press release, Vipshop's share price was as high as $110, its market value was more than $6 billion, and its P/E ratio was as high as 157.14 times.

According to the current market value, Vipshop is 7.3 times that of Dangdang, 11.2 times that of Lanting Jishi and 127 times that of McCullin.

However, behind the rising stock price, Vipshop is facing the pressure of business expansion and challenges from all sides.

Last year, e-commerce companies including Tmall, Dangdang, JumeiYoupin and others have all set foot in flash purchase business, which has made Vipshop, a unique special market, quickly change from a blue ocean to a red ocean. Although Vipshop has signed exclusive sales agreements with a large number of brands by virtue of its first mover advantage, with the entry of large B2C platforms such as Tmall and Dangdang, some brands may be diverted.

"With JD's IPO in the United States, Vipshop also needs to show some performance to keep investors." Zhang Yi, CEO of iMedia Consulting, said that Vipshop is an e-commerce company that has made a special sale model earlier in China, and it needs to build a wall through investment or acquisition to consolidate the position of the boss.

One of Vipshop's response measures is to expand the category and user base through investment. Cosmetics with high gross profit rate become an optional category.

Shen Ya said: "There is a huge growth space for online shopping of cosmetics in China. It is estimated that the scale of online shopping of cosmetics will exceed 120 billion yuan in 2015. Vipshop's strategic stake in Lefeng, an e-commerce platform, will not only help enrich our product supply and expand customer groups, but also continue to consolidate our advantages in building China's largest fashion shopping e-commerce platform."

Tang Yizhi said that cosmetics were the key category of Vipshop in 2014, and hoped that the proportion of cosmetics sales in 2014 would be several times that of last year. If there are other qualified private brands, Vipshop will also consider investment, but there is no specific target at present.

According to relevant research reports of Goldman Sachs, cosmetics accounted for 11% of the sales of Vipshop in 2012.

As for whether it will expand to other categories, Tang Yizhi told reporters that the core goal of Vipshop this year is to focus on clothing Shoes and Hats Well done, there is no clear road map for acquisition and holding.