Perspective Vipshop financial report: rely on brand sales to seize core users and interpret the new format of e-commerce value

Who is the "most different" e-commerce company in China? From different perspectives, this question will have different answers. But when it comes to the maverick of the e-commerce model, there is an example that cannot be avoided, it is Vipshop.

In the context of the endless emergence of e-commerce competition models, the biggest feature of Vipshop is that it has gained a foothold on the track of brand sales. The fierce competition did not make it into an infighting, nor did it produce players who could pose a greater threat to it. In its just released 2021 financial report, its active users, revenue, GMV and other indicators performed steadily, continuing to move forward on its preset track. So, where does Vipshop's "concentration" come from?

Brand sell positioning remains the driving force

Growth is the basis for judging the quality of a company. According to the financial report, Vipshop's revenue in the fourth quarter of 2021 was 34.1 billion yuan (about US$5.4 billion), an increase of 37% from 24.9 billion yuan in the previous quarter. In 2021, Vipshop's annual revenue increased by 15% year-on-year to 117.1 billion yuan. Correspondingly, GMV increased by 16% year-on-year to 191.5 billion yuan, and the total order volume increased by 14% year-on-year to 790 million yuan. This actually reflects that consumers have maintained a strong shopping interest in the brand sale services provided by Vipshop. Therefore, the characteristics of the business are still the advantages of Vipshop.

The most direct driving force may come from the "combination fist" of operations, products, services and other factors. For example, in the second half of 2021, Vipshop launched a number of super big name day activities in response to the platform users' demand for high quality and cost performance, and Skechers super big name day activities sold nearly 250,000 pieces of goods on the same day. During this year's Spring Festival, Vipshop New Year Festival, domestic brands pull back with the word "China" with the word "China" new product sales rose by 66% year-on-year. This actually shows that consumers have taken Vipshop as an important channel for brand sales and big-name goods.

However, if the understanding of Vipshop is still stuck in the promotion, it is undoubtedly a small look at the trend of "brand sale" behind the four words, and the growth of discount retail. From the perspective of the domestic macroeconomic situation, we can explore one or two.

According to Guotai Junan Agency, the preferences of domestic consumers are changing significantly, one is that the platform represented by Vipshop provides a series of good products in the mode of discount retail, so that consumers' shopping channels can be broadened. Second, after the average GDP of Chinese exceeded 10,000 US dollars for the first time in 2019, and the per capita GDP of some first- and second-tier cities exceeded 20,000 US dollars, the shopping logic of consumers changed, they no longer have too many irrational consumption behaviors, but instead paid attention to the coexistence of cost performance and quality, and spent the same money to buy better goods with lower brand premiums. In other words, the coexistence of big-name good goods and low prices is the new demand of consumers.

It is on this basis that high-quality brand supply and sufficient customer demand constitute the "flywheel" of Vipshop's positive growth. Shen Ya, Chairman and CEO of Vipshop, said: "In the future, we will firmly implement the good goods strategy, continuously deepen brand cooperation, improve customer acquisition efficiency, and continue to use good goods to attract users to visit and shop continuously, so as to achieve high-quality and sustainable long-term growth." ”

Build a moat through refined operation

If users provide the most basic vitality for e-commerce, then core users are the purest source of life. Robbie Kelman Baxter has mentioned in his book The Membership Economy: Find your superuser, master permanent transactions, and build recurring revenue. The "super user" of e-commerce is a core user who has established long-term trust in the platform and is willing to pay for better services to achieve two-way reciprocity with the platform.

The most typical example is Alibaba 88VIP, and Jia Luo, vice president of Alibaba Group and general manager of Tmall's platform operation division, even bluntly said that "this is a project that cannot be profitable." However, Alibaba's goal is to reach China's most senior and highest-value purchasers in this way.

To some extent, Vipshop's goal is consistent with Ali's, and it is also at the forefront of e-commerce. In 2021, the number of active users of Vipshop in the whole year increased by 12% year-on-year compared with 2020 to 93.9 million. One of the most noteworthy is that during the reporting period, the number of its core SVIP active users increased by 50% year-on-year, and the online net transaction volume accounted for 36%. SVIP users have an ANNUAL ARPU of about 8 times that of non-SVIP, which fully reflects the characteristics of high repurchase rate, high purchasing power and high retention rate.

But membership is not just an identity, the quality service behind it is the "magic weapon" that attracts users to stay for a long time. This needs to be viewed from two aspects, one is based on the model of Vipshop brand sales to better meet the shopping needs of consumers. The second is that in this process, consumers can more strongly perceive that Vipshop will be "attentive" to users. Ultimately, a long-term and reliable connection between the platform and the user is established.

In terms of customer acquisition, Shen Ya, chairman and CEO of Vipshop, said: "This year, we will vigorously obtain new customers and vigorously ensure the retention of old customers, and make great investment in users. And the most direct way is to let consumers have the right to choose, Shen Ya said: "Normal online shoppers in addition to clothes, will also buy a lot of standard products in life, so this year Vipshop will increase its strength in solving the online shopping category will make some adjustments, hoping to make advantages in the standard products." "It's all about more proactive operations.

On the occasion of the Year of the Tiger, Vipshop and Zhou Shengsheng carried out innovative design and precision marketing through big data, and the gold jewelry customized by both sides was widely welcomed by young consumers and ranked first in the sales volume of Vipshop's gold bracelet for a long time.

On the basis of SF's free return and exchange services, the all-round service to core users will become a scale in the hearts of consumers. Vipshop's core super VIP users can not only enjoy value-added services such as free shipping of self-operated goods throughout the year, free return and exchange freight, and "9.5% discount" for self-operated goods, but also have 24-hour uninterrupted service, which is more intimate and more professional human customer service. By 2021, Vipshop has established a professional customer service team of nearly 2,000 people to solve users' demands and suggestions in a timely manner, and the rate of solving customer problems within 24 hours has reached more than 97%.

Because of this, it is easier for the outside world to understand why Vipshop's consumers are not only sticky and loyal, but also have a more significant willingness to consume. Today, when e-commerce emphasizes high-quality growth, Platforms such as Vipshop, Ali, and JD.com, which emphasize core user services, may eventually have a greater possibility to become a "destination" for consumers to shop.

Undervalued "bellwether"?

The downward shock is the key word that Chinese stocks have faced in the past few months. According to data from Wind, Snowball, Futu and other channels, as of February 16, the price-earnings ratio of China Internet Index (H11136) was at the level of 34% in the past five years, the price-to-book ratio and price-to-sales ratio were at the 3% quartile level, and the valuation was at a historically rare low. This not only shows the downward trend that cannot be ignored in the past period of time, but also shows signs of bottoming out after comparing with the historical trend. Vipshop is also a member of the chinese stock trend.

Of course, even in the past two months, Chinese stocks have shown some signs of rebound, but the repair of valuations and market confidence will take some time. Striking iron also needs to be hard, and to support this rebound, it must need enough room for growth. There are not many tracks with certainty, but the discount retail where Vipshop is located is a successful model that has been proven many times by developed countries.

As mentioned earlier, when the traditional retail economy grows to a certain stage, the rise of discount retail as a supplement and undertaking is almost inevitable.

In the United States, TJX is already a discount retail giant with a market value of more than $70 billion, which has also become a reference for Vipshop's future growth.

A study of the global retail industry shows that discount stores will be the fastest-growing format over the next decade, with a compound growth rate of 5.6% – much higher than the 2.5% of hypermarkets and even higher than the 5.5% of convenience stores. Guotai Junan calculated through the total social retail sales that the domestic discount retail market size will reach 2.83 trillion yuan at the lowest and even reach 3.3 trillion yuan in 2025. This undoubtedly verifies that the Vipshop model has a huge incremental space.

Still, discounted retail in China will not completely replicate the path of its predecessors. Tianfeng Securities pointed out in the research report that the joint sales model favored by Chinese entity businesses and the extremely decentralized regional conditions have led to the efficiency of retail channels online that are more conducive to the development of limited-time sales, discount chains and other formats, and they are grafted from Vipshop to e-commerce. Chinese stocks have entered a recovery trend, and Vipshop, which has greater upside potential and more solid infrastructure, may be one of the first players to usher in the dawn.

It is based on these factors that Guotai Junan and other institutions have also given Vipshop an "overweight rating". After all, as the leader of Vipshop, it always has a stronger channel appeal, and it is more likely to deepen the degree of synergy with the brand, attract more consumers, and open an upward trend with performance.

On February 16, CNBC pointed out in an article that five major international banks, including Goldman Sachs and Credit Suisse, collectively bullish on China, and stressed that "it is time to buy Chinese mainland stocks." Cai Zheng, deputy director of quantitative investment and deputy director of diversified asset management of BOCOM Schroder, also said in an interview that Chinese stocks represented by China's leading Internet companies are important assets that represent the future development trend of China's economy.

An obvious trend is that the recovery will have both strong players such as Tencent and Ali, and there will also be leaders like Vipshop who will do deep moats in specific fields and resonate with market development trends. When the market is already eager for a rebound, Vipshop's new value discovery journey is ready to start.