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Why Vipshop's Business Model is so successful?

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Vipshop’s Company Overview


Vipshop Holdings Limited is a leading online discount retailer for brands in China. Launched in 2008 and headquartered in Guangzhou, the company offers consumers high-quality and popular branded products through flash sales on its vip.com and vipshop.com websites. Vipshop provides a wide range of products, from apparel, accessories, home goods, and cosmetics to electronics, providing an exciting shopping experience for its millions of customers. The company has built a strong reputation for its ability to deliver an extensive product selection, significant discounts, and superior customer service. Vipshop has established strategic partnerships with over 20,000 well-known domestic and international brands, covering over 2.9 million active customers. Business Model: Vipshop operates through a unique flash sale business model. The company purchases inventory from a vast network of brand partners and sells these products on its platform for a limited time and at significant discounts. This model allows Vipshop to minimize inventory risk, as it only purchases goods based on anticipated demand levels. The company's flash sales model creates a sense of urgency among consumers, encouraging quick purchases and increasing customer engagement. By offering high-quality branded products at discounted prices, Vipshop attracts and retains many loyal customers, driving its business growth. Revenue Model: Vipshop's primary source of revenue is product sales on its platform. The company earns revenue by purchasing products at a discounted price from brand partners and selling them at a higher price to consumers. The difference between the purchase and selling prices represents Vipshop's gross profit. Furthermore, Vipshop also earns revenue from its logistics services, which include warehousing, distribution, and other value-added services. Additionally, the company monetizes its customer base through advertising and other marketing services, contributing to its diverse revenue streams.

https://www.vipshop.sg/

Country: China

Foundations date: 2008

Type: Public

Sector: Consumer Goods

Categories: eCommerce


Vipshop’s Customer Needs


Social impact:

Life changing: affiliation/belonging

Emotional: rewards me, design/aesthetics, provides access

Functional: quality, variety, informs


Vipshop’s Related Competitors



Vipshop’s Business Operations


Curated retail:

Curated retail guarantees focused shopping and product relevance; it presents a consumer with the most appropriate options based on past purchases, interactions, and established preferences. It may be provided via human guidance, algorithmic recommendations, or a combination of the two.

Advertising:

This approach generated money by sending promotional marketing messages from other businesses to customers. When you establish a for-profit company, one of the most critical aspects of your strategy is determining how to generate income. Many companies sell either products or services or a mix of the two. However, advertisers are frequently the source of the majority of all of the revenue for online businesses and media organizations. This is referred to as an ad-based income model.

Customer loyalty:

Customer loyalty is a very successful business strategy. It entails giving consumers value that extends beyond the product or service itself. It is often provided through incentive-based programs such as member discounts, coupons, birthday discounts, and points. Today, most businesses have some kind of incentive-based programs, such as American Airlines, which rewards customers with points for each trip they take with them.

Digital transformation:

Digitalization is the systematic and accelerated transformation of company operations, processes, skills, and models to fully exploit the changes and possibilities brought about by digital technology and its effect on society. Digital transformation is a journey with many interconnected intermediate objectives, with the ultimate aim of continuous enhancement of processes, divisions, and the business ecosystem in a hyperconnected age. Therefore, establishing the appropriate bridges for the trip is critical to success.

Discount club:

The discount club concept is built on perpetual high-discount deals utilized as a continual marketing plan or a brief period (usually one day). This might be seen as a reduction in the face value of an invoice prepared in advance of its payments in the medium or long term.

Low cost:

A pricing strategy in which a business provides a low price in order to drive demand and increase market share. Additionally referred to as a low-price approach. The low-cost model has sparked a revolution in the airline industry. The end-user benefits from low-cost tickets as a result of a revenue strategy that seeks various sources of income. Ryanair was one of the first businesses to embrace this approach.

Fast fashion:

Fast fashion is a phrase fashion retailers use to describe how designs travel rapidly from the catwalk to catch current fashion trends. The emphasis is on optimizing specific supply chain components to enable these trends to be developed and produced quickly and affordably, allowing the mainstream customer to purchase current apparel designs at a reduced price.

Online marketplace:

An online marketplace (or online e-commerce marketplace) is a kind of e-commerce website in which product or service information is supplied by various third parties or, in some instances, the brand itself, while the marketplace operator handles transactions. Additionally, this pattern encompasses peer-to-peer (P2P) e-commerce between businesses or people. By and large, since marketplaces aggregate goods from a diverse range of suppliers, the variety and availability are typically greater than in vendor-specific online retail shops. Additionally, pricing might be more competitive.

eCommerce:

Electronic commerce, or e-commerce (alternatively spelled eCommerce), is a business model, or a subset of a larger business model, that allows a company or person to do business via an electronic network, usually the internet. As a result, customers gain from increased accessibility and convenience, while the business benefits from integrating sales and distribution with other internal operations. Electronic commerce is prevalent throughout all four main market segments: business to business, business to consumer, consumer to consumer, and consumer to business. Ecommerce may be used to sell almost any goods or service, from books and music to financial services and airline tickets.

Group buying:

Group purchasing, also referred to as collective buying, provides goods and services at substantially discounted rates in exchange for a minimum number of customers. Typically, these websites offer a discount of the day, which becomes active after a certain amount of individuals agree to purchase the goods or service. In addition, numerous group purchasing sites operate by arranging discounts with local businesses and increasing foot traffic in return for lower pricing.

Remainder retail:

Remainder retail (affectionately referred to as daily deal, flash sale, or one deal a day) is an online business strategy in which a website sells a single product for a period of 24 to 36 hours. Customers may join deal-a-day websites as members and get online deals and invite through email or social media. The deal-of-the-day business model works by enabling merchants to advertise discounted services or goods directly to the deal company's consumers, with the deal company receiving a cut of the retailer's earnings. This enables merchants to foster brand loyalty and rapidly liquidate excess inventory.

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