For 19 consecutive quarters of profit, why is Vipshop still a slim chance?
Recently, the e-commerce company Vipshop reported its second-quarter results, with net revenue exceeding 17.5 billion yuan, making 19 consecutive quarters of profit, which refreshed the record of the continuous profit of the e-commerce industry.
In August 2008, Vipshop information technology co., LTD. Was established in guangzhou in December 8, its website online, the main business for the online sales brand discount merchandise, including the famous brand clothing, shoes, bags, beauty makeup, maternal and child, home, etc.
Vipshop was listed on the New York stock exchange on March 23, 2012. By 2014, Vipshop had a market capitalisation of more than $10 billion, making it the world’s largest distributor. China’s B2C online shopping market is the third largest e-commerce market in China after Tmall and jd.com, and the boom has pushed the new model of vertical e-commerce to the top.
However, the new model of vertical e-commerce in less than three years faces the dilemma of survival in the cracks. Today, 2017 is about two-thirds of the time, and e-commerce has reached its climax, with the expansion of e-commerce companies, the rising of emerging e-commerce and the dying struggle of vertical e-commerce companies. Vipshop’s share price has been declining in April 2015, and is now only a third of its peak, in the event that vertical ecommerce is not going to see the future.
So why is it that Vipshop, a continuous profit, is still sung?
Continuous profit, the investors still look bad
Vipshop reported its second-quarter results: total net revenue of 17.52 billion yuan ($2.58 billion), a 30.3% increase from the 13.44 billion yuan in the same period last year. The total number of active users increased by 22 percent to 28.1 million. Total orders rose 23 per cent year on year to 84.8 million. It is the 19th consecutive quarter that Vipshop has been profitable since it went public.
In iresearch recently released the first half of 2017 China quality electricity research report, Vipshop in second with comprehensive quality customer satisfaction on the whole industry, ranked first in terms of quality goods guarantee. Despite this, the industry’s decline to Vipshop has not stopped. Vipshop has been profitable in recent years and sits in the position of China’s third largest e-commerce company, but falling share prices have put a lot of pressure on Vipshop.
In the electricity industry there is a strange phenomenon: alibaba has been profitable, jingdong losses in a row, until the first quarter of this year began to truly profitable, but both appliance merchant’s share price rising. However, since the launch of Vipshop, which has been profitable until now, share prices have been falling since 2015. Vipshop’s latest results also showed that belongs to Vipshop common shareholders of the net income of 386.5 million yuan ($57 million), more than RMB 451.6 million in the same period last year dropped 14.4%.
Deutsche bank cut its rating on Vipshop to “hold” from “buy” and lowered its target price to $12.6 from $15.5. By contrast, deutsche bank raised its target price to 27% to $201, while lowering its Vipshop rating. On the day of the downgrade, shares of Vipshop plummeted 8.5 per cent, followed by a further fall of 4.47 per cent in the following week. When Chinese stocks closed yesterday, Vipshop fell 8.11 per cent to $10.20.
In fact, the reason that deutsche bank cut Vipshop could be considered on the other hand, although Vipshop has been profitable in recent years, but its growth rate has begun to slow down. The company has been in a profitable long-term position and has been expanding in new areas, making deutsche bank look at its prospects. Jd.com is in line with the investment rules of western economics, with long-term losses turning into profits and beginning to enter the harvest season. In this sense, it’s no surprise that two big e-commerce companies are trading at a higher price. Vipshop’s stock price has been falling for a long time because it has not seen its growth prospects.
So even if Vipshop continues to be profitable, it will not change its stock price decline. Vipshop will then face a more competitive market in addition to falling share prices. In the face of the monopoly of alibaba and jd.com and the squeezes of emerging e-commerce companies, it is a big challenge for Vipshop.
The third pole of e-commerce is still under the shadow of alibaba and jd.com
The purchase of Vipshop by jd.com has shocked the industry and even exploded social networks. Although both sides have stepped in to deny the merger, several media outlets have suggested that the two e-commerce companies may secretly negotiate a merger. Whether the rumours are true or not, Vipshop has lost its luster as the world’s biggest selling website. So what makes Vipshop, a new model for China’s e-commerce business, still unappreciated?
On the one hand, the integrative e-commerce is taking market share and vertical e-commerce sandwich. Beauty makeup products, for example, after a fashion magazine did a report on the Chinese female beauty makeup shopping trend analysis, the white paper “the survey report, according to the report, 79% of respondents would through online shopping to buy cosmetics, among them, the comprehensive platform (45%), 36% brand website, vertical website 34% form the situation of The Three Kingdoms tripartite confrontation.
Now vertical business model in beauty makeup market sales channel of declining, Vipshop share price continued to fall, gather beauty is superior since listed shares is less than a year, a year earlier is a record low stock market dropped to ten percent, and the vertical electric business day skynet is in a puzzle of life and death. Alibaba and jd.com, which are integrated e-commerce companies, have not only innovated high share prices, but also continued to expand the market for women, while the market share of Vipshop, which has been targeting women for consumers, is also being usurped.
From the big market environment, under the monopoly of the integrated e-commerce, vertical e-commerce is extremely weak. Vipshop’s income, net income and order volume also started to decline as the environment declined.
On the other hand, Vipshop development is stuck in a bottleneck period, and the category expansion is slow, which cannot guarantee how long the profit will last. Compared with other e-commerce companies, Vipshop category expansion is relatively slow, and its main operating luggage is young women. While Vipshop is too focused on such commodities and consumer groups, its rivals alibaba and jd.com have started expanding the field of women’s clothing and developing new user groups.
Vipshop has not attracted other consumers through a variety of categories while improving quality services, increasing talent resources, and improving logistics. This leads to a slow increase in new users. In addition, Vipshop self-built logistics investment should not be underestimated. To change the status quo, Vipshop needs to break through the current model.
Vipshop, therefore, in addition to over two integrated electricity shadow, market share continues to be preempted, as well as its own category single unable to attract new users, new business into the high, is responsible for its share price fell, the main reason for the growth is slowing.
Advantage diminished, can Vipshop find a new foothold?
Compared with other websites, Vipshop’s survival in the early days of its establishment did not take a detour. Its flash mode itself can drive users to snap up, so that the marketing expense can save a part of it, and easy to generate word of mouth. But now that the vertical e-commerce model is in jeopardy, is there a chance that Vipshop will go against the trend?
Released in 2014, iresearch consulting in the first quarter of 2014 China B2C shopping website deals market share with the China mobile shopping business deals market share “, Vipshop Tmall and jingdong top three, respectively, of China’s first electric business. However, in the Vipshop special selling road, which has been the first e-commerce site in China for many years, the contribution of Vipshop is to the logistics management of Vipshop, which is different from general e-commerce.
Some in the industry think that Vipshop’s most popular move is its senior vice President, tang, who specializes in “fast-forward” logistics, tailored to flash orders. As of the first quarter of this year, Vipshop had already delivered 93 percent of its orders, but as the quality of its competitors improved, the number of orders did not necessarily increase.
Vipshop took advantage of its own advantages at the beginning of its development and built its own unique advantages. But with the change of the consumption environment, consumption upgrade, the emergence of concepts such as “quality electricity”, have brought great challenge to the electricity industry, the unique advantages of Vipshop in such circumstances is not advantage.
Today, vertical e-commerce is becoming more and more difficult under the monopoly of integrated e-commerce. Alibaba already has the absolute advantage in the clothing category, and jd is breaking through the beauty and clothing categories, continue to increase revenue. Vipshop’s main clothing bags are also being replaced. If you want to break the status quo, you have to find a new foothold, but finding the new one isn’t easy.
All in all, after the vertical e-commerce development reached its peak in 2014, it started to decline under the pressure of the integrated e-commerce company. Vipshop also started to slow down with the environment, and in 2015, it fell into a long – term decline. Currently Vipshop has no other action except improving quality and strengthening logistics. It remains to be seen whether Vipshop will be able to break through the current situation.