VANCL is a leading Chinese internet-based
apparel retailer. Though a market leader in China, VANCL remains largely
unknown in the outside world. There are several reasons for digital marketers
and other eCommerce observers to take note of VANCL: VANCL will receive a
multi-billion dollar IPO on the NASDAQ within the next 24 months. VANCL
currently ships to over 80 countries globally and is likely to emerge as a
global apparel and internet competitor over the next two to five years• VANCL’s
product and marketing strategies are highly innovative and provide valuable
case studies for other e-retailers. To date, much of what is written about
VANCL is in Chinese, and much of this material omits important aspects of VANCL’s
business model and operations. The following presentation draws together public
research and comment to provide the English language reader with an “advanced
primer” on VANCL and the Chinese market. It should be of use to digital marketers,
electronic retailers and financial analysts beginning coverage of the firm.
•VANCL is the 5th largest online B2C
retailer in China
•VANCL took advantage of China’s unusual
combination of high internet penetration and low concentration in the retail
industry to reach a large customer base and grow rapidly
•Launching in 2007, VANCL grew sales to RMB
6 billion (~US$900) in 2011
•Initially offering low cost T-shirts and
men’s shirts, VANCL rapidly expanded its product range to cover most aspects of
men’s and women’s wear, competing in a niche similar to global brands such as
H&M and GAP
•VANCL’s marketing is large scale,
innovative and sometimes controversial
- VANCL invested ~$158M in marketing in
2011; equivalent to >15% of net sales (versus 3.5% typical of most apparel
retailers)
- VANCL has achieved wide-spread awareness
using innovative digital campaigns combining celebrity, viral seeding and
social “curation”
- In 2011, VANCL also became a leader in
the emerging field of “social commerce” by enlisting fans to act as micro-store
managers as part of the “VANCL Star” campaign
- However, using the images of political
leaders in their marketing and associating the brand with a foreign “adult
video” actress has given the brand some degree of infamy
•VANCL’s profitability remains unclear
- Rumours persist that the business has
been loss
-making since launch
- Logistical errors in 2011 caused
inventories to grow out of control
- Several additional tranches of VC funding
has been required and a planned 2011 IPO has been postponed VANCL could yet be
either another “Boo.com”
- or an apparel-based “Amazon”
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To create a marketplace as soon as
possible, Chen Nian spares no effort and even doesn’t bother with getting in
complimentary products. Instead he encourages his staff to compete head on with
other brands. ‘You can’t get competitiveness behind closed doors, for those
Vancl products that can’t survive after (we) introduced outside brands, then
your products should die.’ Chen said.
Vancl also channel its traffic to 3rd party
brands.
June 18 is the anniversary of JD, China’s
No. 2 B2C e-commerce platform but has become a regular promo date for
e-commerce marketplaces since 2011. Suning, Dangdang, 51buy and TMall all
joined the price war last year but Vancl has been too busy looking after itself
to participate. However for this year, Vancl moved ahead of all other parties
by starting off its largest promotion in June 5. On Vancl site, both its own
brand and 3rd party brands are given the same prominence, a layout that can
bring 1/3 of total traffic to 3rd party brands.
Later on, Vancl masterminded Huang
Xiaoming’s (actor) ‘Hold-on style’, Li Yuchun’s (singer) ‘Born in 1984’ and Han
Han’s ‘Spring style’, all become sensational overnight through word of mouth,
viral marketing and spokesperson marketing.
Chen once famously said in an interview
that he owes his success in a red ocean market to achieving a balance with
brand, product and distribution channel. The question is, by switching to
marketplace model and subsequently diluting the brand and product line, will he
find another secret formula for success? For many, opening up the site to 3rd
party brands will damage Vancl’s self-made image as ‘people’s fashion’ and kill
its biggest advantage.
However if Vancl succeeds in turning itself
around, we will have another e-commerce marketplace to choose from to set up
online store in China.
