Vipshop’s entry into SEA should not surprise you

Vipshop is an ecommerce behemoth listed on the New York Stock Exchange – up there with Alibaba and JD.com, among the key players in China. With an estimated 38% market share in flash sales in China, the company could be thought of as the Zalora of China.

The firm is different from the likes of fast-fashion company Shein as it is not a fashion designer, but rather a reseller of other brands – 20,000 of them or so. Hence the comparison to Zalora, but maybe one could call Vipshop the branded brother of Shein.

Photo credit: Shutterstock

Just like Shein, Vipshop has big expansion plans and recently entered Southeast Asia. While this move may have surprised some, it makes total sense to me.

The bigger question is whether Vipshop will succeed where other Chinese firms have failed?

Growing pains

Data from Seeking Alpha shows that Vipshop’s quarterly revenue from early 2020 to now is basically flat. In fact, the fourth quarter of last year saw its revenue fall 6.7% from the previous year.

Last month, the company even launched a share buyback – a rare move in ecommerce. Making such a decision usually shows the company is profitable but doesn’t see many great opportunities to invest in.

Like the rest of us, Vipshop has been paying close attention to the meteoric growth of Shein. The latter has taken Southeast Asia by storm and has a thriving headquarters in Singapore, with a lot of growth throughout the region.

I’ve even seen rumors that Shein is looking to get into offering third-party brands, which would make it a direct competitor to Vipshop.

Simple equation

If you put yourself in the shoes of Vipshop’s management team, it should be obvious why they feel the need to enter Southeast Asia.

The company faces flat growth at home while Chinese competitor Shein is killing it abroad and could be about to step into Vipshop’s turf with branded clothing.

Photo credit: Melissa Goh / Tech in Asia

Let’s face it, one of Vipshop’s main branded competitors in the region, Zalora, doesn’t seem likely to pose much of a challenge. The company has been in the market since 2012 or so and is still struggling.

Is SEA fertile ground?