Reborn in 08, a heretical cultivator starting a business

Chapter 143 JD.com launches an undeclared war, completely encircling Vipshop!
Tang Zhidu was overjoyed: "Chairman, just as you predicted, Paipai.com is losing users, forcing brand sellers to leave."

"We at Vipshop have achieved effortless success thanks to our ever-increasing user base and revenue!"

“Many brands previously only had superficial cooperation with us, treating us merely as a tool for clearing out inventory.”

"But things are different now!"

"Seeing how strong Vipshop's sales capabilities are, many brands directly put their new products on Vipshop for sale at a 10% discount."

"Some brands have even entered into comprehensive strategic partnerships with us and joined Vipshop's self-operated platform."

"Some brands have not joined the self-operated model, but have also opened brand direct flagship stores."

"Currently, we have more than 5000 brands working with us!"

As Tang Zhi spoke, he presented a series of data to Wang Junshan.

Currently, Vipshop collaborates with various brands in three main models:

Brand Sale!

Vipshop operates its own stores!
Directly operated by the brand!

Each of the three models has its own advantages and disadvantages.

Brand flash sales, the business model that made Vipshop successful, with its main focus on low prices!
Brands consign their inventory or leftover stock to Vipshop's eight warehouses in batches for clearance sales at 30-70% off. Any stock that can't be cleared out is then sold at a final discount.

Vipshop is responsible for operations, warehousing, logistics, and after-sales service, and takes a commission of 10%-25% depending on sales volume and product category.

For example, for 3C products, the commission rate is 10%-15%.

We take a 15%-20% commission on clothing products.

We take a 20%-25% commission on beauty products.

Of course, top brands have a certain amount of bargaining power and can lower the commission rate!
For example, Estée Lauder's brand sales commission rate is not 20%-25%, but 15%.

Nike and Adidas don't take a 15%-20% commission rate, but rather 10%.

Despite the relatively low commission rates, the large scale of these major brands' clearance sales remains a major source of revenue for Vipshop.

On the contrary, smaller brands, whose average order value is already low, have even lower prices after the 30-50% discount.

Even with a 25% commission, there's not much profit.

In addition to the commission, another 10% will be deducted as an after-sales guarantee deposit, which will be settled after 90 days.

The remaining 65%-80% of the sales revenue will be transferred to the brand's WeChat account on a T+30 day basis.

This model has the lowest barrier to entry; as long as it's a legitimate brand, a normal product, and can be sold, cooperation is possible.

In addition, the commission rates are reasonable, the settlement is timely, and the inventory clearance efficiency is high, which makes it popular with many brands.

The most important factor is Vipshop's secondary packaging!

All products participating in Vipshop's flash sales will have their original outer packaging removed and replaced with Vipshop's flash sale packaging for promotional purposes.

This differentiates the products from those from other channels, preventing Vipshop's low prices from directly impacting the prices of other channels!

This is something that major brands appreciate.

Seeing the phenomenal success of Vipshop's clearance sales, the financial crisis caused major brands to experience a doubling of inventory pressure.

New products that could normally be cleared out in three months now take six months to sell due to the financial crisis, resulting in three more months of inventory before they go out of season!
Left with no other choice, many brands decisively launched their new products directly on Vipshop, offering a 10% discount.

It's much cheaper than other platforms.

However, because of Vipshop's secondary packaging, the brand can be said to be exclusively supplied by Vipshop, and the 10% discount does not affect the original price or 5% discount on other platforms...

Seeing that Vipshop's sales are getting higher and higher, some brands have simply deepened their strategic cooperation and joined Vipshop's self-operated platform.

Under its self-operated model, Vipshop is responsible for all aspects of operations, warehousing, delivery, logistics, and after-sales service.

In terms of traffic, Vipshop is fully responsible, ensuring top placement on the homepage and in search rankings, providing greater support.

Moreover, the deposit only needs to be a symbolic 30,000 yuan, filtering out shell companies.

In short, brands don't need to worry about anything; they can simply hand over their goods to Vipshop.

However, the disadvantages are also obvious: the supply price is generally about 70% of the selling price.

The remaining 30% consists of Vipshop's logistics costs, warehousing costs, operating costs, after-sales costs, and profits!

After a sale, settlement will be made on a T+30 day basis.

As for slow-moving, unsold goods, brands have two options.

Either return all the inventory.

Alternatively, they could go on brand flash sales and offer clearance sales at 70%, 50%, or 30% off...

Subsequent settlements will also be conducted according to the liquidation model.

In short, with the self-operated model, as long as the brand sends the product to Vipshop's warehouse, they can sell it at a 10% discount if they can.

If items can't be sold at a 10% discount, they can be sold at a brand special sale, with discounts of 30%, 50%, or 60% to clear out inventory.

Brands don't need to worry about inventory at all; they can just sit back and wait for their share of the profits.

If you don't want to join the self-operated model, you can also choose the third model – brand direct operation.

When brands open their own stores, Vipshop takes a 5% commission, resulting in higher profits for the brands compared to Vipshop's self-operated model.

The settlement cycle is shorter, just like Taobao Mall (the predecessor of Tmall), only T+7!

After the buyer confirms receipt, the money will be transferred to the flagship store's WeChat account within seven days.

But the deposit is higher, requiring 50,000.

The operation is also more complicated.

The brand owner wants to open their own store and be responsible for warehousing, logistics, shipping, and after-sales service...

The most important thing is still traffic!

Although directly operated stores also receive some traffic support, it is much lower than that of Vipshop's self-operated stores.

When buyers search for products on Vipshop, self-operated stores will appear at the top.

The homepage of YouTuan.com also features self-operated stores.

Brand-owned stores that want to rank higher or be featured on the homepage have to spend extra money to buy traffic.

There's no way around it; the brand's 5% commission for directly operated stores corresponds to 5% traffic support.

Self-operated businesses generate higher profits and correspondingly higher traffic levels.

These three models meet the different needs of different brands.

Wang Junshan smiled as he looked at the statistics Tang Zhi handed him.
"Vipshop currently partners with more than 5000 brands."

"Among them, there are more than 4,000 brands in the brand flash sale model."

“Vipshop has more than 3,000 self-operated models.”

"There are also more than two thousand brands operating directly."

Some international brands, especially second-tier international brands, do not have enough resources to build warehouses, manage logistics, and operate flagship stores in China. Instead, they choose to join Vipshop and operate their own stores, leaving everything to Vipshop.

In this way, all that is needed is to send the goods to Vipshop's eight warehouses based on sales volume.

You don't need to worry about other aspects like promotion, sales, warehousing, shipping, sales promotions, clearance sales, etc.

Vipshop's self-operated, fully managed model is a boon for brands like this.

Some smaller brands, needing cash flow, cannot accept the T+30-day inventory pressure and high commission rates of self-operated stores, and instead choose direct brand operation. They open their own flagship stores, operate them themselves, handle their own warehousing and shipping. Although it's more troublesome, they only take a 5% commission, and the rest is the brand's own profit.

The T+7 settlement cycle is also faster.

It's worth mentioning that there are over a thousand brands, and all three cooperation models exist!
Especially clothing.

International brands like Nike, Adidas, and Converse, as well as domestic brands like Li-Ning, Anta, Hongxing Erke, Metersbonwe, and Semir, all have partnerships with all three types of companies.

Out-of-season products are being sold at brand clearance sales, with discounts of 30-70%.

New products are available at our self-operated flagship store and brand direct-operated flagship store, with a 10% discount.

This is a typical case of not making a choice; wanting it all.

Wang Junshan glanced at all the brands he was collaborating with, then suddenly frowned:
"Why are there so few 3C and home appliance brands?"

"Especially domestic 3C and home appliance giants, there are very few. They are even fewer than foreign 3C and home appliance brands."

"The development is unbalanced!"

More than 5,000 brands, over 60% of which are clothing and cosmetics.

Two-tenths are daily necessities, and there are also many fast-moving consumer goods.

However, there are very few 3C and home appliance brands, accounting for only half of the total.

There are even fewer domestic brands than foreign brands.

This is completely unreasonable!

Brands such as Nokia, Sony, Ericsson, Panasonic, and Toshiba have opened their own flagship stores on Vipshop, or have opened both self-operated and directly operated stores.

Some unsold inventory products will also participate in brand sales with a 30% discount.

However, there aren't many domestic brands.

Even Lenovo, ASUS, and Acer don't have it!

Even Haier, Hisense, and Midea don't have it!
This is not right!

Tang Zhi looked troubled: "Chairman, in the 3C home appliance sector, there are many imported brands because these brands have been cooperating with YouTuan International before."

"Seeing that YouTuan International's sales are good and the profits are considerable, the brand is naturally willing to list on Vipshop again."

"In addition, Vipshop and U-Tuan International use the same warehouses and sell through the same U-Tuan website, which will not increase costs much, and will provide an additional channel and additional income, so naturally they will not refuse."

"And those fast-moving consumer goods and daily necessities brands, which already cooperate with YouTuan Group Buying and use the same warehouses, it's only natural for them to go online on Vipshop as well."

“But domestic 3C brands have never cooperated with YouTuan International and do not understand our strength. They think that Vipshop mainly focuses on clothing and beauty flash sales, and that 3C products are difficult to sell well.”

"They still believe that JD.com is their first choice and will not offend JD.com for the sake of Vipshop."

Upon hearing this, Wang Junshan immediately understood the reason.

JD.com is currently a vertical e-commerce platform with a limited range of product categories, and it lags far behind Vipshop in terms of both transaction volume and profit.

But in the 3C electronics and home appliance sector, JD.com is the absolute king!
Let alone Vipshop, even Taobao Mall can't beat JD.com.

There's no way around it; JD.com started in 98 and launched JD.com in 04. It's a vertical e-commerce platform that only sells 3C products and home appliances.

Last year, JD.com broke through the 3C (computer, communication, and consumer electronics) market for the first time and ventured into home appliances, partnering with Haier, Hisense, and Midea to add categories such as televisions, refrigerators, and air conditioners.

This year, they have also ventured into daily necessities, launching office supplies and small home appliances, such as rice cookers and shavers.

It can be said that JD.com's home turf is in the 3C and home appliance sectors.

Vipshop's main focus is on apparel, beauty products, and shoes and bags!
In the 3C and home appliance sectors, they really can't beat JD.com.

Coincidentally, Huang Zheng's Ouku.com also focuses on the 3C and home appliance sectors, which highly overlaps with JD.com's business.

Knowing full well that he couldn't compete with JD.com in the 3C and home appliance sectors, he sold Ouku.com in 2010 and started a new business.

Wang Junshan is currently facing the same problem.

"I thought we wouldn't be able to compete with JD.com, or even consider JD.com a competitor, but I never expected that we would be now!"

Wang Junshan shook his head: "When two armies meet on a narrow path, the brave will prevail. Let's investigate JD.com's situation, think of solutions, and hold a high-level meeting tomorrow!"

"Yes!" Tang Zhi quickly made the arrangements.

I was a little puzzled. I didn't expect the boss to target 3C products and home appliances, which is not Vipshop's forte.

But thinking about it, it makes sense; only by addressing our weaknesses can we achieve better development.

The next morning, the high-level meeting was held as scheduled, and Tang Zhi's expression was somewhat solemn.

"This investigation has uncovered something big!" Wang Junshan guessed. "President Tang, please tell me about the investigation."

"Okay, boss." Tang Zhi opened the PowerPoint presentation and began to explain:
"With the decline of Paipai.com, Vipshop has risen to prominence, with more than 5000 partner brands."

"But domestic 3C and home appliance brands rarely cooperate, and even many big brands cannot reach cooperation agreements. In fact, there are fewer cooperation agreements than with imported brands."

"According to our research, the main reason is JD.com!"

"JD.com is leveraging its dominant online position in the 3C and home appliance sectors to launch a comprehensive online and offline offensive."

"For offline stores, JD.com is drastically lowering its commission rates to compete with Suning and Gome."

"Gome and Suning take a 10%-20% commission offline, while JD.com only takes a 3%-10% commission!"

"Online, JD.com is making strong moves against potential e-commerce platforms, especially Vipshop, which has been listed as JD.com's number one enemy."

"According to reliable sources, JD.com has launched an unannounced attack against us!"

"In the past two weeks, JD.com has not only been aggressively recruiting merchants, but also using its monopolistic position to lower commission rates, forcing 3C and home appliance brands to sign exclusive online direct sales agreements with JD.com!"

"For example, Lenovo signed an exclusive direct sales agreement with JD.com last year!"

"JD.com gives Lenovo a minimum commission of 3%, requiring Lenovo to only open direct-sale stores on JD.com!"

"Even on Taobao Mall, there isn't a single Lenovo direct-sale store! For the past six months, they've all been authorized stores opened by distributors."

Similarly, Vipshop does not have any Lenovo factory direct stores.

"Even the Lenovo products sold by Vipshop are purchased from Lenovo's distributors, not directly from the manufacturer."

"It's because of JD.com's exclusivity agreement that we can't cooperate directly with Lenovo!"

"That's why our purchase price is a bit higher than JD.com's."

"Exclusivity agreement, JD.com is really domineering!" Wang Junshan laughed.

JD.com did what even Taobao dared not do!
But thinking about it, it makes sense; it's in line with Chairman Liu's style!
Even if it involves monopoly and unfair competition, so what?

But it just works!
"Yes, not only Lenovo, but also other brands such as HP, Dell, ASUS, Acer, and Philips have signed exclusive direct sales agreements with JD.com."

“Vipshop also cannot directly cooperate with these brands online, so it cannot get the goods at the lowest price.”

"It is precisely because the purchase price of goods is higher than that of JD.com that Vipshop's selling price is also higher than that of JD.com, and therefore it cannot compete with JD.com in terms of sales volume and revenue."

"If these brands can't compete with JD.com, they will perceive JD.com as stronger and be more inclined to cooperate with JD.com, continuing to sign exclusive agreements with JD.com!"

"In this way, Vipshop's purchase price is still higher than JD.com's, and it still can't compete with JD.com!"

"It's a vicious cycle," Wang Junshan sighed.

"It's like this, this is a difficult matter," Tang Zhi said with a hint of helplessness.

"Especially recently, JD.com has been making aggressive moves, forcing more 3C and home appliance brands to sign exclusive agreements, completely blocking Vipshop and Taobao Mall!"

(End of this chapter)