Background
VipShop Holding Ltd. is an online discount retail company based in The People’s Republic of China (RPC). It was among the first internet shops that successfully implemented a third e-commerce model, which allowed VipShop to become highly profitable and scalable. The company regularly provides major discounts and special offers on branded products to its customers, which makes it a leader in the industry. Although the organization was founded in 2008, it grew in a quick succession due to its correct strategic choices in terms of the business model (“Corporate profile,” 2020). Therefore, the company utilizes one of the highly viable business models that are at the core of companies such as Amazon or eBay.
The company’s management is comprised of five individuals with the chief executive officer and the chairman of the board of directors, Mr. Eric Ya Shen. The chief operating officer and vice chairman of the board of directors is Mr. Arthur Xiaobo Hong (“Corporate profile,” 2020). In addition, the company’s financial endeavors are regulated by the chief financial officer Mr. Donghao Yang, whereas the chief technology officer is Mr. Daniel Kao (“Corporate profile,” 2020). Lastly, the key aspect of the third-party e-commerce business is logistics, which is monitored by the senior vice president of logistics, Mr. Yizhi Tang (“Corporate profile,” 2020). Therefore, both board of directors and management are represented by the same individuals.
It is important to indicate that there are six subsidiaries, which are designed to support the business expansions within the regions. These include Vipshop Chongqing or Chongqing Vipshop E-Commerce Co., Ltd., Vipshop Hubei, or Vipshop (Hubei) E-Commerce Co., Ltd., and Vipshop Tianjin or Vipshop (Tianjin) E-Commerce Co., Ltd (“VipShop Holdings Limited,” 2019). In addition, there are Vipshop Zhaoqing or Vipshop (Zhaoqing) E-Commerce Co., Ltd., Vipshop Jianyang or Vipshop (Jianyang) E-Commerce Co., Ltd., and Vipshop Kunshan or Vipshop (Kunshan) E-Commerce Co., Ltd (“VipShop Holdings Limited,” 2019). The subsidiaries are wholly owned, and they handle logistics and warehousing as well as procurement of products. However, the company itself is located in the Cayman Islands. It is done in order to benefit from local tax regulations.
Strategic Analysis
Mission and Vision
The company possesses a strong set of statements regarding its mission and vision. It is stated that VipShop’s mission is “improving quality of life, enhancing the experience of happiness” (“Vipshop corporate social responsibility report,” 2019, p. 10). In other words, it promotes a more general approach towards the goal and objectives, which is a basis for their customer-oriented system of operations. They are primarily focused on bringing customer satisfaction and improving existing discrepancies within the market. The company’s vision is to “establish our position as a worldclass e-commerce platform” (“Vipshop corporate social responsibility report,” 2019, p. 10). The main reason for such a statement is the fact that VipShop is making a great deal of attempts to become highly competitive in a global arena. It seeks to expand its operations and services outside China in order to increase its market share by adding non-Chinese customers in the clientele list. Therefore, VipShop values both competitiveness and customer-orientation by adhering to customer demands, effectiveness, and improvements.
Core Competencies
One should note that possessing a distinctive characteristic in a retail business is a challenging task. VipShop’s core competencies can be found in its customer service, logistical distribution, and merchandising (“Vipshop holdings limited investor presentation,” 2017). The company is highly focused on collaborative and cooperative efforts with well-known and already established brands in order to provide their luxury or seasonal products at a lower price. This makes VipShop unique in the Chinese online retail market because they adhere to a customer-oriented approach and offer rare and valuable items. Such a framework also makes them highly competitive, which facilitates their goal of becoming an international leader.
Competitive Advantage
The customer focus-based competitive advantage of the company can be observed in its ability to be responsive and reciprocal. A high level of service at VipShop Holding Ltd. is a matter of forming service standards, training employees, corporate culture, mission, and values of the company. However, when it comes to responding quickly to customer problems, the digital aspect plays a significant role. The task of quickly resolving a customer or customer complaint is not new to the retail industry. To achieve the modern level of technology development when implementing it in VipShop Holding Ltd., a number of standard problems have been eliminated. With the help of modern software tools, the company can build a system for processing complaints and appeals. This allows it to involve several specialists in the process at the same time.
In addition, VipShop Holding Ltd., it is possible to register each request regardless of the channel of its receipt, to automatically track the process of its processing, to normalize the speed of the processing stages. One of the problems at VipShop Holding Ltd. is the systematization of incoming calls from different channels. Today, customer requests are received through a large number of channels, each of which has its own characteristics (“Vipshop holdings limited investor presentation,” 2017). Due to the electronic services of VipShop Holding Ltd., customer complaint management can track all types of complaints. However, it should be noted that for each channel, the initial registration of the complaint and the entry of information occurs. In addition, an internal typology of complaints and appeals should be developed, allowing you to identify the responsible person who should prepare a response to this complaint and resolve the problem. In the case of the correct entry of information and the proper distribution of complaints by type, it becomes possible to automate the process of processing calls without manual control. Depending on the form of requests, automatic regulation of the terms of their consideration is available.
SWOT
The key strategic decision that ensured the success of VipShop Holding Ltd. was the integration of the third-party e-commerce model. The general outcome of the move can be seen in a steady stock price increase in a one-year period (“Vipshop Holdings Limited (VIPS),” 2020). In addition, the data from the company’s annual reports from 2015 to 2019 show a gradual rise in profits and income (“VipShop Holdings Limited,” 2019). In other words, the current strategic course is working for the benefit of the organization, where both its shares and profitability values are increasing.
Moreover, by evaluating the current strategy of VipShop, one can observe that the company’s main strengths lie in its highly scalable business model of third-party e-commerce. The primary weakness can be seen in the lack of offline retail business, which is needed to supplement the online aspect of the operations (“VipShop Holdings Limited,” 2019). In the case of segment environmental scan, the opportunity is also present in the form of China’s massive population and economic growth. It means that the customer number and their purchasing ability are increasing. The major threat can be described by VipShop’s statement: “Pandemics, epidemics, or fear of the spread of contagious diseases could disrupt our operations or Chinese or global economies, which could materially and adversely affect our business, financial condition, and results of operations” (“VipShop Holdings Limited,” 2019, p. 9). In other words, the main outside danger is the disruption of economies due to the coronavirus pandemic.
References
Corporate profile. (2020).
Vipshop Holdings Limited (VIPS). (2020). Web.
VipShop Holdings Limited. (2019).
Vipshop corporate social responsibility report [PDF document] (2019).
Vipshop holdings limited investor presentation [PDF document] (2017).