Vipshop banks on growth in mobile orders

Vipshop Holdings Ltd, a Chinese online shopping website specializing in discounted female fashion brands, plans to invest more in mobile and logistics services to support its high growth, driven by a rising number of active users and orders in the second quarter.

According to its financial reports, that quarter was the seventh consecutive profitable quarter. Second-quarter net revenue increased 136.1 percent to $829.4 million, while net profit reached $26.4 million, up 192.1 percent.

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The website had 9.3 million users, up from 3.5 million a year earlier. The number of orders was 138 percent higher at 26.3 million. Yang Donghao, chief financial officer, told reporters on Monday in Beijing that brand penetration among online users continued to climb in first- and second-tier cities, attracting more quality users. Repeat customers exceeded 72 percent, with 90 percent of orders coming from those customers, said Yang.

Large order volumes have given the company more bargaining power with brands, said Yang. But the drivers of future high growth lie in the development of mobile services and logistics.

Sales through mobile platforms during the current quarter have increased to 46 percent of the total from 12 percent a year earlier, with July reaching a record high of 52 percent.

Vipshop is also looking for Internet technology companies to upgrade its mobile services. Early this year, the company established its first overseas research and development center in Silicon Valley in the United States. The center will focus on analyzing big data and optimizing the user experience of the shopping website on mobile devices.

The R& D center will strengthen the company's competitive edge in domestic and international markets for discounted brands, said Shen Ya, chairman and chief executive officer.

In addition to mobile services, Yang said the company will expand its warehouse capacity from the current 540,000 square meters to 700,000 sq m by the end of 2016.

Because its business focuses on "time-limited discounts", efficient logistics and low-cost delivery are key to the quality of services. The company is lowering its logistics costs by collaborating with local logistics companies, Yang said, adding that it will also acquire or invest in local logistics companies to improve the quality and efficiency of their services.

Vipshop had the third-biggest market share among Chinese business-to-consumer websites in the first quarter of 2014, according to iResearch Consulting Group.

According to Analysys International, its gross profits remain in top place among e-commerce players, but its gross and net profit margins are not widening much. Amid fierce competition, its flash-sales model, which has been widely copied by competitors, has weakened and will not be able to sustain growth over the longer term.