Alumni Stories
Eric Shen

Founder of Vipshop – China’s Innovative Online Discount Retailer

Vipshop Holdings (NYSE: VIPS) is one of China’s largest discount retailers, specializing in selling fashion, home, and beauty products. Based out of Guangzhou, it operates a ‘flash sales’ model of limited-time purchases. The company was launched in 2008 by Eric Shen, who graduated from the CKGSB Business Scholars Program and EMBA courses.

In this new alumni series, we track down CKGSB’s most influential graduates, many of whom have gone on to lead unicorn companies – privately held companies valued at USD $1 billion or more. According to CB Insights – a global platform which provides authoritative and up-to-date information on the world’s billion-dollar private companies – China has created a total of 217 unicorn companies between 2017 to 2021. Thirty-nine (or 18%) of these companies are run by CKGSB alumni, including 35 companies where CKGSB alumni are founders or co-founders, and 4 companies where they serve as the chairman, CEO or president.

As China’s leading business school, it’s not surprising that CKGSB has been able to produce so many business leaders playing a pivotal role in China’s economic development. More than 18,000 successful entrepreneurs, industry leaders and executives of multinational corporations have chosen to study at CKGSB for the original China insights, world-class faculty and peer-to-peer learning with China’s movers-and-shakers. More than half of CKGSB’s alumni are at the CEO or Chairman level and, collectively, lead one-fourth of China’s most valuable brands.

VIPS has developed a niche in the e-commerce market as an online discount retailer, with 70% of its gross merchandise revenues from off-season and discounted products. It has accumulated a vast network of 30,000 partnering brands and has established a reputation as the first platform that brands approach to sell their excess inventories.

VIPS has generated a compound growth rate of 73.8% between 2012 and 2017. According to Deloitte’s 2019 report, ‘Global Powers of Retailing,’ VIPS ranked second on its list of the world’s fastest growing retailers. In December 2021, the company had a return on both equity and assets (ROE and ROA) of 20%.

VIPS’ rapid growth has largely been due to the company establishing its name as a universally recognised platform in China, offering lower prices than other e-commerce platforms. Its large amount of user data has facilitated its sales forecasting. This has led to the company’s high brand retention rate and reputation as a reliable platform for brands to sell their excess inventories.

In terms of financing, VIPS received its Series A-round of USD $20 million and USD $50 million from DCM ventures and Sequoia Capital in 2010 and 2011 respectively. In 2012, it was listed on the NYSE, and a breakthrough also came in December 2017 when Tencent and JD invested in approximately USD $863 million in the company. Since 2019, VIPS invested even more in its offline outlets after the acquisition of Shanshan Group.

Despite forming a niche in a competitive e-commerce market dominated by, Alibaba and Pinduoduo, there are still likely to be challenges for VIPS. Alibaba has recently opened its outlet stores for brands to clear their inventories. There is also competition from companies operating community e-commerce models in the fashion business, such as Xiaohongshu and Haoyiku.

How Eric Shen transformed Vishop into a Unicorn

From 2001-2012, Eric Shen was working in consumer electronics and telecommunications as chairman of Guangzhou NEM Import and Export Co., Ltd. In 2007, in order to explore ways of improving his business model, he joined the EMBA program at CKGSB. While studying at CKGSB, he started to develop his second business in e-commerce with his course-mate Hong Xiaobo. In its early days, their plan was to enter the market of luxury goods. However, with only 18 purchases in the first month after its launch, VIPS was not initially successful.

Nonetheless, as VIPS’ chairman, Eric Shen changed its business model from luxury sales to mid- to high-end fashion brands. He introduced the idea of limited time purchases and daily 30% discounts. He also partnered with brands which Chinese consumers were familiar with, such as Adidas, Nike and Casio. Subsequently, sales soared – by 2010, the year he graduated from CKGSB, VIPS had acquired 1,000 domestic and foreign brands and was making a net profit of RMB 20 million.

Eric Shen is known as the dark horse in e-commerce. There is a popular saying in China that Eric Shen is “the man who Jack Ma wants to meet most”. He rarely gives interviews, but has a strong work-ethic, and believes that setbacks provide a platform for future success. He changed his luxury product model just at the right time, while also overcoming the losses which initially came after the NYSE IPO, and going on to lead VIPS through a decade of exponential growth.

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