Mais conteúdo relacionado Semelhante a VANCL: China's internet apparel giant (20) VANCL: China's internet apparel giant2. Introduction
VANCL is a leading Chinese internet-based apparel retailer. Though a market
leader in China, VANCL remains largely unknown in the outside world.
There are several reasons for digital marketers and other eCommerce observers to
take note of VANCL:
• VANCL will receive a multi-billion dollar IPO on the NASDAQ within the next 24
months
• VANCL currently ships to over 80 countries globally and is likely to emerge as a
global apparel and internet competitor over the next two to five years
• VANCL‟s product and marketing strategies are highly innovative and provide
valuable case studies for other e-retailers
To date, much of what is written about VANCL is in Chinese, and much of this material
omits important aspects of VANCL‟s business model and operations.
The following presentation draws together public research and comment
to provide the English language reader with an “advanced primer” on
VANCL and the Chinese market. It should be of use to digital
marketers, electronic retailers and financial analysts beginning
coverage of the firm.
(June 12 2012) matthunter.com
© 2012 BOS HunterMJH Vancl Redux V9-3
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3. Executive Summary
• VANCL is the 5th largest online B2C retailer in China
• VANCL took advantage of China‟s unusual combination of high internet penetration and low
concentration in the retail industry to reach a large customer base and grow rapidly
• Launching in 2007, VANCL grew sales to RMB 6 billion (~US$900) in 2011
• Initially offering low cost T-shirts and men‟s shirts, VANCL rapidly expanded its product range
to cover most aspects of men‟s and women‟s wear, competing in a niche similar to global
brands such as H&M and GAP
• VANCL‟s marketing is large scale, innovative and sometimes controversial
- VANCL invested ~$158M in marketing in 2011; equivalent to >15% of net sales
(versus 3.5% typical of most apparel retailers)
- VANCL has achieved wide-spread awareness using innovative digital campaigns
combining celebrity, viral seeding and social “curation”
- In 2011, VANCL also became a leader in the emerging field of “social commerce” by
enlisting fans to act as micro-store managers as part of the “VANCL Star” campaign
- However, using the images of political leaders in their marketing and associating the brand
with a foreign “adult video” actress has given the brand some degree of infamy
• VANCL‟s profitability remains unclear
- Rumours persist that the business has been loss-making since launch
- Logistical errors in 2011 caused inventories to grow out of control
- Several additional tranches of VC funding has been required and a planned 2011 IPO
has been postponed
VANCL could yet be either another “Boo.com” -
or an apparel-based “Amazon”
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
4. Important Notice
All third party information featured in the presentation slides remains
the intellectual property of their respective originators. All use of
information is done under the fair use copyright principal, and I do
not assert any claim of copyright for any quotation, statistic, fact,
figure, data or any other content that has been sourced from the
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warranties can be given.
I do assert a claim of copyright for my domains, matthunter.com, my
site design, slide design, database design, look and feel, and my logo
(“the cube”).
The core material in this work is shared under a creative commons
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share (copy, redistribute, transmit) and remix (adapt the work),
including for commercial use; but must properly attribute the original
work to me. Such attribution should not suggest that I make any
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Further viewing of this presentation indicates your understanding of
and consent to these conditions.
Acknowledgments:
Cover: VANCL Striped Knee-High Socks SKU:6874
Special thanks to Bai Xuan, Gao Menglin, Jung Jhong Hwan & Zhou
Qiang for their assistance in completing this case study
matthunter.com
DIGITAL ◊ PRODUCT DEVELOPMENT ◊ STRATEGY
© 2012 BOS HunterMJH Vancl Redux V9-3
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5. Agenda
• VANCL 101 介绍
• Products 产品
• Marketing 市场营销
• Logistics 后勤
• Financing & IPO 金融
© 2012 BOS HunterMJH Vancl Redux V9-3
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6. Macro factors make the Chinese retail market
highly attractive
• Management
consultancy AT Market Potential Versus Country Risk
Kearney annually
produce a study of
global retail markets
China
• Based on factors such
as market size,
political stability,
corruption and so they
classify countries
based on “Country
risk” versus “Market
potential” to identify
the highest potential
markets
• Today, China stands
out:
Large Market High Potential Rising incomes
Strong Growth Low rivalry Stable
Source: AT Kearney Global Retail Development Index © 2012 BOS HunterMJH Vancl Redux V9-3
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7. Many small players and high internet penetration
make the Chinese retail market highly unusual
China’s top 20 retailers hold only …Whilst 51% of households have
13% of sales internet access
Retail Consolidation Internet penetration, 2010
(top 20 retailers’ share of total retail sales), (Households)
2010
India India
China(Urban) 13% China(Urban) 51%
Brazil Brazil
Japan Japan
United States United States
South Korea South Korea
Germany Germany
France France
UK UK
0% 20% 40% 60% 0% 20% 40% 60% 80% 100%
With no dominant retailers there is a strong
opportunity for new internet retailers
Source: BCG © 2012 BOS HunterMJH Vancl Redux V9-3
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8. Exploiting this opportunity, serial entrepreneur
Chen Nian founded VANCL in 2007
• Chen Nian founded VANCL in 2007 with
the aim of becoming a leading men‟s
apparel company in China
• Prior to VANCL, Chen Nian had co-
founded Joyo in 2000 – a successful B2C
retailer. Joyo was acquired by Amazon
for $75 million, becoming Amazon Joyo
(Amazon‟s brand in China)
• Chen Nian persuaded much of the top
leadership team at Joyo to leave to join
Founder, Chen Nian the new VANCL business
• Chen Nian is also a published author &
widely celebrated as a leading
innovator in China
© 2012 BOS HunterMJH Vancl Redux V9-3
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9. Since launch in 2007 VANCL has grown rapidly,
hitting ~RMB 6 Billion in 2011
VANCL Revenue
RMB (元) 7
Billions 6
6
5
4
3
2
2
1 0.6
0.3
0.01
0
2007 2008 2009 2010 Est 2011
Source: News & PR Releases © 2012 BOS HunterMJH Vancl Redux V9-3
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10. VANCL has grown by increasing its marketing
investment and growing its product range
Development Milestones
VANCL launched Product expansion Social Commerce
First round of VC Launch women, young & Launch VANCL Star
Specialty mens’ shirt lines children’s wear
Social
Phone ordering
Marketing
HISTORY 2007 2008 2009 2010 2011 2012
Recruit Start Offline Controversial
Foreign Marketing Political T-Shirt
Designers
Korean team
V+
brought in
launched
3rd party
Ru Feng Da
brands
In-house
stocked
logistics
launched
© 2012 BOS HunterMJH Vancl Redux V9-3
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11. VANCL is now the leading online apparel
retailer
Market Share of Apparel Online Retailers, 2010
40%
35%
30%
25%
20%
15%
10%
5%
0%
VANCL M18 Menglu Masa Maso Fashion TOGU XIU HANY Others
Revolution
Source: iResearch © 2012 BOS HunterMJH Vancl Redux V9-3
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12. Measured across all categories (not just
apparel) VANCL is a top 5 B2C firm in China
VANCL is China‟s 6th largest B2C VANCL is China‟s 5th largest B2C
company by revenue company by monthly users
Top Chinese B2C Websites Top Chinese B2C Websites
by Revenue Share (Jan 2012) by Monthly Users (Dec 2011)
Others 33.6% VIP Shop 8.1
m18 0.2%
Moonbasa 12.5
RedBaby 0.4%
Yihaodian 0.7%
Yihaodian 12.5
NewEgg 0.7% Suning 13.0
Coo8.com 1.0% Shop.QQ.Com 15.8
51Buy.com 1.1%
Vancl 27.2
Vancl 1.5%
Dandang 1.6% Amazon.cn 29.8
Amazon.cn 2.2% Dandang 31.3
Suning.com 2.4%
360Buy.com 44.5
360Buy.com 14.7%
Tmall 39.9% Tmall 110.5
0% 20% 40% 60% 0 50 100 150
B2C Revenue Share Millions of users
Source: Analysis International, iResearch © 2012 BOS HunterMJH Vancl Redux V9-3
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13. Agenda
• VANCL 101 介绍
• Products 产品
• Marketing 市场营销
• Logistics 后勤
• Financing & IPO 金融
© 2012 BOS HunterMJH Vancl Redux V9-3
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14. VANCL‟s first product area was T-shirts – a
relatively less concentrated clothing segment
Market Share of top 10 brands of selected sectors (2009)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jackets T-Shirts Ladies wear Men's suit Children's Men's shirts Denim Wear Ladies Maternity Sportswear Maternity
wear Underwear Wear Wear
VANCL appears to have prioritised entry into segments based on
low levels concentration. VANCL‟s product extensions moved from
T-shirts, to men‟s shirts and then on to ladies wear; and only
recently moved into the more highly concentrated clothing
segments.
Source: China National Commercial
Information Centre © 2012 BOS HunterMJH Vancl Redux V9-3
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15. VANCL is best known for the three core
products they first stocked
T-Shirts
VANCL‟s earliest and most
recognised products. Carry a
wide range of themes (from films
to the industrial revolution),
retailing at ~元50
Canvas shoes
A diverse range of styles, from
plain to punk, retailing at ~元80
Shirts
VANCL started with affordable
men‟s shirts before expanding to
women. Both formal and leisure
wear retailing at around ~元70
VANCL‟s earliest product line consisted of T-shirts, shirts and canvas shoes targeted
at the male market; offering male shoppers sufficient choice, low prices and
reasonable quality. Initial ranges were narrow but have since become vast.
© 2012 BOS HunterMJH Vancl Redux V9-3
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16. However, VANCL now stocks a
comprehensive apparel product line
Sunglasses;
元99
Polo shirt; 元99 Polo shirt; 元80 Polo shirt; 元80 Shorts; 元60
Watch; 元139
Belt; 元99 Dress; 元169 Dress; 元189 Jacket; 元389 Shirt; 元99
VANCL have expanded into almost all areas of formal and leisure wear, including
accessories, jeans and jewellery. Expansion into other household areas from 2009-
2011 saw VANCL stock items such as mops. These items have now been dropped.
© 2012 BOS HunterMJH Vancl Redux V9-3
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17. Though collectively referred to as “fast fashion” retailers,
H&M, Zara and VANCL have significant differences
H&M Zara VANCL
Product • Build quality: • Moderate • Strong • Moderate
strategy • Trend matching: • Moderate • Moderate • Weak
Price • Typical: • Low/Medium • Medium • Low
Customer • Flirty: • ***** ** • *** • **
Segment & • Sexy: • ****** • **** • **
Product
• Hip: • ***** • **** • *****
Design
Attributes • Timelessness: • *** • ********* • ****
• Traditional: • *** • ****** • ****
• Classic: • *** • ****** • ****
Unique Items • 4,000 p.a. • 10,000 p.a. • Unknown
Designs • Own+Guest • Own+Clones • Own
Distribution • 2,300 stores • 1,285 stores • Web only
Marketing, % of Sales • 3.5% • 0.5% • 15%
Manufacturing • Outsourced • 40% in house • Outsourced
• Outsourced on
simple items
© 2012 BOS HunterMJH Vancl Redux V9-3
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18. VANCL‟s product quality is widely considered
good for its price level
Illustrative: VANCL versus international peers
Above Line =
Unexpectedly
High Quality ,
OR Under
priced
Perceived
Quality
Below Line =
Considered
Overpriced
OR Premium
Price
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
19. Agenda
• VANCL 101 介绍
• Products 产品
• Marketing 市场营销
• Logistics 后勤
• Financing & IPO 金融
© 2012 BOS HunterMJH Vancl Redux V9-3
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20. VANCL‟s branding is founded on a distinctive
message, executed through innovative campaigns
VANCL Marketing Profile
Targeting • 18 – 30 years old • Moderate purchasing power
• Fashion conscious • Internet savvy
• Convenience seekers • Students, young professionals
Creative • High contrast imagery • Themes of struggle, energy,
• Distinctive typography individuality, authenticity
• Youthful stereotypes • Prominent celebrity endorsement
Core message: Find understanding, acceptance and strength in a sense of self
Media Buying • Heavy paid digital presence: ~$80M USD
• Social marketing and viral: ~$5M
• TV and Outdoor: ~$75M
Digital Social Offline
• SEM (PPC,SEO) • Viral • TV
• Affiliate • Social eCommerce • Outdoor
• Display • Weibo • Partnerships
© 2012 BOS HunterMJH Vancl Redux V9-3
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21. VANCL‟s messaging appeals to a highly
individualistic, introspective post-80s youth
• Understand • Always be yourself
yourself
• Strive to Core message: • Be hopeful
succeed with Find understanding,
acceptance and strength
out fear of in a sense of self
failing
• Do not fear to • Do not fear to
express your express yourself
emotions and your identity
Balances angst, optimism,
humility and celebrity
© 2012 BOS HunterMJH Vancl Redux V9-3
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22. Youth-focus means although VANCL enjoys strong brand
awareness, they convert “only” 9% of all e-Shoppers to
regular buyers
TaoBao reaches the whole market VANCL reaches a “large niche”
TaoBao Awareness & Shopping Funnel VANCL Awareness & Shopping Funnel
(2011) (2011)
% of All 100% % of All 100%
e-Shoppers 92% e-Shoppers
90% 90%
82%
80% 75% 80%
89% of
aware 70%
70% 91% of
consumers
trial
61%
trial
60% consumers 60%
make
50% repeat 50%
purchases
40% 40%
30% 30%
20% 20% 27% of 16%
aware 53% of trial
consumers consumers 9%
10% 10% make repeat
trial
purchases
0% 0%
Awareness Trial Regular Buyer Awareness Trial Regular Buyer
TaoBao, China‟s B2C market leader, has VANCL‟s heavy advertising spend creates
neutral brand values and exhaustive product strong awareness (61%), but the youth-
offerings; enabling widespread appeal and focused branding converts this to a lower
use use rate of “only” 9% of e-Shoppers
Source: BCG e-shopper online survey © 2012 BOS HunterMJH Vancl Redux V9-3
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23. Creative combines strong brand concepts with
direct response elements (prices, promotions)
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24. VANCL‟s brand-oriented creative uses a bold
simplicity to achieve cut-through
“I love you” “Nothing to fear” “There is spring” “Nothing to fear”
“I am VANCL” “I am VANCL”
VANCL‟s most recognised campaigns use high-contrast imagery, youthful celebrities
and life-affirming messaging; & most recently use the “I am VANCL” tagline
“To move forward,
Nothing to fear”
© 2012 BOS HunterMJH Vancl Redux V9-3
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25. Brand creative also uses a regular stable of
high profile celebrity spokespeople
VANCL uses highly visible Chinese celebrities who are seen to
share the brand‟s core values :authentic, youthful, accessible,
persevering, energetic, and highly individual
VANCL‟s celebrity endorsements
Han Han Wang Luodan Huang Xiao Ming Li Yuchun
韩寒 王珞丹 黄晓明 李宇春
Writer, rally Actress, Actor, singer Pop-star
driver, voted one of and model; and actress,
prolific China‟s 50 UNICEF Chinese Red
blogger and most ambassador, Cross
widely beautiful also used by ambassador,
considered people Gucci, also used by
China‟s #1 Tissot & HP, Coca-
“internet Mercedez Cola &
personality” Benz others
© 2012 BOS HunterMJH Vancl Redux V9-3
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26. VANCL‟s lead spokesperson since 2008 is
China‟s #1 Internet personality, Han Han
“28-year-old Han Han is a man of many hats. A best-selling novelist,
champion amateur race-car driver, wildly popular blogger and is also
known as China's most media-savvy celebrity rebel. Having appeared
on China's literary scene at the age of 17 in 2000 with his first best
seller, Triple Gate, Han has shrewdly mined a seam of youthful
resentment and anomie through his stories of anguished characters
in their late teens and early 20s. One of China's top-earning authors,
he is widely seen as a torchbearer for the generation born after
the beginning of the country's opening to the outside world, a group
the Chinese call the "post-'80s generation": apolitical, money- and
status-obsessed children of the country's explosive economic boom.
His main weapon is his blog, where he criticizes the Writers'
Association, literary critics, bureaucrats, city mayors, and whoever he
takes it into his head to dislike. In a country where the old
conventions and traditions are respected, Han Han is somewhat an
underground force”
Singapore Management University Digital Marketing Report
Han Han lends VANCL an “anti-establishment”
vibe designed to appeal to Chinese youth
© 2012 BOS HunterMJH Vancl Redux V9-3
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27. Management is also prepared to associate the
brand with some unconventional celebrities
• In December 2011, VANCL invited famous
(infamous?) Japanese adult film star, Sora
Aoi, to attend their year end gala (Pictured
left-top with VANCL‟s founder Chen Nian, left-
bottom with VANCL spokesperson Han Han)
• Sora Aoi surged to stardom in China (despite
pornography being banned in the country)
when she opened a Sina Weibo (“Chinese
Twitter”) account. She currently has over 9
million followers.
• The celebrity‟s appearance on the televised
event caused much controversy with some
questioning why the event was not censored
on “moral grounds”.
• However, others praised the move
for demonstrating boldness,
courage and VANCL’s sync with
youth values – as well as leveraging
her 9 million Weibo followers
Source: Global Times, Want China Times © 2012 BOS HunterMJH Vancl Redux V9-3
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28. VANCL‟s “political quotes” T-shirts recently
generated further controversy
• Two T-shirt lines were launched featuring
quotes from famed politicians Wen Jiabao
(E.g. “Look up at the starry sky”) and Deng
Xiaoping (E.g. “Deny Xiaoping‟s Southern
Tour”), along-side other brief words making
references to famous comments or speeches
• Many of the highlighted comments had
ambiguous interpretations. For example,
“Independent Character” comes from Wen
Jiabao‟s comment “My independent character
has not won people‟s understanding.” It‟s is
unclear whether highlighting this comment
slights Wen or celebrates his humility
• The products were seen as violating
advertising law for their use of political
themes and the use of the likenesses of
politicians to sell them; making VANCL liable
to a fine
VANCL earning further
“rebellious” credentials?
© 2012 BOS HunterMJH Vancl Redux V9-3
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29. Western audiences may recognise elements of
several foreign brands in VANCL‟s positioning
H&M‟s French GAP‟s
ADIDAS‟
fashion Connection‟s core product
youthful energy
democratisation provocativeness simplicity
VANCL‟s products
contain a promise of French Connection
“affordable fashion”, in a UK‟s re-branding
style similar to was born on an Founded by Don
Swedish/Global retailer edgy acronym & a Fisher who couldn‟t
H&M. Fashionable simple product find good jeans to fit.
designs at “good idea: Though expressive,
ADIDAS‟s determination- enough” quality. The the product focus is
based messaging in tune brand is carefully "cool clothes […] still:
with youth that values positioned to appear presented in a
success and winning, “egalitarian” and contemporary “Clean. Classic.
not participation or “accessible” and to avoid environment and American design.”
effort any vulgar connotations supported by fresh,
of being “cheap” fun advertising”
…And all underpinned by something like Amazon‟s
reputation for service and efficiency
© 2012 Matt Hunter matthunter.com
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30. VANCL invests ~$158M per annum in
advertising to deliver its message
• VANCL is a significant advertiser
VANCL 2012 Known Media Spend
by Channel (As of June 2012)
• Reports place VANCL‟s 2011 media US$ 90
spent at $158M; equivalent to Millions 80
79.3
~RMB 1 billion or approximately
15% of total sales 70
- This compares to marketing 60
expense of 3.5% of sales for 50
leading global retailer, H&M
40
30
• VANCL‟s media budget is thought to
be majority online with an 20
12.7 11.9
emphasis on pay per click search 10
engine marketing and affiliate
advertising 0
Outdoor Baidu Other Online
• VANCL‟s 2012 media spend is
forecast to be higher than 2011 –
considerably so if commission for
VANCL Star (see later) are included
Source: Want China Times © 2012 BOS HunterMJH Vancl Redux V9-3
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31. VANCL‟s paid digital marketing optimises to
different metrics on different platforms
Cost-Effective
Direct Awareness
Customer
Attribution Building
Acquisition
• Partitions a portion of digital • VANCL accepts that some • Boost sales without
Objective marketing budget to act as digital territories will not absorbing further risk from
“direct response” generate high click through marketing
rates
• Spend heavily on major • Purchases high cost, highly • VANCL has long operated a
Strategy portal sites and leading prominent ad space on the substantial affiliate
Chinese search engine, highest-traffic websites advertising program offering
Baidu, optimising around real (Sina, Tencent, Sohu …) to commissions of ~16% to
time metrics boost brand perception web-owners and search
engine marketers
• ALSO purchases high-
volume, low-cost space in • Enables skilled third parties
social media platforms to assist in promoting VANCL
(forums, QQ) to build with commission paid only on
awareness & consideration realised, tracked sales
• Cost per Click • Cost per impression • Cost per sale
Metrics
• Cost per Sale • Consideration to purchase • Estimated as driving 40%
• Cost per Customer • Unprompted Awareness of sales in 2009
Acquisition • Cookie-based visitor
tracking
Versatility enables VANCL
to tackle a range of online opportunities
© 2012 BOS HunterMJH Vancl Redux V9-3
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32. VANCL‟s paid digital presence is complemented by
a rich, well earned social following
VANCL‟s Social Media Marketing
Viral campaigns VANCL Star Weibo
(“Chinese Twitter”)
An active and The leading One of the strongest
creative online innovator in social followings in micro-
fanbase, generating commerce, directly blogging anywhere
additional promotion enlisting customers in the world
and media coverage and fans to generate
revenue whilst
bolstering the brand
© 2012 BOS HunterMJH Vancl Redux V9-3
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33. VIRAL
VANCL‟s Social Media Marketing
Viral campaigns VANCL Star Weibo
(“Chinese Twitter”)
An active and The leading One of the strongest
creative online innovator in social followings in micro-
fanbase, generating commerce, directly blogging anywhere
additional promotion enlisting customers in the world
and media coverage and fans to generate
revenue whilst
bolstering the brand
© 2012 BOS HunterMJH Vancl Redux V9-3
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34. VANCL successfully experimented with viral
social media in 2010
VANCL “Mockery” Campaign Overview
• In April 2010, VANCL combined on- and off-line media to create a highly
Overview
successful viral, social media campaign
Objective • Leverage the growing Chinese internet trend of “online mockery” to gain
cost efficient media exposure to a wide audience
Strategy • VANCL launched a new campaign featuring celebrities (Han Han, Wang
Luo Da) alongside their introspective thoughts
• Campaign launched using nationwide TV and outdoor advertising in
Beijing and Shanghai
• With assistance of a media agency, VANCL created mocking copy-cat
adverts based on this campaign and secretly seeded them online, with
the aim of inspiring others to produce their own copy cat adverts
Results • “Fake” seeded ads got the idea to “critical mass” and sparked interest
• Copy-cat adverts were established as a unique Chinese internet meme
• 3,000 customer created versions of the ad posted in the first 2 weeks
• Widespread posting of copy-cats across Chinese social media
• Significant additional unpaid media exposure
Source: Thomas Crampton, CNN GO © 2012 BOS HunterMJH Vancl Redux V9-3
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36. The advert became an internet meme, with
customer created, socially shared, copy-cat adverts
© 2012 BOS HunterMJH Vancl Redux V9-3
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37. SOCIAL COMMERCE
VANCL‟s Social Media Marketing
Viral campaigns VANCL Star Weibo
(“Chinese Twitter”)
An active and The leading One of the strongest
creative online innovator in social followings in micro-
fanbase, generating commerce, directly blogging anywhere
additional promotion enlisting customers in the world
and media coverage and fans to generate
revenue whilst
bolstering the brand
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
38. VANCL‟s 2nd breakthrough social campaign in 2011
leveraged „curation‟ to actively boost sales
VANCL “Star” Campaign Overview
• In March 2011, VANCL launched a sub-site, VANCL Star, combining
Overview
elements of photo blogging, fan advocacy and social media to create a
new retail platform: social eCommerce
• Leverage VANCL fans to cost-effectively sell VANCL products
Objective
Strategy • Invite VANCL customers to upload photos of themselves modelling
VANCL products
• VANCL customers highlight the specific VANCL products used in their
photos, tying to the VANCL online shopping experience
• Encourage “VANCL Stars” to share their creations with the world
• If other people buy items from a VANCL Star‟s product window, pay the
VANCL Star customer a 10% commission
Results • 元238K sales in the first two weeks
• Thousands of customers signed up
• Lower cost per sale versus comparable channels (E.g. Affiliate
advertising) gives opportunity for元600 million saving
• Extensive additional “free” media coverage on- and off-line
© 2012 BOS HunterMJH Vancl Redux V9-3
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39. The VANCL Star user interface combines photo
uploads, social features and electronic retail
VANCL Star: User Interface Breakdown
The VANCL items
Uploaded the star used
photo
Link to
buy
Share this Star‟s
creation on social
Click to “Love” this networking sites
Star‟s style
© 2012 BOS HunterMJH Vancl Redux V9-3
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40. VANCL announced RMB1 billion budget for sales
commissions made through VANCL Star
© 2012 BOS HunterMJH Vancl Redux V9-3
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41. VANCL Star has the potential to deliver RMB
600 million in media savings
• VANCL Star‟s “League table” indicated the top 100
“Stars” had generated sales of nearly ¥240K in the first
two weeks of the campaign
VANCL Star: Sales Generated in the First 2 Weeks Since Its Launch
Total Average Total Average
Ranking Ranking
Sales Sales Sales Sales
001 – 010 ¥159,926 ¥15,992 051 – 060 ¥8,790 ¥879
011 – 020 ¥30,099 ¥3,010 061 – 070 ¥6,839 ¥684
021 – 030 ¥18,548 ¥1,855 071 – 080 ¥5,227 ¥523
031 – 040 ¥12,215 ¥1,222 081 – 090 ¥4,404 ¥440
041 – 050 ¥10,265 ¥1,027 091 – 100 ¥3,989 ¥399
Total: ¥237,568
• Assuming VANCL reaches it’s target of issuing ¥ 1billion in
commission at a rate of 10% of sales, this will represent a
saving versus affiliate advertising (which typically pays ~16%)
of ¥ 600 million
Source: iCity, New Media Analytics © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
42. MICRO-BLOGGING
VANCL‟s Social Media Marketing
Viral campaigns VANCL Star Weibo
(“Chinese Twitter”)
An active and The leading One of the strongest
creative online innovator in social followings in micro-
fanbase, generating commerce, directly blogging anywhere
additional promotion enlisting customers in the world
and media coverage and fans to generate
revenue whilst
bolstering the brand
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
43. Micro-blogging is more influential in China than in
the US – making a strong brand presence vital
Micro-blogs (E.g. Weibo / Twitter)
Millions of 350
Micro- 319
bloggers 300
250
200
150
108
100
50
0
USA China
• 3x as many micro-blogging accounts in China as in USA
• 10x amount of internet traffic referred by Sina Weibo (the leading micro-blog
platform) in China as is referred by Twitter in the USA
Source: CNNIC, Twitter © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
44. VANCL‟s micro-blogging campaigns are amongst
the most successful in the world
VANCL uses multiple • VANCL use individual Weibo accounts for
Weibos (micro-blogs) to different product areas; allowing fans to get
serve different functions updates from the company overall, the V+ third
party brand store or simply from the canvas shoe
line, if they so desire
• VANCL actively monitors and engages in
conversations with other Weibo users, making
the medium interactive rather than purely
broadcast
• VANCL leverage Sina Weibo’s extra functionality
(not available on Twitter) to engage their
audience, offering polls and design-based
applications
• The brand has high relevance and continues to
build relationships
VANCL is the 2nd most re-tweeted user on Sina Weibo
(the leading micro-blog platform)
Source: Labbrand © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
45. VANCL uses its own following on Weibo to launch its
strongest video creative –engaging audience and boosting
Internet Word of Mouth
• In May 2011, VANCL released their 1-
minute long “introspection” advert
featuring famed actor Huang Xiao Ming
• The creative stood out for its boldness in a
number of respects:
- A boxing ring setting elicited ideas of
determination, strength and struggle
- An orchestral score overlaid a sense of
greatness
- A raw introspective soliloquy grounded the
creative in a personal sensation
Huang Xiao Ming - The overall message of the featured celebrity:
that he is not an exceptional person, just an
“At age seven, determined to be a ordinary person, struck a chord in a country
used to a high degree of hierarchy and power
scientist. But after growing up, he distance in daily life
became an actor. Bestowed with good
• Seeing the potential to generate significant
looks, diligence, and success. But also internet word of mouth, VANCL decided to
given ridicule, doubt, and mockery. This premier the advert via a Weibo link
is life. You can strive, but you are • Within 8 hours, the advert had been re-
incapable of refusing. What victory is tweeted (or in Chinese Weibo terminology,
there? To stand one’s ground means forwarded) 120,000 times
everything. That’s right, I’m not an • This is the current single day
actor. “Not at all” (Eng). I’m an ordinary record for forwarding of a
person.” commercial link on the Weibo
platform in China
Huang Xiao Ming‟s soliloquy
Source: Live Journal © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
46. Agenda
• VANCL 101 介绍
• Products 产品
• Marketing 市场营销
• Logistics 后勤
• Financing & IPO 金融
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
47. Chinese apparel retailers have many different approaches
to distribution – VANCL is one of several operating without
physical stores
Distribution Channels:
Chinese Owned Using B2C Outsourced Physical
Apparel online store Platform Online Store Stores
Market
Overview
No Bricks & Mortar
Retailers: VANCL 凡客誠品,
Mecox Lane 麥考林, PPG
Multi-channel
Distribution Strategy:
Retailers: Li Ning, Uniqlo,
H&M, Zara, GAP
Platform leveragers
Retailers: “Tao-
brands”:Ringnor(言若),
Milachic (樂米拉), Qiustyle (
斯黛歐);
Platform & Store
Retailers: Sportica, Green Box (
绿盒子),Levis, Justyle …
Outsource & Store
Retailers: Metersbonwe
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
48. VANCL retail over the phone, web and via app
Call Centre(2007) Websites(2008) App(2009)
• >1,000 staff • VANCL sells own-label
• >110,000 calls daily V+ retails third party brands
• >50,000 orders per day
• 20 million registered users
Source: Call Centre Study, News Coverage © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
49. VANCL creates value for customers through a combination
of strong design, marketing and logistics capabilities
Manu-
Services &
Product facturing Outbound Marketing
Reverse
Design & Supplier Logistics & Sales
Value Chain Logisitcs
Mngmnt
Description:Translation of
information to
Transform plan
to physical
Delivery of
products to
Provision of
info &
Maintenance /
long run
plan product customers messaging to enhancement of
customers product value
proposition
Primary • Portfolio Resource • Inventory • Web / Mobile • Creative • Branding
Allocation Planning & Stores Layout Development & • Gaining Customer
Activities: • Designer Replenishment Management & Execution Feedback
Recruitment • Supplier Optimisation • Media Buying • Returns Handling
• Assortment Selection • Markdown pricing • Digital & / Reverse
Planning • Buying / • Customer Physical Logisitics
• Cloning of Leading Negotiation Conversion Coordination • Customer
Items of Rivals • Quality Control • Warehousing • Cross Selling Relationship
• Third Party Brand • Business Process • Route Management
Recruitment Re-engineering Optimisation
• Cannibalisation • Labour
Analysis Optimisation
Secondary Management Information Systems (Translation of Data to Information) Sales Analysis; Competitor Intelligence; Market
Activities: Intelligence; KPI Measurement & Reporting; IS Hardware & Software
Human Resource Management: Recruitment; Training; Promotion; Culture Creation
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
50. Like many Chinese retailers, VANCL has a
heavy in-house logistics operation
• The logistics industry in China remains
extremely fragmented
- China has many thousands of logistics firms;
however most have less than 5 delivery
vehicles at their disposal
- In response, many internet firms (TaoBao,
Yihaodian, 360Buy, Amazon Joyo, …) have
ventured further down the value chain to
embrace delivery
• VANCL operates its own delivery firm: Ru
Fend Da
- Delivers majority of VANCL products in major
cities (Shanghai, Beijing, Guangzhou,
Shenzhen)
- ->30 warehouses nationwide
- 70% of 2011 deliveries carried in-house
• VANCL also relies on third parties for
fulfilment but makes strides to
standardise service
- Third party couriers must wear a
standard “VANCL Vest” when making
deliveries
China‟s road and rail network
Source: Marbridge Daily •
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
51. VANCL‟s returns policy offers customers exceptional
service - but generates substantial costs
• VANCL encourages returns to raise customer satisfaction
- VANCL couriers typically wait whilst customers try on their orders. Stock which
they decide does not fit can be immediately returned
- All returns are accepted within 30 days; irrespective of normal
exceptions, such as labels having been removed or clothing worn
• Founder Nian Chen described the thinking over the costs and benefits of
this policy:
"It's quite troublesome. Not only does the courier have to spend time
returning the items, but the clothes can't be resold. [But] we don't
want to lose a customer over the small delivery cost of [$3 to $5].
What would you choose -- to hold on to a small amount of money or
keep a customer you've worked hard to attract? It's a simple choice”
• Returns are reported to run at between 3% and 10% of monthly sales
VANCL adopt a lifetime customer value (LTV) in
assessing the profitability of their transactions; which
may assist in driving long term growth, OR might
equally permanently erode business profitability
Source: Advertising Age, Call Centre Study © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
52. 2011 saw VANCL make a number of
embarrassing and costly logistics mistakes
• Following a number of successful marketing
campaigns featuring Han Han & Wang Luodan,
Average Number of T-Shirts VANCL‟s January 2011 sales were 6x January
Held in Stock 2010 levels.
(Millions of Units) • Making linear extrapolations, VANCL
management made announcements of projected
8 sales for the year of RMB 10 billion, up from RMB
7.0 2 billion in 2010
7
• VANCL made three critical errors:
- VANCL misestimated demand growth rates
6
- VANCL re-ordered sold out items, only to
receive stock which was out of fashion by
5 the time it arrived in store and therefore was
4
-64% - slow to sell
- VANCL expanded the product range to non-
apparel lines which they did not understand
3 2.5 and did not fit the brand positioning
• By September 2011, VANCL held inventory
2 worth RMB 1.4 billion; equivalent to 100 days of
sales
1
• VANCL were forced to embrace
mark downs to move inventory and
0 today have pushed inventory days
2011 2012 back to 30
VANCL sell around 150,000 T-Shirts per day. • Although VANCL appear to have
In 2011, poor sales analysis led VANCL to largely recovered, the episode appears
increase inventory to an unnecessarily high 7 to demonstrate a basic weakness in
million units. Stock has now been reduced to VANCL‟s data analysis and logistics
just 2.5M. capabilities that could have long term
implications
Source: Economic Observer © 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
53. Agenda
• VANCL 101 介绍
• Products 产品
• Marketing 市场营销
• Logistics 后勤
• Financing & IPO 金融
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
54. To date, VANCL has received $500M from
investors
Round Year Month Investors & Amount
1st • 2008, January SAIF invests US$10 million
July SAIF, Qiming, Venture Partners, IDGVC
2nd jointly invest US$30 million
3rd • 2009, August Qiming, IDG, Ceyuan, SOFTBANK invest
US$30 million
4th • 2010, September IDGVC & others invest $100M
5th • 2010, December Ceyuan, SAIF, Tiger Fund invest $100M
6th • 2011, December $230M further investment
Chen Nian asserts VANCL will value at
US$5 Billion upon IPO
Source: Press Reports, Chen assertion: China Daily 2011-03BOS HunterMJH Vancl Redux V9-3
© 2012 Matt 20120606 matthunter.com
55. However, many analysts suspect VANCL‟s
pricing is too aggressive to be profitable
Illustrative Cost Breakdown
Low cost T Shirt
• Price: RMB 29
• Cost:
- Material(cotton fabric):
0.15kg/piece*70/kg≈ RMB10
- Printing: RMB 3
- Manufacturing: RMB 5
- Tags etc.: RMB 1
- Delivery (free if order >RMB 200)
RMB 15
Stock?
- Overhead?
- Returns / Reverse Logistics?
- Marketing expenses?
Result:
VANCL is loss-making on
many low end transactions
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
56. Chen Nian has little time for doubters of his
“loss-leader, land grab” business model
Chen dismissed talk of a possible repeat of the dotcom crash in
China, saying that the current wave of fundraising and new Internet
companies were being driven by real consumer demand for Web services.
"The difference is that with websites such as Vancl.com, users actually have
to fork out some money to pay for products, and it's not just measuring
clicks," Chen said.
"If you say it's a bubble, it's either because you're not a well-run
company, or it's because you're a venture capitalist who can't afford
to enter the market and so you complain about the high cost of
entry.“
China Daily (2011-03-09)
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
57. Can VANCL‟s business model provide results
for investors?
The case for… The case against…
VANCL‟s cash high burn rate is driven • Customers‟ satisfaction with VANCL is
primarily by marketing investment based on an unsustainable value
Marketing spend has been used to build proposition: most notably, exceptionally
brand awareness and convert China‟s low prices, and overly generous returns
rapidly growing internet user base into • Although celebrated for innovative
regular customers marketing, VANCL‟s digital marketing
As customers are converted to regular campaigns are in truth relatively
re-purchasers, the % of net sales straightforward; relying simply on huge
invested in marketing will fall budgets rather than sophisticated
targeting or messaging to produce
Generous returns policies have helped results
new customers embrace internet
shopping; and return rates are likely to • VANCL‟s logistics capabilities are also
fall as customers learn what sizes to suspect: the 2011 over-stocking fiasco
order and what product quality to expect suggests serious weaknesses. VANCL are
unlikely to gain a competitive edge
VANCL‟s strong brand name, established versus logistics specialists (e.g. Amazon)
customer base, scale and sophisticated or emerging consolidated third party
logistics will provide a “moat” to protect logistics companies (e.g. a Chinese DHL).
future profits This makes VANCL‟s courier and
warehousing investment a
liability, not an asset
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com
58. Matt Hunter is a digital marketing specialist with 8 years
experience. He previously worked at management
consultancy Bain & Company in London, Johannesburg and
Sydney before heading digital marketing and product
development at Confused.com, a successful UK internet
business.
He specialises in digital marketing, product development and
strategy.
He holds an MA in Economics & Management from the
University of Oxford, an MSc in Strategic Information
Systems from Cardiff University and is currently completing
the MIT-Tsinghua MBA in Beijing, China.
<< Available for opportunities in digital marketing, tech start-
ups or PE/VC funds; and roles with Asian exposure. >>
Email: ProfessionalEnquiries@Gmail.com
LinkedIn: http://cn.linkedin.com/in/digitaldirector
matthunter.com
DIGITAL ◊ PRODUCT DEVELOPMENT ◊ STRATEGY
© 2012 BOS HunterMJH Vancl Redux V9-3
Matt 20120606 matthunter.com