VIP Feature Image

VIP is one of RooLife’s most tried and tested eCommerce partners. Since 2015, we have launched at least 8 separate brands on VIP International: VIP’s Cross Border eCommerce (CBEC) platform. These brands have sat predominantly in the cosmetic and personal care categories. VIP frequently performs as one of our top B2B2C sales channels. This is largely a result of our close working relationship, with their head office only a stone’s throw from our Guangzhou offices.

Mass Audience Exposure via Price Penetration

In China, VIP is renowned as the pioneer online ‘flash sales’ platform. By contrast to the marketplace models (i.e. Tmall), VIP merchants do not operate stores. Instead, they operate individual product pages. As VIP rolls out various promotions throughout any given month, merchants have the autonomy to pick and choose which campaigns they participate in.

To draw a Western parallel, VIP is kind of like Catch-of-The Day, but targeted at affluent, sophisticated, older women. This demographic is perhaps one of the most powerful in China from a purchasing power perspective. They’re also incredibly loyal. VIP boasts a 70% repurchase rate amongst their online members. This makes VIP a particularly attractive channel for any brand considering a price penetration strategy into China.

As of 2020, VIP shop serves over 100 million members. This includes 12 million daily active users transacting 204 orders/minute. The official numbers indicate that over 75% are female, and that 26-35 year olds comprise the key target audience. Our experience is that over the vast majority of sales are driven by affluent women aged 30-40 from higher tier cities. These women are likely to be working professionals who may or may not have one or more children.

[Above] RooLife at VIP’s Guangzhou headquarters in 2019.

Pricing Strategy: Perhaps the Most Complex of All CBEC Platforms

The success of VIP’s business model rests largely on their sophisticated consignment pricing structure. Unlike other B2B2C direct-purchase platforms (i.e. Tmall Direct, Kaola), VIP do not want your cheapest distributor price. What they want is to be able to approach you any day of the month with an offer to participate in an upcoming promotion.

These promotions are commonly 2-for-1 deals and/or 50-60% off promotions. The lost margins are covered entirely by the you as the merchant. After receiving VIP’s promotion invitation, you may only have several hours to decide whether to participate. The following flowchart provides a basic overview of the cash and product flows associated with VIP’s consignment model:

VIP Consignment Flowchart

From a business perspective, the model is nothing short of brilliant. VIP enjoy stable profit margins, all the while, consistently offering the best market prices to their customers. As a result, VIP was the first B2C online retailer in China to achieve profitability

Blurring the Lines Between Finance and Marketing

Although the above flowchart relates specifically to VIP: its implications are relevant to all brands operating in the CBEC space. It reflects the industry preference for products which are light (i.e. low weight), small, long-lasting and premium priced. In other words, products which help you minimise shipping cost, reduce inventory exposure and maximise revenues.

Having a margin buffer allows your brand to forego margin and even operate at a loss for several days of the month. These losses are generally offset by selling volumes at higher margins for the remainder of the month. For cosmetics brands, you’ll want to target a wholesale price that incorporates at least a 30% marketing buffer.

It’s also important to recognise that VIP utilise pricing crawlers to monitor your pricing on other platforms (i.e. Tmall, Kaola, JD etc.) If a SKU is triggered, you can usually expect a call from VIP, and a two hour deadline to match your VIP price with the competing platform.

[Above] VIP’s comparatively male oriented flagship store on JD.com

VIP’s Position in China’s Digital Ecosystem

VIP is an online sales platform in its own right. However, for all intents and purposes, most brands view it as a marketing and brand-building exercise. It is unlikely to be amongst your most profitable sales channels. Furthermore, the negative implications of sustained heavy discounting need little explanation. Conversely though, VIP offers massive, instant exposure to some of China’s most digitally engaged online shoppers. It is a platform where savvy shoppers, unwilling to compromise on quality, look to save money. For fledgling brands in China’s increasingly competitive market, VIP is a no-brainer.

VIP sits securely within Tencent’s ecosystem, following a number of recent strategic investments. As a result, VIP’s store is now available on JD.com, as well as via a standalone WeChat Mini-Program. The implication of this is that VIP products can be promoted to a much wider audience. For instance, VIP’s JD store is much more tailored towards fashion and apparel and even targets men.

In terms of integrated marketing strategies: WeChat and Sina Weibo are the only major social networks that enable links to VIP. These are the primary platforms where you should execute your influencer, video, WOM (etc.) campaigns.

On the topic of digital marketing, VIP frequently make beta-tools available to merchants for trialling. Altought their 2019 tests with coupons and livestreaming fell short, their current trials appear to be gathering momentum. While various tools may come and go, VIP are unlikely to lose sight of their key value driver: offering the lowest possible prices for high-quality and trusted brands.

[Above] Screenshots from a KOL WeChat Article showcasing an Essano VIP promotion for International Women’s Day 2020. The article includes direct purchase links to VIP’s WeChat Mini Program.

VIP Fresh Sales Page

[Above] VIP’s ‘Flash Sales’
Landing Page.

Sales Promotions: A Powerful Marketing Tool

In any given month, your VIP calendar will incorporate a variety of different promotions. These include

  1. ‘Crazy’ sales: smaller daily promotions. Best practice is to do these 2-3 times per month.
  2. Big promotions: generally, one per month
  3. ‘Flash’ sales: special-offer promotions tailored for VIP’s ‘Flash Sales’ page.

Like Tmall’s Juhuasuan, VIP’s most powerful sales channel is their ‘Flash Sales’ page. Generally speaking, this is where customers navigate to immediately identify the best deals on the platform. The promotions available on this page can be short term (<3 days) or long term (indefinite; hinged on stock availability). Generally speaking, VIP’s biggest category sellers tend to reap greater opportunities in terms of ad positioning and prominence.

As with all CBEC platforms, inventory planning is also vital. You will need to anticipate the major flash sales and promotions months in advance where possible. More often than not, by the time you receive a flash-sale invitation, it’s already too late to ship the minimum stock volume required for participation.

What Does VIP Look for in a Brand?

VIP are currently scouting a number of international brands to expand their offering to customers. As a rising number of international brands look to China to offset their domestic losses, VIP are becoming increasingly spoiled for choice. To pique VIP’s interest and stand out above the pack, you’ll need to be able to demonstrate the following:

  • Brand equity and established sales base in China and at home.
  • An extensive marketing plan for China, including:
    • 6+ month sales and marketing plan;
    • Brand-building initiatives outside of the VIP platform, and;
    • Exclusive VIP offerings and promotions (i.e. VIP tailored products and bundles).
  • A willingness to invest in China brand development.
VIP tailored products

[Above] Bundles prepared by various brands exclusively for VIP

Article compiled by Alexander Kelso for RooLife Group, July 2020

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