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Vipshop Holdings Limited: Merger and Acquisition
Vipshop Holdings Limited is a Chinese online retailing company specialized in selling popular brands clothes, goods, and apparel. Established in 2008 by Eric Ya Shen, it operates via the vip.com website and has the headquarters in Guangzhou, China (WSJ Markets, 2020). Vipshop is the largest online store based on providing discounts for customers, and such an approach is the first Chinese e-commerce model that gets profit from lowering the prices. The company received 3,401 million US dollars of revenue during the last quarter of 2020, and its stock price keeps growing (WSJ Markets, 2020). The development strategy of Vipshops operations includes mergers and acquisitions as these procedures allow the company to grow and expand its influence, functionality, and competitiveness.
Companies merge when they make deals with nearly equate benefits for both, while the acquisition requires full control of one firm above another. In December 2017, Vipshop merged with Tencent, and JD.com, Inc by making investment agreements with good outcomes for all sides. Vipshops 2019 annual report (2020) states that: Tencent granted us an access interface on Weixin Wallet, and JD.com granted us access to Weixin Discovery shopping application, to utilize the traffic from such platforms (p. 18). These companies expanded their user base by cooperating with Vipshop, and the latter became capable of optimizing its internal processes such as choosing and ordering products on the website. Moreover, Vipshop invests in technological, retail, and consumer-research funds to get the actual data about trends and behaviors to eliminate risks of unexpected changes in the market.
Merging can be temporary or based on particular business agreements, yet the company purchase does not include equal interests. Acquisitions are reasonable if businesses need to increase market power, overcome entry barriers, decrease product development cost, reduce risks, reshape competitive qualities, become more diversified, and develop new capabilities (Hitt et al., 2016). Vipshop acquired several companies throughout its history to maintain leading positions in Chinas online retail market. In September 2016, Vipshop bought 100% of equity interest in Zhejiang Ebatong Technology Co., Ltd. It was the third-party payment platform that was implemented into the online store (VIPS Investor Relations, 2020). The acquisition cut the costs of managing the vip.com website and reduced risks related to online payment procedures. The acquired company created an exclusive Internet billing system and increased Vipshops market power.
The most significant acquirement for the online retail company was related to the expanse of the product providers. On July 10, 2019, Vipshop Holdings Ltd. announced the strategic acquisition of Shan Shan Commercial Group Co., Ltd., the company based on managing outlets in China (VIPS Investor Relations, 2020). Vipshop took an interest in Shan Shan Outlets, and it became the e-commerce platforms largest provider of goods to sell. The acquisition was successful as its outcomes were beneficial for both companies, the process arranged in a friendly manner with signing, and the measures to apply in case of changes were submitted.
China has strict regulations for businesses, and Vipshop considers legal risks and implications during its financial and strategical management. All of the acquired concerns are Chinese, and this factor allows the company to beat the competitors by having a centralized system of sales. Vipshop Holdings Ltd. operates in the e-commerce market famous for its significant competitiveness, thus the companys strategy aims to maintain leading positions. It acquires firms that assist in keeping the products quality high, implementing the latest technology-based features, and growing the base of satisfied and loyal customers.
References
Hitt, M.A., Duane Ireland, R., & Hoskisson, R. E. (2016). Strategic management: Concepts and cases: competitiveness and globalization. Boston, MA: Cengage Learning.
Vipshop Holdings Limited (VIPS) Investor Relations. (2020). Vipshop Holdings Ltd. 2019 20-F annual report [PDF file].
WSJ Markets. (2020). Vipshop Holdings Ltd. The Wall Street Journal.
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