Vancl, the fast follower excels

Chen Nian, the founder and CEO of Vancl

Yesterday, I watched a TV program interviewing Chen Nian (陈年), the founder and CEO of Vancl.com. His name isn't unfamiliar. He is also the co-founder of Joyo.com (Amazon China). When Amazon acquired Joyo, he continued to work as an executive VP. However, things went sour when heated argument between him and the newly appointed top American executives began. In the end, he was not happy and left Joyo. Now, here comes Vancl, a leading online shirt retailer and a brand of men's apparel. Actually, Vancl isn't the first to explore the B2C business online. It's PPG who made a buzz first. PPG's advertising campaign almost made PPG a household name in China in 2007 and early 2008. PPG's ads were everywhere on TV and on many newspapers. However, PPG's advertising campaign backfired. It was too EXPENSIVE, which cost PPG the first mover advantage. News came out last year that PPG was in trouble and short of cash. The entrepreneurial Chen Nian was amazed by PPG's business model: selling shirt online, self-owned brand, outsourced logistics & production, and no factories needed. According to himself, he studied PPG for several months before coming up with the idea of Vancl. The business model is not much different, but Chen Nian put his advertising campaign ONLINE. That's why whenever I browse the internet, I see Vancl. Vancl was established in Oct. 2007 and later in mid 2008 received a total of USD 30 million venture capital investment. Vancl sells more than 10,000 shirts per day. According to the TV program, Vancl's sales revenue reached RMB 300 million in 2008, which was a miracle for a newly established company.

Two months ago, I bought a shirt, a pair of trousers and shoes on Vancl. Honestly, I'm very satisfied. It's inexpensive and the quality is very good. I remember Chen Nian boast that Vancl's products, moderately priced, are made of well selected high-quality fabrics, and the quality is not inferior to many big name brands. I am not an apparel expert, but I assume he lives up to what he's promised. What makes Vancl an instant success? Here are some of my thoughts,

• Being a fast follower. PPG, the first mover, found the niche
  market. Vancl followed with improved business model and is more capable of executing the business plan.
• Knowing clearly who the customers are. Vancl targets male professionals aged between 25 to 40. Well, I'm one of those customers who's reluctant to spend time walking around shopping malls to buy clothes for work use.
• Knowing how to reach target customers at a reasonable cost. Vancl's ads have been on a lot of well selected websites (e.g. Tianya.com, 51job.com, yeeyan.com, etc.). I've heard from a friend who has some contact with the marketing officer of Vancl that over 80% of their advertisement is online. There seems to be a profit-sharing agreement with various websites. That's exactly where PPG did wrong. I watched PPG's ads on TV and newspaper. All that I knew was I could dial a telephone number to order PPG's shirts, but I wasn't aware of PPG's website even though it was vaguely mentioned in the ads. Also, it's too expensive to advertise on TV and newspaper.
  

I think the above three points are the keys that led to Vancl's success. Also, there are other reasons behind Vancl's success. For example, Vancl knows customers needs very well and keeps improving their products; and Vancl's other marketing activities (e.g. customer loyalty program, giveaway electronic coupons) help foster a large number of loyal customers; good logistics ...

As I know, the orders made via Vancl.com are still on the rise. But, wait! Where is PPG now? Can Vancl take a breath now? I am afraid not. Masamaso and Bono are coming to get you!

Related reading:
VCs in China: Kleiner’s shirt factory, Sequoia’s farm
Vancl Secures Series C VC Financing

Thank you very much for buying our Chinese competitors!

VS

VS
Li Guoqing (李国庆), the co-CEO of Dangdang China's largest online retailer of books, CDs and videotapes, said that if Dangdang's biggest competitor Joyo had remained Chinese he would have had a much harder life. Obviously, he is right. Joyo was the No. 1 in the market before. But since Amazon's acquisition, Joyo has been going downwards and lagged far behind Dangdang. Joyo is not alone. Eachnet shares similar experience. Eachnet used to be the No. 1 auction site in China with over 60% market share. However, Eachnet gradually became mediocre after being acquired by Ebay. The new Chinese entrant, Alibaba's Taobao entered the market and quickly surpassed Eachnet. Now Taobao has firmly established itself as the most popular online auction site in China and the gap between the two is growing. Foreign internet companies do not seem to adapt well in China. Need more evidence? Google is trailing behind Baidu while Yahoo is struggling.

Why foreign internet giants fail to win the competition against their Chinese counterparts? This is a question that many have tried to answer. I'm not going to do it here, but I have been keen to hear what those who have been personally engaged in the competition would say. Here are some of them.

The outspoken Li Guoqing ,once on a TV program, ridiculed Ebay by telling a story about Ebay's inefficiency. He says that once Ebay's Chinese team decided to change some Chinese fonts on Eachnet. The Chinese team could not do it right away. They needed to report to the US headquarter of Ebay to obtain an approval before they could actually do the change. The approval did not come soon and one China-based Chinese executive of Eachnet was very angry and threatened to resign. After all the farce, the change of fonts was finally done, which was not quick. I know the story sounds absurd and I am not sure if it is true. But from my personal experience with a foreign company in China, I tend to believe the story. If you have followed the news, Ebay and Tom formed partnership and Tom's former CEO Wang Leilei (王雷雷) became the CEO of Eachnet. When he began to work at Eachnet's Shanghai office, he was not impressed. He once said Eachnet's staff had the bad habit of doing every thing by emails, powerpoint files, etc. They did things in a less straightforward way. He thought they had gone too far, which was less efficient. Anyway, Wang himself failed to lead Eachnet out of oblivion and then quit. Another well known resignation from Yahoo China was Xie Wen (谢文). Xie, the former CEO of Hexun, was invited to lead Yahoo China as CEO by Alibaba's Chairman Jack Ma (马云). But after a meeting in the US with Yahoo CEO Jerry Yang, Xie decided to resign. His resignation was just about 40 days from his appointment. Rumors say Xie had not won the support he needed to change Yahoo China. The reason for his resignation has not been disclosed.

I assume the above does give a glimpse at why foreign internet giants stumble in China. Has any of them improved? I don't see it for the time being. Actually, those foreign internet giants deserve a big 'thank you' from their Chinese competitors for destroying those Chinese companies acquired.