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

The 'invisible' entrepreneurs

He is ordinary-looking, plainly dressed, hard-working but not so articulate. He is the bread earner of his family, but he takes big risks by putting all his savings into something called 'business'. He has limited education and no idea of business etiquette, but he IS in the business.

There is a culture of entrepreneurship in some regions of southeast provinces in China. About 4 years ago, I had the chance to have a glimpse of the small business of one of those entrepreneurs. At that time, my father, a retired electrical engineer was invited by someone to work for his startup business in a small city in Zhejiang. The business was to develop a product to be used to adjust the speed of battery-powered bicycle. Being bored at home, my father decided to move to the city and work for him. I was a bit worried and decided to accompany my father to go and have a look at the place where my father was supposed to live and work. The living and working conditions were anything but appealing. The boss (entrepreneur) was not rich and rented an unfurnished 3.5-storey apartment in the countryside, which was used for accommodation and workshop. The guy was married with a son. He employed some migrant workers. His family and all the employees including my father lived and worked in the unfurnished apartment. As the photos show, the floor was rough and uneven; The makeshift staircase looked dangerous; and, there was NO third floor! I had a chat with some migrant workers. They were young (between 17-23 yrs old) and worked 12-13 hours a day seven days a week. Actually, one 'migrant worker' turned out to be the niece of the boss. The boss' mother-in-law also worked as a cook in the apartment. Anyway, my father made the decision to stay and work. I was assured by the boss that he would take good care of my father. Then, I left the next day. My father only worked there for about 3 months. Later, I learned from my father that the business failed but the boss didn't quit and decided to start a new business.

In this story, the guy started with limited fund and utilized all the possible resources available to run his startup business. He was down but not out. He is the one that fits the description in the first paragraph of this post. Actually, there are many entrepreneurs like him working against the odds in the manufacturing industry in China, but they are 'invisible' to many because they are not in the fancy IT or high-tech industry and they are not in big cities. I know that less than 20% (or even a lower percentage) of those small businesses can survive over a period of five years. Win or lose, they are still the heroes in the economy. Nobody knows where the next Li Shufu (李书福, Chairman of Geely Automobile) comes from, right?