The Chinese e-commerce market is a vast landscape — and a highly competitive field. An example of this fact is Shangpin.com. Literally translated to ‘Merchandise’, Shangpin is an e-commerce retailer offering imported luxury goods. Although the company is not as wide-known as giants such as Tmall and Jingdong, the user base cannot be underestimated.
The company’s strategy was to import foreign luxury goods to China. Foreign goods are often held in higher regard, with Chinese consumers associating these brands with ‘better quality’ and ‘higher status’. Founded in 2010, the number of users quickly grew to 50 million users with this strategy. One year after its establishment, the company already reported an annual revenue of 200 million RMB. With the promising results, the company attracted investors from all over the country. In nine years of operation, the company received at least an estimated 1 billion RMB in investment.
Consequently, nobody expected the sudden crash of the company, just when the big e-commerce giants started to take notice. Shangpin recently announced their bankruptcy, stating they didn’t have the financial resources to continue their services. It turned out that Shangpin had gone through three rounds of layoffs, being unable to pay off their employees. As the retailer didn’t receive new investments, it had no choice but to close its doors.
The highly competitive market is a natural result of the country that accounts for more than 50% of the global e-commerce transactions globally. With over 560 million users, entrepreneurs are eager to fight for their part of market share. Although a few, like Shangpin, become successful, this does not necessarily mean their strategy is sustainable. Early success attracts many investors, making it possible to adopt an unsustainable strategy. With the goal of attracting more consumers, Shangpin offered steep discounts and promotions, with products often offered for the same price as in their domestic markets. When the investments started decreasing, naturally the discounts were also reduced. This is when the retailer discovers that their user base does not mostly consist of loyal users.
Shangpin is one example how much potential the Chinese e-commerce market has, while also showing how competitive it is. Early success doesn’t guarantee long-term sustainability, with many unexpected factors playing a role in achieving your goals. Xiao Hong Shu is another example, with the app recently being unavailable for download.