As the sun was preparing to greet the day in Guangzhou,
and just as US investors enjoyed the last hours of a three-day weekend,
China's forgotten e-commerce player quietly announced results that beat analyst
estimates.
Average sales growth over 10 quarters: 71 percent.
Vipshop Holdings, which is traded in New York, lacks
the massive girth of Alibaba Group Holding or the star power of JD.com, but it does have better return on equity and price-earnings ratios.
It's also getting a closer look from investors seeking
alternative ways to bet on China's growing consumer market while avoiding
frothy valuations.
Vip.com has managed to turn the decidedly unchic business
of flash discount sales into a high-class luxurious experience, adding in brand
cachet and solid delivery. Its homepage is all you need to see to understand
why: Western female models adorned with Gucci sunglasses and Versace clothing.
While JD.com and Alibaba are both pushing into fashion
retailing, Vipshop's early-mover advantage in flash sales has helped it build
some critical mass, not only among shoppers but among brands looking to clear
inventory while lacking the offline outlets commonly available in Western
markets.
Read also: Alibaba takes big step offline
The result has been an average 71 percent sales growth
over the past 10 quarters and continuous profitability for the past four years.
At the same time as it faces solid competition from
JD.com, and Alibaba looks to offline channels (including a recent tie-up with
Shanghai Bailian Group), the market for clearance sales may have a ceiling.
Sanford C. Bernstein, for example, estimates that the addressable market for
flash sales is around 25 percent of the total e-commerce pie, and thus predicts
that this will be the last year in which Vipshop can outpace industry growth.
Now the dilemma for investors is whether an inevitable
slowdown will markedly affect returns, or if a management focus on sacrificing
pace for margins will be enough to buoy earnings. As the adage goes, past
returns are no guarantee of future performance.
This column does not necessarily reflect the opinion of
Bloomberg LP and its owners.
BLOOMBERG