Chinese discount online retailer Vipshop Holdings Ltd. will buy brick-and-mortar chain Shan Shan Outlets for 2.9 billion yuan ($422 million), furthering its expansion into physical retailing.
The investment will be paid in cash installments Vipshop announced in a statement on Wednesday. The New York-listed company will take over the retail business from Chinese conglomerate Shan Shan Investment Holdings Co. Ltd.
Founded in 2008, Vipshop rose to prominence chiefly by convincing clothing retailers to use it as a means to empty their inventory, allowing it to sell branded products relatively cheaply.
But fierce competition in the e-commerce space has seen the company’s online growth slow in recent years. For the first quarter of this year, Vipshop claimed 29.7 million active users, up from 26 million from the same period last year. But quarterly revenue of 21.3 billion yuan was just a 7.3% increase, compared with a 24.6% increase for the same period last year.
The deal with Shan Shan Outlets “represents another milestone in our efforts to explore online and offline integration in our core business,” said Eric Shen, chairman and CEO of Vipshop. “Through this highly strategic transaction, we will gain presence in the offline outlet business in China, which further enhances our ecosystem and fortifies our leading position in China’s discount retail segment.”
Investors were less ebullient as the company’s stock closed 7.51% lower on Wednesday.
Vipshop’s exploration of physical retailing mirrors that of other Chinese internet companies, which have been increasingly going offline as the e-commerce market nears saturation point.
The e-commerce titan Alibaba Group Holding Ltd. has long pioneered the concept of “new retail” by blurring online and offline retailing. Alibaba’s string of investments in brick-and-mortar assets has included supermarket chains Sanjiang Shopping Club, Lianhua Supermarket, Sun Art Retail Group and home improvement store operator Easyhome.
Shan Shan Outlets is a subsidiary of Shan Shan Investment Holdings, the Chinese conglomerate headquartered in Zhejiang province with businesses spanning clothing, healthcare and new energy technologies. Shan Shan Outlets operates five sites in China with plans to add another five by the end of next year.
Contact reporter Mo Yelin (yelinmo@caixin.com)
