Scientific Journal of E-Business April 2014, Volume 3, Issue 2, PP.6-11
Competitive Strategy of Jumei Youpin Hualin Wang Jiangxi University of Finance & Economics, Industrial Clusters and Enterprise Research Center, Nanchang China #Email: wanghualin2002@163.com
Abstract: This paper focuses on analyzing the competitive strategy used by Jumei Youpin, one of the electricity suppliers in China. The company of Jumei pays special attention on its differentiation strategy. It also launches a series of marketing and advertising campaigns to promote its unique positioning. Founded only a few years before, it has achieved impressive sales performance and established its own competitive advantage. Therefore, this paper does a good exploration on company’s specific application of competitive strategy. Keywords: Jumei Youpin; Strategy Competitive; Differentiation
1 INTRODUCTION Jumei Youpin was founded by three overseas returnees, Chen Ou1, Dai Yusen and Liu Hui in 2010, when groupbuying websites sprung up across China. It has become China’s first professional cosmetics group-buying website. They pioneered the "cosmetics group-buying" concept: the daily recommendation of hundreds of cosmetics with limited amount, and sell in discount far below market price. From the beginning of its creation, Jumei adheres to the highest demands of user experience and to the policy of “100% authentic”, “100% real shot" and "30 days unconditional return (even with products opened)", trying to bring unique beauty for women. September 2010, the Internet Society of China (rating agency approved by the Ministry of Commerce and the SASAC) granted Beijing Rui Chong Culture Media Co., Ltd., which Jumei affiliated, A-level credit certification. And in December 2010, Jumei Youpin was awarded the “2010’s most popular group-buying website for women” in the China Internet Economic Forum, which organized by the “Internet Week”. At the same time, famous brands like Estee Lauder, Lancome, Versace, Maybelline, Olay, Herborist etc., officially cooperate with Jumei to carry out group-buying activities jointly. As the concept of “cosmetics group-buying” emerged lately in China, in 2011, Jumei won the favor of Angel Investment, K2 Ventures and Sequoia Capital. Since then, Jumei has changed its business model, from the cosmetics group-buying web to the vertical B2C e-commerce web, and has achieved success in this model shift. In June 2011, Jumei Youpin Shopping Mall opened on the web successfully. From 2010 to 2011, Jumei had built its own professional customer service center and storage in Beijing, Shanghai, Guangzhou, and Chengdu. It has become China’s leading cosmetics e-commerce website with more than five million users and hundreds of millions of monthly sales. By 2011, Jumei has become one of the fastest growing e-commerce websites. And today, it has been the largest vertical cosmetics online sale mall in China.
2 COMPETITIVE SITUATION Currently, cosmetics electronic business develops rapidly and continues to increase its market size, thus, its market outlook is quite optimistic. According to the data of China Electronic Commerce Research Center, in 2012, the domestic cosmetics online transactions accounted for 21.9% of the total retail sales of cosmetics. Against this background, many companies have swarmed into the cosmetics e-commerce industry. According to incomplete 1
Chen Ou, the founder and CEO of Jumei; Dai Yusen, the co-founder and vice president of product of Jumei; Liu Hui, the co-founder and vice president of research and development of Jumei -6www.sjae.org
statistics, China has more than 2000 group-buying websites. Therefore, although it enjoys the first place in cosmetics group-buying, Jumei Youpin still faces fierce competition.
2.1 Competitive Pressure from Cosmetics Vertical E-Commerce Platform Among the cosmetics vertical e-commerce platforms, Lafaso is Jumei Youpin’s main competitor. Lafaso is the first website with stars and experts settled, and it is also a large women shopping web providing “solutions to women’s fashion”. Lafaso’s business category includes a series of products, for example, essential oils, dietary supplements, skin care products, cosmetics, perfumes, accessories, fashion products and books etc., in order to meet the demands of women. First, in light of marketing advantages, Lafaso makes use of the celebrity effect to attract consumers. For example, it invites Xie Na, Li Jing, Xiao P, Kevin and other senior experts on cosmetics to make recommendations to customers. In addition, Lafaso has its own brand -- Jcare. These methods help Lafaso enhances its brand value and improves its users’ stickiness, that is, their satisfaction and loyalty to the brand. Second, in light of user experience, Lafaso focuses on improving its brand image, website design, product categories etc., in order to build a professional platform designed for women. And these strategies have had tremendous impact on influencing the choice made by consumers. Against the in-depth analysis of the network data of Jumei Youpin and Lafaso in February 2013, it shows that Lafaso has an average of 3.6 visits per month, which is higher than Jumei’s 3.1 visits per month. Finally, in the aspect of the average page views, daily visits per capital and product coverage, Lafaso is also in a dominant position. In all, as we can see, Lafaso is more competitive in its ability to meet the diverse needs of consumers.
2.2 Pressure from Comprehensive E-Commence Platform In the comprehensive e-commerce platform, Jumei Youpin’s main competitors are Taobao, Dangdang and so on. Taobao is China’s most popular online shopping retail platform, with 500 million registered users. It has a daily flow of more than 60 million visitors, and its average daily on-line products are over 800 million. After nine years of development, Taobao changes its business model, from a single C2C network market to a comprehensive retail district, which includes C2C, group-buying, distribution, auctions and other e-business models 2 . Also, in the cosmetics industry, Taobao enjoys a strong competitive advantage. Firstly, Taobao has many Crown stores, such as NALA, Xixi Walk, Wisdom Tree, Xiao Ye, etc. These Crown stores already have a large number of loyal fans, thanks to their long established time, wide product coverage, obvious advantages on price and discount, and the complete membership system. Secondly, in order to avoid some self-shops’s selling of shoddy goods, Taobao sets up Tmall separately and promotes its B2C form. In this context, various cosmetics brands have set up flagship stores in Tmall, such as Mask Family 1908, Afu etc. These direct channels are good at obtaining consumer’s confidence. Finally, since Taobao is China’s largest e-commerce platform, it has obvious advantages in products’ categories and prices. Over the years, online shopping consumers are used to purchasing products in Taobao. Just as the mobile version of Taobao’s advertising slogan says, “nothing can escape from the palms of Taobao”, which means that with the help of Taobao, the basic needs of consumers can be met, so there is no need and no way for consumers’ to run away. Therefore, this kind of spending habits of consumers make them automatically exclude other shopping sites, thereby creating a strong user stickiness.
2.3 Pressure from Physical Channels Physical channel is the main channel for the sale of cosmetics, which includes direct outlets (Avon), brands stationed in the mall (Lancome, Estee Lauder, etc.), brands settled in the supermarket (Inoherb), cosmetics chain enterprise (Sephora) and other retail stores. In spite of the fact that online shopping is eroding the living space of physical stores, they still have incomparable superiority. Compared with online shopping, physical stores can better satisfy consumers’ shopping experience. The pleasure which on-line shopping offers cannot be satisfied by physical stores. Meanwhile, due to the characteristics of 2
Data taken from Taobao’s official website. -7www.sjae.org
cosmetic products, consumers pay more attention on the real-life experience of products. And it is precisely the problem which cannot be overcome by online shopping. Furthermore, in contrast with on-line shopping, shopping in physical stores bring a sense of security for consumers. Influenced both by the traditional Chinese concept “seeing is believing”, and the negative impact of on-line cosmetics shopping, some consumers prefer to spend more money on purchase genuine counter goods, so as to avoid risks. In particular, consumers are more inclined to go to the counter or the professional cosmetics sales company to buy the high-end cosmetics. This psychological sense of trust cannot be brought by the detailed product description or the product authorization which on-line shopping sites offer. Finally, when compared with on-line shopping, physical stores enjoy a much wider and deeper extent of coverage, and a more direct contact with consumers. For some products with little differentiation, consumers may be more willing to go to stores to buy them for the sake of convenience, thus saving costs both in time and logistic.
3 JUMEI YOUPIN’S COMPETITIVE STRATEGY A successful differentiation strategy is inseparable from a precise positioning of market. Since its establishment, Jumei Youpin has positioned itself as a cosmetics group-buying website. For the purpose of “to gather beauty, for the benefit of women”, it commits to provide users with a much more professional service to help them enjoy beauty more easily. Within the core of Jumei’s self-positioning concept, it repeatedly stresses the importance of three aspects: cosmetics, group-buying and female consumers. As the saying goes like this, “the desire to look attractive is universal”, and it is especially true for female consumers. With the popularity of the concept of skin care and makeup, more and more women pay more attention on products benefiting to skin. Thence, the increased demand provides Jumei a broader market. Meanwhile, based on the characteristics of cosmetics, that is high prices and high profits, Jumei adopts the group-buying method to lower the price of cosmetics to benefit customers, therefore enhances its attractiveness to female consumers. As we can see, Jumei’s three core concepts of positioning: cosmetics, group-buying and female consumers, are inseparable and complementary to each other. On the basis of this positioning, Jumei Youpin adopts a unique differentiation strategy, which can be reflected in the following aspects.
3.1 Differentiated Mode Jumei Youpin uses vertical B2C model, which belongs to one of the B2C model. It mainly aims to meet the specific needs of a particular population. And it is much easier to manage due to its single variety of products. Moreover, there are chances for those reputable merchants to work with big brands. The B2C model enables Jumei to equip with a very strong purchasing power, supply channels and a high degree of control of the product quality. Although the vertical model weakens products’ price competitiveness, it effectively circumvents the problems, like the confused targeting price and product quality on line, which face those comprehensive platforms like Taobao.
3.2 Differentiated Concept After more than a month when Jumei Youpin opened its on-line store, it made a commitment of “100% authentic”. This assurance is still the highest standard in online sales of cosmetics. It is this commitment that brings Jumei good credit. Founding in a competitive environment with a wide spread of counterfeit products, Jumei wins the trust of consumers and establishes a good brand image. In addition to the establishment of a credible brand, Jumei also works with some major international brands from Europe, Japan and South Korea etc, in order to expand the depth of their cooperation and to ensure “genuine” products, and therefore safeguards the interests of consumers.
3.3 Differentiated Service Jumei Youpin offers the service of “100% real shooting”. In order to provide consumers with the most realistic information, Jumei sticks to the principle of real shooting by using its own studio and photographer. It tries to work through the lens to present the details of the products and their using effect, and thus eliminates consumers’ concerns. In after-sale service, Jumei Youpin implements the standard of "30 days unconditional return (even with products -8www.sjae.org
opened)", that is, consumers enjoy the unconditional return and full fund within 30 days of purchase if they are not satisfied with the products, even with products opened. This standard on the one hand reflects Jumei’s confidence in product quality, but also its superior after-sale service quality. Also, all the goods purchased by Jumei are underwritten by the China United Property Insurance Company. Within 90 days since the date of receipt, if consumers have any doubts about the quality of goods, they are empowered to call Jumei’s customer service hot-line to ask for full payment, which are shared both by Jumei and the China United Property Insurance company. These measures are consistent with Jumei’s initiatives and aims.
3.4 Differentiated Information Exchange Method Jumei Youpin uses differentiated evaluation system, namely the word-of-mouth center. In this platform, consumers can share purchase experience and product using effect. Every product reviews are written by consumers personally, which greatly improves the authenticity of the comments. At the same time, the word-of-mouth center can provide details which can not be reflected by product description. All of these can be important references to consumers. Also, consumers can upload their own shopping experiences to the platform to share with others. Up till now, Jumei has more than 100,000 word-of-month references provided for consumers.
4 JUMEI YOUPIN’S DIFFERENTIATED MARKETING STRATEGY 4.1 Entertainment Marketing Since 2011, Jumei shows the enormous impact of entertainment marketing. Compared with Lafaso which is good at media marketing, Jumei has played a nice battle. Chen Ou successfully creates the image of a new generation of entrepreneurs and sets off a new wave of discussion and imitation from people. Meanwhile, Jumei implants advertisements into those female biased programs and dramas. By doing so, it succeeds in attracting the attention of young female. As Chen Ou says in 2012 China Fashion Session Finals, “from the very beginning we analyze our user’s type. Most of them are stylish female users. Then we ask what their favorite programs are? Is it dramas, variety shows or new exotic products? After analyzing, we do entertainment marketing the first day when we decide to run the business. It is with the aid of entertainment marketing, Jumei achieves a monthly sale of 100,000 to 500,000,000 leaps in just three years, thus dominating the pilot position in the cosmetics e-commerce.
4.2 Word-of-mouth Marketing Jumei Youpin’s policies of “100% authentic guaranteed”, "30 days unconditional return (even with products opened)", “buying two items without shipping fee”, “lightening delivery” etc, can be reasons to excite its users to make quick decisions, while to those who are unfamiliar with Jumei, these policies can not arouse their sympathies. In order to enhance the word-of-mouth publicity effect, Jumei encourages users to share with others their own brand experience in ways of “word-of-mouth report”, and the one who writes good can even receive rewards provided by Jumei. These word-of-mouth reports are different from the reports writing in the general B2C website. Jumei’s reports are much more substantial, detailed, truer and reliable. They can also be important references when consumers buy the products. On the one hand, when compared with sellers’ unilateral promotional effects, consumers are more vulnerable to the influence of other consumers, for the aroused sense of identity; on the other hand, a good reputation can enhance consumer’s confidence and brand loyalty, they will even recommend Jumei to others unconsciously. It is this word-of-mouth marketing that makes up for Jumei’s deficiencies in price positioning and product line, thus stands out in the homogenization of competition. Therefore, if companies want to be in an invincible position in the fierce competition, they must firmly attract consumers and form a good reputation to play the huge advantage of word-of-mouth marketing.
4.3 Private Logistics System The agile and flexible supply chain management is the competitive advantage of the e-commerce enterprises. Jumei -9www.sjae.org
Youpin is aware of the importance of it, so from the day of its founding, it establishes its own storage and logistics. Although it brings pressure on funds, it effectively ensures the user experience and avoids the poor quality and chaos delivery brought by the leasing storage facilities. Nowadays, Jumei has established a 60,000 square meters warehouse in Shanghai, Beijing, Chengdu and Guangzhou respectively. And it has cooperated with some third-party logistics companies, like YunDa, ShenTong, YuanTong, ZJS Express etc., and therefore, it can realize 6 hours of lightning delivery within any region in the country. Meanwhile, each warehouse uses the epoxy floor and the constant temperature and humidity system, in order to ensure the product quality in a full range. And for the sake of improving the quality and standard of delivery, Jumei strictly checks every link from product inspection, storage, shelving to inventory. By using bar codes, the distribution accuracy rate is above 99%. The establishment of private logistics and warehouses means that Jumei has sped up its logistics system across the board, in order to provide users with a fast and convenient shopping experience.
4.4 Officially Authorized Brand Flagship Store On-line shopping has brought great convenience to people’s lives, but consumers have always been skeptical of the product quality. Especially in the cosmetics industry, due to the diverse product channels and types, consumers can not ensure the purchase of the product is of good quality. To solve this problem, Jumei for the first time raised the ideal of the officially licensed flagship store. With L'Oreal’s flagship store first settled in Jumei, many other makeup brands, like Lancome, Clinique etc., succeeds in opening flagship stores in Jumei. These stores cover almost all the products of various brands, and their price is competitive. Currently, Jumei’s cooperating brands cover most of the mainstream cosmetics brands both at home and abroad. This innovative form of cooperation, on the one hand, provides consumers with affordable products; on the other hand, it eliminates the concerns of consumers and thus strengthens Jumei’s slogan of “100% authentic guaranteed”.
5 CONCLUSION After Jumei Youpin has made remarkable achievements in the field of cosmetics, it tries to find a new breakthrough in new categories which center on the needs of women. Ultimately, Jumei chooses the sector of luxury goods. The motives behind this action are for two reasons: first, the luxury goods industry brings tremendous business opportunities; second, by the use of consumer’s existing confidence in “100% authentic guaranteed” policy, Jumei attempts to drive the sales of the luxury goods. According to Jumei’s official website of “luxury channel’, it shows that all the luxury goods will be wrapped separated and delivered uniquely by the SF Express for the sake of safety. Also, because of the high-value of luxury goods, Jumei will launch a package of measures to ensure the safety of the luxury products. In order to avoid the homogeneous competition and to expand its profit margin, Jumei Youpin launches its own brand. Previously, Jumei produced a full set of brushes (18 brushes per set), and it receives warm welcome from consumers. For commercial enterprises, the development of its own brand is of great significance. Through the free development of brand, they can not only obtain higher profits, but also have more control over the product. When other ecommerce enterprises are engaging in the “price war”, Jumei Youpin has put resources into research and development of its own brand, thus cleverly avoids the homogeneous competition with other websites.
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AUTHORS 汪华林 （1968- ） 男，汉族，硕士，副教授，市场营销，武汉大学公共经济管理在读博士。 E-mail: wanghualin2002@163.com
- 11 www.sjae.org