Caixin
Nov 26, 2019 07:47 PM
BUSINESS & TECH

Vipshop Outsources Delivery as Pressure to Cut Costs Mounts

Vipshop Chief Financial Officer Yang Donghao said this month that the company had already outsourced around 30% to 40% of its delivery operations. Photo: IC Photo
Vipshop Chief Financial Officer Yang Donghao said this month that the company had already outsourced around 30% to 40% of its delivery operations. Photo: IC Photo

Discount online retailer Vipshop Holdings Ltd. said it will no longer use its own logistics unit for deliveries and instead outsource them to courier giant SF Holding Co. Ltd., amid pressure to cut costs in the competitive e-commerce market.

The tie-up will “optimize the efficiency of our logistics operations, decrease our fulfillment expenses,” Vipshop CEO Eric Shen said in a statement Monday.

A Vipshop representative told Caixin that this move means the company’s Pinjun Express unit will no longer operate last-mile delivery services — those from warehouse to doorstep. Pinjun will continue to offer services such as warehouse management and air freight, the representative said.

Founded in August 2008, Vipshop is known for selling brand-name goods at discount prices, including clothes, cosmetics, baby formula and home appliances. The New York-listed company established Pinjun in 2013 as it expanded rapidly.

But the wholly owned unit has become a burden on the company’s core e-commerce business as its delivery costs rose above the industry average. The company’s spending on “fulfillment” — which includes warehouse operations, delivery and after-sale customer services — as a proportion of total revenue came in at 8.1% in the third quarter this year, according to its earnings report. That’s higher than the 6.4% at rival JD.com Inc., another e-commerce platform that uses its own logistics company for deliveries.

Vipshop began outsourcing deliveries earlier this year. This month, Chief Financial Officer Yang Donghao said in an earnings call that the company had outsourced around 30% to 40% of its delivery operations.

The new partnership will reduce costs, which is crucial for platforms in the fiercely competitive e-commerce market, China E-Commerce Association industry analyst Cui Libiao said in a note.

The move may also help SF Holdings at a time when China’s express delivery industry is consolidating, with companies sacrificing profits to fund growth.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code