By Wen Liu Hua Fang
Quick Company - this concept was constantly emphasized by media in the first two years of Vancl’s establishment by its founder, Chen Nian. Back then, Vancl's marketing was omnipresent and undeniably fast. Lei Jun, as an investor in Vancl, also founded a quick company - Xiaomi. Today, after a few years, a comparison reveals that Vancl is now experiencing tight cash flow, while Xiaomi is thriving with a valuation of tens of billions. Why do Vancl and Xiaomi, both founded by star entrepreneurs, have such drastically different outcomes?
I have worked in e-commerce and have been involved in the internet industry and consulting work. I will interpret this from these two dimensions.
Starting models are basically the same, but business logic differs greatly
In the early stages of Vancl and Xiaomi, both companies adopted a model of brand e-commerce with a small number of SKUs. Lei Jun has also mentioned that Xiaomi follows the Amazon model. Both companies amplify the sales of single items (known as "bestsellers" in Taobao circles) through extreme marketing to create sales and profits. After the initial phase, they expand into related products, enriching the shopping basket. Once a certain scale is reached, they extend into other categories.
Vancl started with shirts and expanded into shoes, sweatshirts, jackets, and coats, and later branched out into home goods. Now, it has compressed its categories, opened up for brand residency, and become a smaller version of Tmall focused on clothing. Xiaomi, on the other hand, has expanded from smartphones to smartphone accessories, boxes, TVs, reading devices, and more, moving outward from within. Structurally, Xiaomi has adhered to the Android platform as its main line, focusing on hardware and software at the device level.
However, the cash flow between the two companies varies significantly. Vancl was recently reported to have tight cash flow and delayed payments to suppliers, while Xiaomi enjoys abundant resources. Many people attribute this difference to category differences, but I disagree. In my view, it is due to the significant difference in business logic between the two companies.
Vancl's product quality has always been criticized, and its fashion sense is rather average. From the perspective of the apparel industry, Vancl's products cannot command high prices. Vancl has maintained its sales volume through substantial advertising expenses without making significant breakthroughs in product development. In a certain sense, Vancl lags behind Han Duyishuo. Although Vancl markets itself as a brand for young people, it does not understand the consumption characteristics of the younger generation, narrowing its customer base from "commoners" to "extremely common." E-commerce driven by investment is a long-term strategy and platform-oriented. Vancl tried to pivot back to being a platform but found itself lacking advantages in user loyalty, domain names, traffic, etc. Tmall, Dangdang, JD.com, Suning, Tencent, and others are all vying for market share, leaving Vancl outside the window of opportunity for platform development.
Xiaomi may not match Apple in quality and is often referred to as a "commoner's brand," but it has successfully operated a user community, which is Xiaomi's most valuable user asset. Lei Jun's leadership of Xiaomi's success can be attributed to three reasons: a powerful team (with experts like Lin Bin and Li Wanqiang), an excellent user community atmosphere, and supply chain futures model innovation discussed in the industry. Most media outlets regard the third reason as the core factor of Xiaomi's success, but this is a misinterpretation. At the product level, Xiaomi hardware does not stand out much, but MIUI is indeed a good product, launched precisely during the explosive growth period of smartphones.
Lei Jun's business logic is far more rigorous than Chen Nian's, with a longer-term vision and greater emphasis on fundamental key elements. This is a characteristic and accumulation of Lei Jun as an outstanding entrepreneur.
Product positioning and brand positioning: even quick companies need to fight a protracted war
Xiaomi's ample cash flow comes from the reasonable cost-performance ratio of its products and always staying a step ahead. The Lei Jun team is smart here; many people said Xiaomi might release laptops or tablet products, and although there was some hype involved, Xiaomi ultimately chose to enter the relatively less IT-focused TV sector. In the eyes of internet users and Xiaomi fans, no matter how great traditional TV manufacturers are, they are still traditional enterprises and cannot match Xiaomi's coolness. However, if Xiaomi had chosen laptops or tablets, it would have faced established brands like Lenovo, HP, and Apple, and it would have been difficult to surpass or innovate in product terms.
Vancl's initial stage relied on marketing and positioning rather than products. Vancl's early shirts were of street vendor quality. I bought a few, and later found taxi drivers wearing them, so I stopped wearing them. As a former media person, Chen Nian made the common mistake of media professionals entering business - mistaking public opinion for word-of-mouth and overly relying on media-like advertisements and marketing. He focused on surface-level efforts while neglecting the most fundamental aspect - the product. Vancl's product quality is completely incapable of retaining quality users, giving off the impression that media treats readers as fools, shouting slogans while forgetting their own emperor's new clothes.
The e-commerce field is inevitably a protracted battle. In today's internet-savvy era, e-commerce is essentially a traditional enterprise, with the internet merely serving as a channel for marketing and sales. Consumers' cognitive levels are always improving, and consumers' brand recognition changes at different stages of their growth. Vancl's early and mid-stage neglect of basic commercial principles in product positioning and brand positioning has caused it much trouble. What was once hailed as successful marketing was equivalent to participating in a few large-scale promotional events. A few years ago, at a DoNews 5G salon, I discussed with Hong Bo, Lingling Fa, Wang Le, and others whether Vancl's brand positioning was a fatal flaw and whether customer loyalty existed. The answers have now been validated.
Discussion on brand positioning and consumer self-awareness
Some people believe that brand positioning must target specific demographics, which is true. But why hasn't Chen Nian, such a famous entrepreneur, solved this problem? Because Vancl initially copied the PPG model, and PPG wasn't actually very cheap, with decent quality. However, for some reason, when it came to Chen Nian and Vancl, the product side went to extremes. Based on my experience in e-commerce, pricing at extremes is often the result of sales pressure having nowhere to release or relieve.
Vancl promoted individuality and self-persistence through marketing tactics like the "Fanke style," but this spirit did not translate into its products. Consumers' perception of Vancl's brand did not materialize, turning what could have been a memorable marketing campaign into just another high-end promotion. Clothing is not just a piece of fabric; it is a medium that carries the display of an individual's spirit and self-identification. When thousands of identical Vancl outfits hit the streets, any sense of taste or individuality disappears instantly. Vancl's products lack spiritual force and personalization, violating common sense in the clothing industry. The clothing field is not one where standardized industrial standards lead to victory.
A few days ago, Li Wanqiang of Xiaomi wrote about the importance of participation. Xiaomi has practiced participation in marketing, user community building, and consumer feedback. Vancl, on the other hand, has approached these aspects more media-centrically and superficially. Users show little enthusiasm or interest in participating in Vancl's products, instead focusing more on celebrity endorsements and brand topics. Xiaomi creates strong consumer anticipation, while Vancl finds itself in an awkward product path unable to compete with Taobao brands. Consumers' attitudes determine the brand's attitude towards consumers, perhaps Chen Nian should humble himself and seek the truth of real life.