VIPShop Buys 75% Stake in Online Beauty and Fashion Retailer Lefeng.com

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lefengChinese online discount retailer VIPShop (NYSE: VIPs) announced today it has acquired 75% stake in Lefeng.com — aka LAFASO, an online beauty and fashion retailer, for USD132.5 million.

Since VIPShop has been centered on clothing/shoes/bags while Lefeng’s focus is cosmetics, the two companies are complementary.

Lefeng was established in 2008 as a subsidiary of Ovation Entertainment Ltd. – The TV show production company was founded in 2000 by Li Jing, a Chinese TV producer and host. Starting from cosmetics retailing, Lefeng later introduced group-buying, discount sales, and fashion clothing.

Not only average cosmetics and fashion brands, Lefeng also sells goods of the founder’s own cosmetics brand and fashion brands by her celebrity friends, actors/actresses, cosmetics professionals, etc.; it is estimated that those personal brands may be more profitable than third-party cosmetics goods. The celebrity network and the founder’s self-produced beauty and fashion TV shows work as free advertising for Lefeng.

The site is also known as one of the first to use fashion opinion leaders to influence purchasing decisions. Everyone can apply on the site and the employed ones enjoy a variety of privileges. Lefeng never disclosed whether the opinion leaders are paid, only saying they give rewards to the most active ones.

Lefeng’s direct competitor is Jumei.com, founded in 2010. Lefeng and Jumei, however, has a mutual investor, Sequoia Capital China. A recent rumor is Jumei is planning for a US IPO later in this year.

Sequoia Capital China invested several million dollars in Lefeng in 2008. In April 2012, Lefeng’s parent company raised USD40 million from investors including CBC Capital. It is reported Wang Licheng, current CEO of Lefeng, will resign by the end of this month.