China’s daily deals market was worth $1.7 billion in Q1 of last year. While general deals sites, ones that sell everything from bargain food deals to package holidays, make up most of the revenue in the market, Jumei is different in focusing on an interesting and lucrative niche: selling cosmetics to China’s female e-shoppers.
Make-up and skincare is a niche area that’s working out great for Chinese specialist e-stores like Lafaso, which was acquired today by flash sales site VIPShop. This strong focus helps Jumei stand out among consumers, and makes it seen as a safe place to buy products with the peace of mind that they’re not fakes – a common concern among China’s online shoppers.
While Jumei looks like a risky investment as the first Chinese daily deals site venturing onto Wall Street, investors can take heart from the success of discount-oriented VIPShop (NYSE:VIPS), whose share price has rocketed from $6.50 to $114.56 since it IPO’d in early 2012.