Chinese startups copy U.S. counterparts

SAN FRANCISCO, USA: DCM and SequoiaCapital China are betting they can take a successful model and applyit in China.

The two firms have invested $20 millionin a Series A round of funding in Vipshop , an online retailer inChina, similar to the U.S.-based Gilt Groupe or the European-basedPrivalia and Vente Privee. The companies sell high-end apparel andaccessories for discounts in limited-time opportunities, what's knownas flash sales.

The funding of Vipshop is theBeijing-based company's first institutional round of funding.Vipshop, founded in 2008, had previously raised a small amount ofmoney from friends and family, according to DCM General Partner TomBlaisdell.

Vipshop currently works with more than400 retail brands, including Adidas, Esprit, Nine West, Kappa,Ochirly, GEOX and Triumph, according to a company press release. Thecompany has about 1.5 million members in China.

Blaisdell said many ecommerce sites arequickly taking hold in China, thanks in large measure to the absenceof brick-and-mortar retail stores in the country. China doesn't havethe same infrastructure advantages as its Western counterparts. Plus,the consumer base is huge. Blaisdell said China has some 400 millionInternet desktop users, plus an estimated 600 million cell phoneusers.

In addition, China has a growing andaffluent middle-class, which now numbers more than 120 million,according to statistics provided by the company, and Blaisdell saidVipshop can serve as a distribution channel for out-of-season stock,in which there typically is no shelf space in Chinese stores.

"Given China's unique marketplace,there is additionally an important need for brands and distributorsto work with credible online retail channels to reach their targetaudience," according to the company press release.

China is already ripe with manyexamples of Internet companies that may seem familiar to U.S.consumers.

Ctrip is a travel site similar toTravelocity, while Baidu.com is often called the Google search engineof China. DongDong.com, an online bookseller, is comparable toAmazon.com.

"The Internet, social networkingand ecommerce are all growing in China because (they are) soscalable," Blaisdell said. "Fifteen to 20 years ago, therewas no consumer-based economy in China, but that has changed over theyears."