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TABLE OF CONTENTS
VIPSHOP HOLDINGS LIMITED INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on February 21, 2013

REGISTRATION NO. 333-            

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Vipshop Holdings Limited
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant's name into English)



Cayman Islands
(State or other jurisdiction of
incorporation or organization)
  5961
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification Number)

No. 20 Huahai Street,
Liwan District, Guangzhou 510370
The People's Republic of China
+86 (20) 2233-0000

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Law Debenture Corporate Services Inc.
400 Madison Avenue, 4th Floor
New York, New York 10017
(212) 750-6474
(Name, address, including zip code, and telephone number, including
area code, of agent for service)



Copies to:

Z. Julie Gao, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
c/o 42/F, Edinburgh Tower, The Landmark
15 Queen's Road Central
Hong Kong
+852 3740-4700

 

Leiming Chen, Esq.
Simpson Thacher & Bartlett LLP
c/o ICBC Tower, 35/F
3 Garden Road, Central
Hong Kong
+852 2514-7600



Approximate date of commencement of proposed sale to the public:
as soon as practicable after the effective date of this registration statement

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities
to be registered(1)(2)

  Proposed maximum
aggregate offering
price(3)

  Amount of
registration fee

 

Ordinary Shares, par value US$0.0001 per share

  US$120,000,000   US$16,368

 

(1)
American depositary shares issuable upon deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (Registration No. 333-180029). Each American depositary share represents two ordinary shares.

(2)
Includes ordinary shares that are issuable upon the exercise of the underwriters' option to purchase additional shares. Also includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These ordinary shares are not being registered for the purpose of sales outside the United States.

(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED                        , 2013

American Depositary Shares

Representing                Ordinary Shares

LOGO

Vipshop Holdings Limited



        This is a public offering of American depositary shares, or ADSs, of Vipshop Holdings Limited. We are offering                ADSs and the selling shareholders named in this prospectus are offering                ADSs. Each ADS represents two ordinary shares, par value US$0.0001 per share. We will not receive any proceeds from the ADSs sold by the selling shareholders.

        Our ADSs are listed on the New York Stock Exchange, or the NYSE, under the symbol "VIPS." On February 20, 2013, the closing trading price for our ADSs, as reported on the NYSE, was US$23.36 per ADS.

        We are an "emerging growth company" under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.



        Investing in our ADSs involves risks. See "Risk Factors" beginning on page 13.



        Neither the United States Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 
  Per ADS   Total

Public offering price

  US$                   US$                

Underwriting discounts and commissions

  US$                   US$                

Proceeds to us (before expenses)

  US$                   US$                

Proceeds to the selling shareholders (before expenses)

  US$                   US$                

        The underwriters have an option to purchase up to                additional ADSs from us and an aggregate of                additional ADSs from certain selling shareholders at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus.

        The underwriters expect to deliver the ADSs to purchasers on or about                        , 2013.



Goldman Sachs (Asia) L.L.C.   Deutsche Bank Securities   J.P. Morgan

Piper Jaffray & Co.   Oppenheimer & Co.   China Renaissance Securities (Hong Kong) Limited



The date of this prospectus is                        , 2013


Table of Contents


TABLE OF CONTENTS

Conventions Used in This Prospectus

  ii

Prospectus Summary

  1

Risk Factors

  13

Special Note Regarding Forward-Looking Statements and Industry Data

  48

Use of Proceeds

  49

Dividend Policy

  50

Capitalization

  51

Dilution

  52

Market Price Information for Our ADSs

  54

Enforceability of Civil Liabilities

  55

Our Corporate History and Structure

  57

Selected Consolidated Financial and Operating Data

  61

Management's Discussion and Analysis of Financial Condition and Results of Operations

  63

Industry Overview

  89

Business

  94

Regulations

  110

Management

  122

Principal and Selling Shareholders

  132

Related Party Transactions

  136

Description of Share Capital

  138

Description of American Depositary Shares

  148

Shares Eligible for Future Sale

  158

Taxation

  160

Underwriting

  167

Expenses Related to this Offering

  175

Legal Matters

  176

Experts

  177

Where You Can Find Additional Information

  178

Vipshop Holdings Limited Index to the Consolidated Financial Statements

  F-1

        You should rely only on the information contained in this prospectus or in any related free-writing prospectus that we have filed with the United States Securities and Exchange Commission, or the SEC. Neither we nor underwriters have authorized anyone to provide you with different information. We are offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ADSs.

        Neither we nor the underwriters have taken any action to permit a public offering of the ADSs outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ADSs and the distribution of the prospectus outside the United States.

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CONVENTIONS USED IN THIS PROSPECTUS

        In this prospectus, unless otherwise indicated or the context otherwise requires, references to:

    "we," "us," "our company" and "our" refers to Vipshop Holdings Limited, its subsidiaries and its consolidated affiliated entity;

    an "active customer" for a given period refers to any registered member on vipshop.com who has purchased products from us at least once during such period;

    a "repeat customer" for a given period refers to any customer who (i) is an active customer during such period, and (ii) had purchased products from us at least twice during the period from our inception on August 22, 2008 to the end of such period. Orders placed by a repeat customer during a given period include all orders placed by the customer during such period even if the customer made the first purchase from us in the same period;

    a "registered member" refers to any consumer who has registered and created an account on our vipshop.com website;

    "daily unique visitors" refers to the number of different IP addresses from which a website is visited during a given day;

    "monthly unique visitors" refers to the number of different IP addresses from which a website is visited during a given month;

    "cumulative customers" refers to all customers who had purchased products from us at least once during the period from our inception on August 22, 2008 to a specified date;

    "DCM Entities" refers to, as the context may require, any or all of our shareholding entities affiliated with DCM. See "Principal and Selling Shareholders;"

    "Sequoia Entities" refers to, as the context may require, any or all of our shareholding entities affiliated with Sequoia Capital China. See "Principal and Selling Shareholders;"

    "Frost & Sullivan" refers to Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a third-party market research company that we commissioned to provide information on the industry in which we operate;

    "ADSs" refers to our American depositary shares, each of which represents two ordinary shares;

    "China" or the "PRC" refers to the People's Republic of China, excluding, for purposes of this prospectus only, Taiwan, Hong Kong and Macau;

    "shares" or "ordinary shares" refers to our ordinary shares, par value US$0.0001 per share;

    "RMB" or "Renminbi" refers to the legal currency of China; and

    "US$," "dollars" or "U.S. dollars" refers to the legal currency of the United States.

        Except as otherwise indicated, all information in this prospectus assumes no exercise by the underwriters of their option to purchase additional shares.

        Renminbi amounts shown in this prospectus are accompanied by translations into U.S. dollars solely for the convenience of the reader. Unless otherwise noted, all such translations from Renminbi to U.S. dollars in this prospectus were made at RMB6.2301 to US$1.0000, the noon buying rate for December 31, 2012 as set forth in the H.10 statistical release of the Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. The PRC government restricts the conversion of Renminbi into foreign currency and foreign currency into Renminbi for certain types of transactions. On February 15, 2013, the noon buying rate set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.2323 to US$1.0000.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in the ADSs, you should carefully read the entire prospectus, including our financial statements and related notes included in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." This prospectus contains information from the Chinese Flash Sales Market Study, an industry report commissioned by us and prepared by Frost & Sullivan, a third-party market research firm, in February 2013. We refer to this report as the Frost & Sullivan Report in this prospectus.


Our Business

        We are China's leading online discount retailer for brands as measured by total revenues in 2011, the number of registered members as of December 31, 2012 and the number of monthly unique visitors in December 2012, according to the Frost & Sullivan Report. We offer high-quality branded products to consumers in China through flash sales on our vipshop.com website. Flash sales represents a new online retail format combining the advantages of e-commerce and discount sales through selling a finite quantity of discounted products or services online for a limited period of time. Since our inception in August 2008, we have attracted a large and growing number of consumers and popular brands. We had 26.8 million registered members and over 4.9 million cumulative customers and promoted and sold products for over 5,800 popular domestic and international brands as of December 31, 2012.

        Our business model provides a unique online shopping experience for our customers. We offer new sales events daily with a curated selection of popular branded products at deeply discounted prices in limited quantities during limited time periods, creating the element of "thrill and excitement" associated with our unique customer shopping experience. Our strong merchandizing expertise enables us to select the brand composition and product mix of our daily sales events that appeal to our customers, which mostly consist of urban and educated individuals in China who are seeking lifestyle enhancements. We have built a highly engaged and loyal customer base that contributes to our sales growth, while also enabling us to attract new customers primarily through word-of-mouth referrals. A majority of our customers have purchased products from us more than once. Our total number of repeat customers was 0.2 million, 0.9 million and 2.6 million in 2010, 2011 and 2012, respectively, representing 56.2%, 60.6% and 63.9%, respectively of the total number of our active customers during the same periods. Orders placed by our repeat customers accounted for 86.7%, 91.9% and 93.2% of our total orders during the same periods.

        We are a preferred online flash sales channel in China for popular domestic and international brands. We believe that well-known and popular brands are attracted to our website and services because of our ability to monetize large volume of their inventory in short periods of time, increase consumer awareness of their brands and products, reach potential customers throughout China, and fulfill their demand for customer data analysis and inventory management. Among the brands who have promoted and sold products on our website, substantially all of them have returned to pursue additional sales opportunities with us. To date, we have the exclusive rights to sell selective products from over 700 brands.

        We strive to optimize every aspect of our operations as we continue to grow our business. We generally have the right to return unsold items for most of our products to our brand partners. Our logistics operations and inventory management systems are specifically designed to support the frequent sales events on our website and handle a large volume of inventory turnover. We use both leading delivery companies with nationwide coverage and quality regional and local couriers to ensure reliable and timely delivery. We have developed our IT infrastructure to support the surge of visitor traffic to our website during the peak hours of our daily flash sales. We believe that our efficient operational and

 

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management systems combined with our robust IT infrastructure set a solid foundation for our continuing growth.

        We began our operations in August 2008 and have grown significantly since then. In 2010, 2011 and 2012, we fulfilled over 0.9 million, over 7.2 million and over 21.9 million customer orders, respectively, and we generated total net revenues of US$32.6 million, US$227.1 million and US$692.1 million, respectively. In 2010, 2011 and 2012, we incurred net losses of US$8.4 million, US$107.3 million and US$9.5 million, respectively. Our net loss in 2011 and 2012 reflected non-cash share-based compensation expenses in an aggregate amount of US$73.9 million and US$7.6 million, respectively. We recorded net profit of US$6.3 million in the fourth quarter of 2012, the first time we achieved profitability after tax.

        PRC laws and regulations currently limit foreign ownership of companies that provide internet-based services, such as our online retail business. To comply with these restrictions, we conduct our online operations principally through our consolidated affiliated entity, Guangzhou Vipshop Information Technology Co., Ltd., or Vipshop Information. We face risks associated with our corporate structure, as our control over Vipshop Information is based upon contractual arrangements rather than equity ownership. See "Our Corporate History and Structure" and "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry."


Our Value Proposition to Consumers and Brands

        Since our inception in August 2008, we have focused on building the leading online discount retail website in China. We believe that the success of vipshop.com is a direct result of the unique value proposition that we offer to both consumers and brands.

        For consumers, we provide a unique online shopping experience characterized by "thrill and excitement." The "thrill and excitement" experience for consumers arises from their discovery of the high quality items available for sale on our website each day and being able to purchase these high quality items at a significant discount to retail prices. We deliver this unique online shopping experience to consumers across China, providing them with access to carefully selected, high quality products from coveted brands which they might not otherwise have access to or have thought about purchasing.

        For brands, we offer a channel to create new consumer demand for their products and services and the ability to monetize their inventory quickly without compromising their brand promise. We provide a new and impactful marketing channel for brands to increase consumer awareness throughout China. We help brands expand their addressable market of potential customers by offering products at a price that entices new customers to try a brand's products that they may not otherwise have sampled or been able to afford. We also provide our customer behavior and transaction data to brands to help them refine their product development and sales and marketing strategies.


Our Industry

        The retail market in China is in the midst of an extended period of robust growth driven by increasing urbanization and higher levels of disposable income. Retail sales in China grew from RMB7.6 trillion in 2006 to RMB18.4 trillion in 2011, representing a compound annual growth rate, or CAGR, of 19.2%, according to China's National Bureau of Statistics. According to the Frost & Sullivan Report, retail sales in China are expected to reach RMB23.7 trillion in 2013. Retail sales are expected to continue to grow as a percentage of China's GDP as domestic consumption becomes a more important component of China's economy. According to the Frost & Sullivan Report, retail sales are projected to constitute 43.2% of China's GDP in 2015, compared to 39.0% in 2011. However, China's retail market is still at the relatively early stage of development. Chinese consumers, equipped with increasing purchasing power for lifestyle products and services, are highly brand conscious and price sensitive, yet the availability of discount retailers and outlet malls within China's retail ecosystem is

 

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extremely limited. According to the Frost & Sullivan Report, China's discount retail market size in 2011 and 2012 was US$15.1 billion and US$23.6 billion, respectively, compared with US$64.6 billion and US$67.8 billion in the U.S. China's discount retail market accounted for 0.5% and 0.7% of the total retail market in 2011 and 2012, respectively, compared with 1.4% and 1.4% for the same periods in the U.S., according to the Frost & Sullivan Report. Frost & Sullivan projects that discount retail sales in China will reach RMB560.8 billion in 2015, representing a CAGR of 56.3% from 2011, as discount retail channels become more developed and diversified.

        The internet is enabling Chinese consumers to more easily research and purchase products and services online. According to the Frost & Sullivan Report, the number of online shoppers in China grew from 80 million in 2008 to 187 million in 2011. The number is projected to grow to 363 million in 2015, representing a CAGR of 18.0% from 2011 to 2015. Driven by the increasing number of online shoppers, as well as higher purchase volumes per shopper, the online retail sales revenue in China is expected to grow from RMB785 billion in 2011 to RMB3,020 billion in 2015, representing a CAGR of 40.1%, according to the Frost & Sullivan Report.

        Flash sales represents a new online retail format combining the advantages of e-commerce and discount sales channels. The flash sales market in China is estimated to grow from RMB8.4 billion in 2011 to RMB104.2 billion in 2015, according to the Frost & Sullivan Report. Unlike leading flash sales models in the U.S. and Europe, the flash sales market in China has quickly expanded beyond selling primarily luxury brands and services. China's flash sales market encompasses a broader range of brands and products, appealing to a larger base of consumers. While sales of apparel products comprised of 57.1% of total online flash sales market in China in 2011, they are projected to decrease to represent 43.1% of the total flash sales market in 2015, as other growing product categories such as household goods, cosmetics and other lifestyle products account for a larger portion of the market, according to the Frost & Sullivan Report. We believe that the flash sales market will increase as a percentage of total retail sales in China as merchandising expertise, economies of scale and fulfillment and logistics capabilities of flash sales companies continue to improve.


Our Strengths

        We are focused on revolutionizing the online shopping experience in China for both consumers and brands. We believe the following strengths have been critical to our success to date:

    China's leading online discount retailer for brands;

    highly engaged and loyal customer base;

    preferred online flash sales channel for popular brands;

    powerful network effects;

    superior operational expertise; and

    experienced management team with deep industry knowledge.


Our Strategies

        Our goal is to be the destination of choice for online sales of branded products and be the lifestyle trend setter in China. We plan to execute the following strategies to achieve our goal:

    enhance customer experience and loyalty through innovation;

    strengthen our brand relationships and expand our product selection;

    further promote our vipshop.com brand to attract more customers;

    expand our operational capabilities and IT infrastructure; and

 

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    pursue strategic alliances and acquisition opportunities.


Our Challenges

        Our ability to achieve our goal and execute our strategies is subject to risks and uncertainties, including the following:

    if we are unable to manage our rapid growth or execute our strategies effectively, our business and prospects may be materially and adversely affected;

    if we are unable to offer branded products at attractive prices to meet customer needs and preferences, we may lose customers and our business, financial condition and results of operations may be materially and adversely affected;

    our business and results of operations may be materially and adversely affected if we are unable to maintain our customer experience or provide high quality customer service;

    any harm to our vipshop.com brand or failure to maintain our reputation may materially and adversely affect our business and growth prospects;

    if we fail to manage our relationships with, or otherwise fail to procure products at favorable terms from, our existing brand partners, or if we fail to attract new brand partners, our business and growth prospects may suffer;

    we primarily use third-party delivery companies to deliver our products, and if they fail to provide reliable delivery services, our business and reputation may be materially and adversely affected;

    if we do not compete effectively against existing or new competitors, we may lose market share and customers;

    we have a history of net losses and may incur net losses in the future; and

    we may suffer losses if we are unable to effectively manage our inventory.

        In addition, we expect to face risks and uncertainties related to our corporate structure and doing business in China, including:

    risks associated with our control over our consolidated affiliated entity, which is based on contractual arrangements rather than equity ownership; and

    uncertainties associated with our compliance with applicable PRC regulations.

        Please see "Risk Factors" for a more detailed discussion of these and other risks and uncertainties we face.


Our Corporate History and Structure

        We are a holding company incorporated in the Cayman Islands and conduct our business through our subsidiaries and consolidated affiliated entity in China. We started our operations in August 2008 when our founders established Guangzhou Vipshop Information Technology Co., Ltd., or Vipshop Information, in China. In order to facilitate foreign investment in our company, our founders incorporated Vipshop Holdings Limited, or Vipshop Holdings, an offshore holding company in Cayman Islands, in August 2010. In October 2010, Vipshop Holdings established Vipshop International Holdings Limited, or Vipshop HK, a wholly owned subsidiary, in Hong Kong. Subsequently, Vipshop HK established a wholly owned PRC subsidiary, Vipshop (China) Co., Ltd. (formerly, Guangzhou Vipshop Computer Service Co., Ltd.), or Vipshop China, in January 2011.

 

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        During 2011 and 2012, Vipshop China established the following wholly owned PRC subsidiaries to support our regional business expansion:

    Vipshop (Kunshan) E-Commerce Co., Ltd., or Vipshop Kunshan;

    Vipshop (Jianyang) E-Commerce Co., Ltd., or Vipshop Jianyang;

    Vipshop (Beijing) E-Commerce Co., Ltd., or Vipshop Beijing;

    Vipshop (Tianjin) E-Commerce Co., Ltd., or Vipshop Tianjin; and

    Guangzhou Pinwei Software Co., Ltd., or Pinwei Software.

        The following diagram illustrates our corporate structure as of the date of this prospectus:

GRAPHIC


(1)
Shareholders of Vipshop Information include our co-founders and shareholders Eric Ya Shen, Arthur Xiaobo Hong, Bin Wu and Xing Peng, holding 52.0%, 26.0%, 11.6% and 10.4% of the total equity interests in Vipshop Information, respectively.

(2)
An intermediary holding company.

(3)
A subsidiary primarily engaged in warehousing, logistics, product procurement, research and development, technology development and consulting businesses.

(4)
Subsidiaries primarily engaged in warehousing and logistics businesses in the respective cities of Chengdu, Kunshan, Beijing and Tianjin and their respective nearby regions.

(5)
A subsidiary primarily engaged in software development and information technology support.

        Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates internet access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and

 

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other government regulations. We are a Cayman Islands company and our PRC subsidiary, Vipshop China, is a wholly foreign owned enterprise. As a wholly foreign owned enterprise, Vipshop China is restricted from holding the licenses that are necessary for our online operation in China. To comply with these restrictions, we conduct our operations partly through Vipshop Information, our consolidated affiliated entity in China. Vipshop Information operates our website and holds the licenses necessary to conduct our internet-related operations in China.

        Our wholly owned subsidiary, Vipshop China, has entered into a series of contractual arrangements with our consolidated affiliated entity, Vipshop Information, and its shareholders, which enable us to:

    exercise effective control over Vipshop Information;

    receive substantially all of the economic benefits of Vipshop Information through service fees, which are equal to 100% of Vipshop Information's net income and may be adjusted at Vipshop China's sole discretion, in consideration for the technical and consulting services provided by Vipshop China; and

    have an exclusive option to purchase, or designate one or more person(s) to purchase, all of the equity interests in Vipshop Information to the extent permitted under PRC laws, regulations and legal procedures.

        These contractual arrangements include:

    an exclusive business cooperation agreement under which Vipshop Information agrees to engage Vipshop China as its exclusive provider of technical, consulting and other services in relation to its business operations. The term of this agreement is ten years from the execution date of October 8, 2011, which may be extended for a period to be determined by Vipshop China. Vipshop China may terminate this agreement at any time by giving 30 days prior written notice. Vipshop Information has no right to terminate this agreement unless Vipshop China commits gross negligence or fraud;

    an exclusive purchase framework agreement under which Vipshop Information agrees to purchase products or services exclusively from Vipshop China or its subsidiaries. Vipshop Information and its subsidiaries must not purchase from any third party products or services that Vipshop China is capable of providing. The term of this agreement is five years from September 1, 2011. If neither party objects in writing and both parties remain cooperating at the expiration of the agreement, the parties will continue to be bound by this agreement until a new agreement is entered into. Vipshop China may terminate this agreement at any time by giving 15 days prior written notice. Vipshop Information has no right to terminate this agreement unless Vipshop China commits gross negligence or fraud;

    an equity interest pledge agreement under which the shareholders of Vipshop Information have pledged all of their equity interests in Vipshop Information to Vipshop China to guarantee Vipshop Information's performance of its obligations under the exclusive business cooperation agreement. The agreement will remain in effect until all of the obligations of Vipshop Information under the exclusive business cooperation agreement have been duly performed or terminated;

    an exclusive option agreement under which the shareholders of Vipshop Information have granted Vipshop China an exclusive option to purchase, or designate one or more person(s) to purchase, all or part of their respective equity interests in Vipshop Information at a purchase price of RMB10, subject to any adjustments as may be required by the applicable PRC laws and regulations of the time. The term of this agreement is ten years from the date of execution, which may be extended for a period to be determined by Vipshop China; and

 

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    powers of attorney under which all of the shareholders of Vipshop Information have each irrevocably appointed Vipshop China as their attorney-in-fact to act on their behalf to exercise all of their rights as shareholders of Vipshop Information and to effect transfers of all or part of their equity interests in Vipshop Information pursuant to the equity interest pledge agreement and the exclusive option agreement. Vipshop China has the right to appoint any individual or entity to exercise the power of attorney on its behalf. Each power of attorney will remain in effect until the shareholder ceases to hold any equity interest in Vipshop Information.

        We do not have any equity interest in Vipshop Information. However, as a result of contractual arrangements, we are considered the primary beneficiary of Vipshop Information, and we treat it as our consolidated affiliated entity under the generally accepted accounting principles of the United States, or U.S. GAAP. We have consolidated the financial results of Vipshop Information in our consolidated financial statements included in this prospectus in accordance with U.S. GAAP.

        We face risks with respect to the contractual arrangements with our consolidated affiliated entity and its shareholders. If our consolidated affiliated entity or its shareholders fail to perform their obligations under the contractual arrangements, our ability to enforce the contractual arrangements that give us effective control over the consolidated affiliated entity may be limited. If we are unable to maintain effective control over our consolidated affiliated entity, we would not be able to continue to consolidate its financial results. The revenues generated by our directly owned subsidiaries, apart from revenues earned in respect of the relevant contractual arrangements with Vipshop Information, are primarily derived from our product promotion activities for brands. In the years ended December 31, 2010, 2011 and 2012, our subsidiaries contributed in aggregate approximately nil, 0.37% and 0.02%, respectively, of our total consolidated net revenues, exclusive of revenues derived from Vipshop Information. As of December 31, 2010, 2011 and 2012, our holding company and our subsidiaries accounted for an aggregate of nil, 63.70% and 56.53%, respectively, of our consolidated total assets (excluding assets attributable to transactions with Vipshop Information). For a detailed description of the risks associated with our corporate structure, see "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry." For a detailed description of the regulatory environment that necessitates the adoption of our corporate structure, see "Regulations."

        In addition, as a holding company, our ability to pay dividends may depend upon dividends paid to us by Vipshop China, our wholly-owned subsidiary in China, which may be restricted under PRC law. For more information, see "Risk Factors—Risks Relating to Doing Business in China—We principally rely on dividends and other distributions on equity paid by Vipshop China in China to fund our cash and financing requirements, and any limitation on the ability of Vipshop China to make payments to us could have a material adverse effect on our ability to conduct our business" and "Regulations—Regulations on Dividend Distribution."


Our Corporate Information

        Our principal executive offices are located at No. 20 Huahai Street, Liwan District, Guangzhou 510370, the People's Republic of China. Our telephone number at this address is +86 (20) 2233-0000. Our registered office in the Cayman Islands is located at the office of International Corporation Services Ltd., P.O. Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman, KY1-1106, Cayman Islands.

        Our website is www.vipshop.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.

 

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Implications of Being an Emerging Growth Company

        As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected not to take advantage of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

        We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (b) December 31, 2017, the last day of our fiscal year following the fifth anniversary of the completion of our initial public offering of our ADSs in March 2012; (c) the date on which we have, during the previous three-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

 

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The Offering

Offering price

  US$          per ADS.

ADSs offered by us

 

          ADSs.

ADSs offered by the selling shareholders

 

          ADSs.

ADSs outstanding immediately after this offering

 

          ADSs (or          ADSs if the option to purchase additional shares is exercised in full by the underwriters).

Ordinary shares outstanding immediately after this offering

 

          ordinary shares (or          ordinary shares if the option to purchase additional shares is exercised in full by the underwriters).

The ADSs

 

Each ADS represents two ordinary shares.

 

The depositary will hold the ordinary shares underlying your ADSs. You will have rights of an ADS holder as provided in the deposit agreement among us, the depositary and owners and beneficial owners of ADSs from time to time. We do not have any present plan to declare or pay any dividends in the near future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares, after deducting its fees and expenses. You may turn in your ADSs to the depositary in exchange for our ordinary shares. The depositary will charge you fees for any exchange. We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs, you agree to be bound by the deposit agreement, as amended from time to time.

 

To better understand the terms of the ADSs, you should carefully read the "Description of American Depositary Shares" section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.

Option to purchase additional shares

 

We and the selling shareholders have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of          additional ADSs.

Use of proceeds

 

We expect that we will receive net proceeds of approximately US$          million from this offering, or approximately US$          million if the underwriters exercise their option to purchase additional ADSs in full, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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We plan to use the net proceeds received from this offering to fund our capital expenditures for expanding our logistics network and fulfillment capabilities and for further enhancing our IT systems and infrastructure, including mobile technologies. The remaining proceeds will be used for general corporate purposes, including funding working capital and potential investments in and acquisitions of complementary businesses, although we are not currently negotiating any such investment or acquisition. See "Use of Proceeds" for more information.

 

We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.

Lock-up

 

We, our directors, executive officers and our selling and certain other shareholders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 90 days following the date of this prospectus. See "Underwriting" for more information.

New York Stock Exchange symbol

 

VIPS

Payment and settlement

 

The underwriters expect to deliver the ADSs against payment therefor through the facilities of the Depository Trust Company on                    , 2013.

Depositary

 

Deutsche Bank Trust Company Americas

Risk factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of risks you should carefully consider before investing in our ADSs.

 

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Summary Consolidated Financial and Operating Data

        You should read the following information concerning us in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        Our summary consolidated statements of income (loss) data presented below for the years ended December 31, 2010, 2011 and 2012 and our summary consolidated balance sheets data as of December 31, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our summary consolidated statements of income (loss) data presented below for the period from August 22 to December 31, 2008 and 2009 and our summary consolidated balance sheet data as of December 31, 2008, 2009 and 2010 have been derived from our audited consolidated financial statements not included in this prospectus. Our audited consolidated financial statements are prepared in accordance with U.S. GAAP. Our historical results for any period presented are not necessarily indicative of results to be expected for any future period.

 
  For the period
from August 22 to
December 31,
2008(1)
  For the year ended December 31,  
 
  2009   2010   2011   2012  
 
  US$   US$   %   US$   %   US$   %   US$   %  
 
  (in US$, except percentages and number of shares and per share data)
 

Summary Consolidated Statements of Income (Loss) Data:

                                                       

Net revenues

    1,087     2,804,830     100.0     32,582,115     100.0     227,142,876     100.0     692,112,964     100.0  

Cost of goods sold(2)

    (886 )   (2,576,191 )   (91.8 )   (29,374,315 )   (90.2 )   (183,801,334 )   (80.9 )   (537,637,860 )   (77.7 )
                                       

Gross profit

    201     228,639     8.2     3,207,800     9.8     43,341,542     19.1     154,475,104     22.3  

Operating expenses(3):

                                                       

Fulfillment expenses(4)

    (84,641 )   (611,333 )   (21.8 )   (5,809,118 )   (17.8 )   (45,478,327 )   (20.0 )   (96,523,444 )   (13.9 )

Marketing expenses

        (303,509 )   (10.8 )   (2,438,066 )   (7.5 )   (15,253,325 )   (6.7 )   (32,272,629 )   (4.7 )

Technology and content expenses

    (8,480 )   (103,235 )   (3.7 )   (562,120 )   (1.7 )   (5,516,361 )   (2.4 )   (14,644,113 )   (2.1 )

General and administrative expenses

    (226,145 )   (650,786 )   (23.2 )   (2,843,583 )   (8.7 )   (84,575,539 )   (37.3 )   (25,541,812 )   (3.7 )
                                       

Total operating expenses

    (319,266 )   (1,668,863 )   (59.5 )   (11,652,887 )   (35.7 )   (150,823,552 )   (66.4 )   (168,981,998 )   (24.4 )

Other income

    3,596     59,470     2.1     78,675     0.2     564,182     0.2     2,563,321     0.4  
                                       

Loss from operations

    (315,469 )   (1,380,754 )   (49.2 )   (8,366,412 )   (25.7 )   (106,917,828 )   (47.1 )   (11,943,573 )   (1.7 )
                                       

Loss before income tax

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (8,765,901 )   (1.3 )

Income tax expenses

                                (706,173 )   (0.1 )
                                       

Net loss

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (9,472,074 )   (1.4 )

Deemed dividend on issuance of Series A Preferred Shares

                        (49,214,977 )   (21.7 )        
                                       

Net loss attributable to ordinary shareholders

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (156,486,502 )   (68.9 )   (9,472,074 )   (1.4 )
                                       

Net loss per share:

                                                       

—Basic

    (0.01 )   (0.03 )       (0.18 )       (3.38 )       (0.11 )    

—Diluted

    (0.01 )   (0.03 )       (0.18 )       (3.38 )       (0.11 )    

Weighted average number of shares used in computing net loss per share:

                                                       

—Basic

    47,775,000     47,775,000           47,775,000           46,255,574           88,849,206        

—Diluted

    47,775,000     47,775,000           47,775,000           46,255,574           88,849,206        

Net loss per ADS(5)

                                                       

—Basic

    (0.01 )   (0.06 )       (0.35 )       (6.77 )       (0.21 )    

—Diluted

    (0.01 )   (0.06 )       (0.35 )       (6.77 )       (0.21 )    

(1)
We commenced operations in August 2008 but only commenced sales of our products on our vipshop.com website in December 2008. We incurred significant operating expenses and generated limited sales in the period from August 22 to

 

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    December 31, 2008. As a result, percentages for this period are not meaningful for investors to evaluate our results of operations and are not presented in this table.

(2)
Excluding shipping and handling expenses, and including inventory write down which amounted to nil, US$31.7 thousand, US$2.6 million, US$1.7 million and US$12.2 million in the period from August 22 to December 31, 2008, and the years ended December 31, 2009, 2010, 2011 and 2012, respectively.

(3)
Including share-based compensation expenses as set forth below:

 
  For the period
from August 22 to
December 31,
2008
  For the year ended December 31,  
 
  2009   2010   2011   2012  

Allocation of share-based compensation expenses:*

                               

Fulfillment expenses

                297,095     292,866  

Marketing expenses

                184,404     169,100  

Technology and content expenses

                729,420     897,133  

General and administrative expenses

                72,716,983     6,237,850  
                       

Total

                73,927,902     7,596,949  
                       

*
The share-based compensation expenses for 2011 included (a) US$63.9 million in share-based compensation expenses in connection with the unvested shares of our co-founders; (b) US$6.2 million in shared-based compensation expenses in connection with a transfer of ordinary shares between our co-founders; and (c) US$3.8 million share-based compensation expenses in connection with share options granted to executive officers and employees. In addition, unrecognized share-based compensation expenses as of December 31, 2011 were US$19.8 million, which were related to the unvested share options granted to our executive officers and employees. The unrecognized share-based compensation expenses were expected to be recognized over a weighted-average period of 3.06 years on a straight-line basis as of December 31, 2011. The share-based compensation expenses for 2012 included US$7.6 million share-based compensation expenses in connection with share options and non-vested shares granted to our executive officers, independent directors, employees and a consultant. The unrecognized share-based compensation expenses related to share options and non-vested shares were US$14.5 million and US$2.1 million, and were expected to be recognized over a weighted-average period of 2.45 years and 3.62 years on a straight-line basis as of December 31, 2012 respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Share-Based Compensation" for details.
(4)
Including shipping and handling expenses, which amounted to US$157, US$0.3 million, US$4.3 million, US$29.4 million and US$53.9 million in the period from August 22 to December 31, 2008, and the years ended December 31, 2009, 2010, 2011 and 2012, respectively.

(5)
Each ADS represents two ordinary shares.

 
  As of December 31,  
 
  2008   2009   2010   2011   2012  
 
   
   
  (in US$)
   
   
 

Summary Consolidated Balance Sheets Data:

                               

Cash and cash equivalents

    12,258     287,720     1,111,091     44,954,778     124,472,629  

Total current assets

    125,574     2,584,046     15,567,836     158,278,041     381,952,106  

Total assets

    229,720     2,739,835     17,132,690     167,435,320     398,917,120  

Total liabilities

    399,404     4,289,798     27,244,271     149,146,118     316,334,306  

Total shareholders' (deficit) equity

    (169,684 )   (1,549,963 )   (10,111,581 )   18,289,202     82,582,814  

        The following table presents summary operating data for the periods indicated:

 
  For the year ended
December 31,
 
 
  2009   2010   2011   2012  

New active customers (in thousands)

    38     255     1,330     3,307  

Repeat customers (in thousands)

    14     155     903     2,625  

Total orders (in thousands)

    71     927     7,269     21,919  

Orders placed by repeat customers (in thousands)

    47     804     6,681     20,457  

Brand partners

    76     411     1,075     2,759  

 

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RISK FACTORS

        An investment in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Industry

Our limited operating history makes it difficult to evaluate our business and prospects.

        We commenced operations in August 2008 and have a limited operating history. We have experienced rapid growth in our business since our inception. As of December 31, 2012, we had attracted 26.8 million registered members and over 4.9 million cumulative customers, and had promoted and sold products for over 5,800 domestic and international brands. Our total net revenues increased from US$32.6 million in 2010 to US$227.1 million in 2011 and to US$692.1 million in 2012. However, our historical growth rate may not be indicative of our future performance. We cannot assure you that we will be able to achieve similar results or grow at the same rate as we did in the past. It is also difficult to evaluate our prospects, as we may not have sufficient experience in addressing the risks to which companies operating in new and rapidly evolving markets such as the online discount retail market, may be exposed. You should consider our prospects in light of the risks and uncertainties fast-growing companies with a limited operating history may encounter.

If we are unable to manage our rapid growth or execute our strategies effectively, our business and prospects may be materially and adversely affected.

        We have experienced a period of rapid growth and expansion that has demanded, and will continue to demand, significant financial and managerial resources. We plan to further increase our sales through enhancing our brand recognition, growing our customer base and increasing customer spending on our website.

        We intend to continue investing in our logistics network and warehousing capacity to support our long-term growth. To further improve our nationwide fulfillment capabilities, we plan to add more logistics centers and warehouses in strategic locations in China. However, we do not have experience in operating our own logistics centers. As a result, we cannot assure you that we will be able to execute our expansion plan as expected. In addition, our expansion also requires us to continue to effectively manage our relationships with brand partners and with third-party delivery companies to ensure efficient and timely delivery of our products. To continue our business growth, we will also need to allocate significant managerial and financial resources in retaining, training, managing and motivating our workforce.

        We also seek to broaden our product offerings, which will require us to introduce new product categories and work with different groups of brand partners to address the needs of different kinds of consumers. We have limited or no experience in some of our newer product offerings, such as online sales of leisure travel packages and other lifestyle products, and our expansion into these new product categories may not achieve broad customer acceptance. These offerings may present new and difficult technology or operational challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failure or other quality issues. In addition, our profitability, if any, in our newer product categories may be lower than in our older categories, which may adversely affect our overall profitability and results of operations. Furthermore, there is no assurance that we will be able to recoup our investments in introducing these new product categories.

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        All of these endeavors involve risks. We can provide no assurance that we will successfully execute these expansion plans and strategies. We may fail to acquire financial or managerial resources needed for our business growth in a timely and cost-efficient manner, or at all. We cannot assure you that we will be able to manage our growth effectively, and any failure to do so may have a material adverse effect on our business and prospects.

If we are unable to offer branded products at attractive prices to meet customer needs and preferences, we may lose customers and our business, financial condition and results of operations may be materially and adversely affected.

        Our future growth depends on our ability to continue to attract new customers as well as to increase the spending and repeat purchase rate of existing customers. Constantly changing consumer preferences have historically affected, and will continue to affect, the online retail industry. Consequently, we must stay abreast of emerging lifestyle and consumer preferences and anticipate product trends that will appeal to existing and potential customers. As we implement our strategy to offer a personalized web-interface focusing on deep curation and targeted offerings desired by our customers, we expect to face additional challenges in the selection of products and services. Our ability to offer individually-tailored merchandise is dependent on our IT systems, including our business intelligence system, to collect and provide accurate and reliable information on consumer interests. In addition, most of our customers are urban and educated consumers who choose to purchase branded products on our website due to the deep price discounts that we offer. If our customers cannot find desired products within our product portfolio at attractive prices, they may lose interest in our website and thus may visit our website less frequently or even stop visiting our website altogether, which in turn, may materially and adversely affect our business, financial condition and results of operations.

Our business and results of operations may be materially and adversely affected if we are unable to maintain our customer experience or provide high quality customer service.

        The success of our business largely depends on our ability to provide superior customer experience and high quality customer service, which in turn depends on a variety of factors, such as our ability to continue to provide a reliable and user-friendly website interface for our customers to browse and purchase our products, reliable and timely delivery of our products, and superior after sales services. Our sales may decrease if our website services are severely interrupted or otherwise fail to meet our customer requests. Should we or our third-party delivery companies fail to provide our product delivery and return services in a convenient or reliable manner, or if our customers are not satisfied with our product quality, our reputation and customer loyalty could be negatively affected. In addition, we also depend on our call center and online customer service representatives to provide live assistance to our customers. If our call center or online customer service representatives fail to satisfy the individual needs of customers, our reputation and customer loyalty could be negatively affected and we may lose potential or existing customers and experience a decrease in sales. As a result, if we are unable to continue to maintain our customer experience and provide high quality customer service, we may not be able to retain existing customers or attract new customers, which could have a material adverse effect on our business, financial condition and results of operations.

Any harm to our vipshop.com brand or failure to maintain our reputation may materially and adversely affect our business and growth prospects.

        We believe that the recognition and reputation of our vipshop.com brand among our customers and brand partners have significantly contributed to the growth of our business. Maintaining and enhancing the recognition and reputation of our brand are critical to our business and competitiveness. Many factors, some of which are beyond our control, are important to maintaining and enhancing our

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brand and may negatively impact our brand and reputation if not properly managed. These factors include our ability to:

    provide satisfactory user experience as consumer preferences evolve and as we expand into new product categories;

    increase brand awareness among existing and potential customers through various marketing and promotional activities;

    maintain the popularity, attractiveness and quality of the products we offer;

    maintain the efficiency, reliability and quality of our fulfillment services; and

    preserve our reputation and goodwill in the event of any negative media publicity on internet security or product quality or authenticity issues affecting us or other online retail businesses in China.

        A public perception that non-authentic or counterfeit goods are sold on our website, even if factually incorrect, could damage our reputation, reduce our ability to attract new customers or retain our current customers, and diminish the value of our brand. If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our website, products and services, it may be difficult to maintain and grow our customer base, and our business and growth prospects may be materially and adversely affected.

If we fail to manage our relationships with, or otherwise fail to procure products at favorable terms from, our existing brand partners, or if we fail to attract new brand partners, our business and growth prospects may suffer.

        We source our products from both domestic and international brand partners. In 2010, 2011 and 2012, we worked with 411, 1,075 and 2,759 brand partners, respectively. Maintaining strong relationships with these brand partners is important to the growth of our business. In particular, we depend significantly on our ability to source products from brand partners at favorable pricing terms, typically at a substantial discount to the original sales price. However, our agreements do not ensure the long-term availability of merchandise or the continuation of particular pricing practices. Our contracts with our brand suppliers typically do not restrict the brand partners from selling products to other buyers. We cannot assure you that our current brand partners will continue to sell products to us on commercially acceptable terms, or at all. In the event that we are not able to purchase merchandise at favorable pricing terms, our revenues, profit margin and earnings may be materially and adversely affected. Our brand partners primarily include brand owners, and to a lesser extent, brand distributors and resellers. In the event any brand distributor or reseller does not have authority from the relevant brand owner to sell certain products to us, such brand distributor or reseller may cease selling such products to us at any time, which may adversely affect our business and revenues. In addition, if our brand partners cease to provide us with favorable payment terms or return policies, our requirements for working capital may increase, resulting in a negative effect on our cash flows from operating activities, and our operations may be materially and adversely affected. We will also need to establish new brand partner relationships to ensure that we have access to a steady supply of products on favorable commercial terms. Furthermore, our relationships with some brand partners, particularly international brand partners of apparel products in China, may be adversely affected as a result of our sale of branded products that are directly procured from overseas markets. If we are unable to develop and maintain good relationships with brand partners that would allow us to obtain a sufficient amount and variety of quality merchandise on acceptable commercial terms, it may inhibit our ability to offer sufficient products sought by our customers, or to offer these products at prices acceptable to them. Any negative developments in our relationships with brand partners could materially and adversely affect our business and growth prospects. In addition, as part of our growth strategy, we plan to further expand our brand and product offerings. If

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we fail to attract new brand partners to sell their branded products to us due to any reason, our business and growth prospects may be materially and adversely affected.

We primarily use third-party delivery companies to deliver our products, and if they fail to provide reliable delivery services, our business and reputation may be materially and adversely affected.

        We primarily deliver products through third-party delivery companies and are relying more on regional and local couriers which have a smaller scale of operations than nation-wide delivery companies. Currently, we maintain long-term cooperation arrangements with a number of third-party delivery companies to deliver our products to our customers. Interruptions to or failures in these third parties' delivery services could prevent the timely or proper delivery of our products. These interruptions may be due to events that are beyond our control or the control of these delivery companies, such as inclement weather, natural disasters, transportation interruptions or labor unrest or shortage. If our third-party delivery companies fail to comply with applicable rules and regulations in China, our delivery services may be materially and adversely affected. We may not be able to find alternative delivery companies to provide delivery services in a timely and reliable manner, or at all. As competition intensifies in the future, we expect that we will be required to ensure faster delivery times, which could place increasing pressure on our delivery network. Delivery of our products could also be affected or interrupted by the merger, acquisition, insolvency or government shut-down of the couriers we engage to make deliveries, especially those local couriers with relatively small business scales.

        We began to establish our own in-house delivery capabilities in Shanghai in 2011, and we may face additional challenges in managing our relationship with third-party delivery companies as a result of establishing our in-house delivery operations.

        If our products are not delivered in proper condition or on a timely basis, our business and reputation could suffer. Although we typically require the delivery companies, especially the local couriers, to make cash deposits or guarantee payments securing their due performance of duties as part of our engagement with them, such security may not be sufficient to recover the losses that we sustain as a result of their failure to perform.

If we do not compete effectively against existing or new competitors, we may lose market share and customers.

        The online discount retail market is rapidly evolving and competitive. Our primary competitors include major B2C e-commerce companies in China that sell a broad range of products and services online, such as Tmall, 360Buy and Dangdang, and other online discount retail companies in China. We compete with others based on a number of factors, including:

    ability to identify products in demand among consumers and source these products on favorable terms from brand suppliers;

    pricing;

    breadth and quality of product offerings;

    website features;

    customer service and fulfillment capabilities; and

    reputation among consumers and brands.

        Some of our current and potential competitors may have significantly greater resources, longer operating histories, larger customer bases and greater brand recognition. As the online discount retail market in China is expected to grow rapidly, many new competitors and some existing B2C e-commerce companies may enter into this market. In addition, other online retailers may be acquired by, receive investment from or enter into strategic relationships with, well-established and well-financed

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companies or investors which would help enhance their competitive positions. Some of our competitors may be able to secure more favorable terms from brand partners, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory policies and devote substantially more resources to their website and systems development than us. In addition, new and enhanced technologies may increase the competition in the online retail industry. Increased competition may negatively affect our business development, online retail and brand recognition, which may in turn affect our market share and operating margins. We can provide no assurance that we will be able to compete effectively against our competitors, and competitive pressure may have a material adverse effect on our business, prospects, financial condition and results of operations.

We have a history of net losses and may continue to incur net losses in the future. Before 2011, we had also experienced negative cash flow from operating activities.

        We have incurred net losses since our inception in August 2008. Our net losses amounted to US$8.4 million, US$107.3 million and US$9.5 million in the years ended December 31, 2010, 2011 and 2012, respectively. As of December 31, 2012, we had accumulated losses of US$176.0 million. In addition, net cash used in our operating activities amounted to US$6.6 million in 2010, before we generated net cash from operating activities of US$1.3 million and US$111.6 million in 2011 and 2012, respectively. Although we achieved net profit for the first time in the fourth quarter of 2012, we cannot assure you that we can continue to generate net profits or maintain positive cash flow from operating activities in the future. Our ability to be profitable depends on our ability to grow our business and increase our net revenues and our ability to control our costs and operating expenses. Although we have experienced significant revenue growth since our inception, such growth may not be sustainable and we may continue to incur net losses in future periods or fail to maintain positive cash flow from operating activities. We have incurred in the past and expect to continue to incur in future periods share-based compensation expenses and we expect our costs and other operating expenses to continue to increase as we expand our business, either of which will reduce our net income and may result in future losses. If our costs and operating expenses continue to increase without a commensurate increase in our revenue, our business, financial condition and results of operations will be negatively affected, and we may need additional capital to fund our continued operations.

We may suffer losses if we are unable to effectively manage our inventory.

        Due to the nature of the flash sales business, we need to manage a large volume of inventory turnover. We depend on our forecasts of demand and popularity for various kinds of products to make decisions regarding product purchases. Our customers may not order products at levels expected by us. In addition, any unfavorable market or industry conditions or change in consumer trends and preferences may limit our ability to accurately forecast the inventory levels to meet customer demand. We generally have the right to return unsold items for most of our products to our brand partners. In order to secure more favorable commercial terms, we may need to continue to enter into supply arrangements without unconditional return clauses or with more restrictive return policies.

        We recorded US$2.6 million, US$1.7 million and US$12.2 million in inventory write-downs in the years ended December 31, 2010, 2011 and 2012, respectively. Such write-downs primarily reflected the estimated market value of damaged or obsolete inventory. In addition, in October 2010, when we were in the process of implementing our new IT systems, improving our inventory count procedures and relocating our warehouse, some of our inventory stock items were not properly recorded in the inventory ledger, resulting in discrepancies between the inventory ledger and our actual inventory stock. We recorded write-downs of such discrepancies.

        If we fail to manage our inventory effectively in the future, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values and write-downs, which could have a material adverse effect upon our business, financial condition and results of operations. In addition, if we are

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unable to sell products or if we are required to lower sale prices in order to reduce inventory level or to pay higher prices to our brand partners in order to secure the right to return products to our brand partners, our profit margins might be negatively affected. High inventory levels may also require us to commit substantial capital resources, preventing us from using that capital for other important purposes. If we do not accurately predict product demand, our business, financial condition and results of operations may be materially and adversely affected.

If we are subject to higher product return rates, our business, financial condition and results of operations may be materially and adversely affected.

        Purchases of apparel, fashion accessories and other items over the internet may be subject to higher return rates than merchandise sold at physical stores. We have established a seven-day product return policy in order to accommodate our customers and to overcome any hesitance that they may have in shopping on our website. Our product return rates increased from 2010 to 2011 but decreased from 2011 to 2012. If we are unable to continue to reduce our product return rates, or if our product return rates increase or are higher than expected, our revenues and costs can be negatively impacted. In addition, as we cannot return some products to our brand partners pursuant to our contracts with them, if return rates for such products increase significantly, we may experience an increase in our inventory balance, inventory impairment and fulfillment cost, which may materially and adversely affect our working capital. As a result, our business, financial condition and results of operations may be materially and adversely affected.

We rely on online retail of apparel products for a significant portion of our net revenues.

        Historically, online retail sales of apparel products accounted for a significant portion of our total net revenues. We expect that sales of these products will continue to grow and represent a significant portion of our total net revenues in the near future. We have increased our offerings to include other product categories, including fashion items, cosmetics and home goods, as well as leisure travel packages and other lifestyle products, and expect to continue to expand our product offerings to gradually diversify our revenue sources in the future. However, the sales of these new products and services may not increase to a level that would reduce our dependence on our current line of products and services. Any failure in maintaining or increasing the number of our online retail customers or our sales volumes could result in our inability to retain or capture a sufficient share of the new markets that we are targeting. Any event that results in a reduction in our sales of apparel products could materially and adversely affect our ability to maintain or increase our current level of revenue, our profitability and business prospects.

We plan to expand our logistics network. If we are not able to manage such expansion successfully, our growth potential, results of operations and business could be materially and adversely affected.

        Our logistics network, currently consisting of regional logistics centers located in Guangdong Province in Southern China, Jiangsu Province in Eastern China, Sichuan Province in Western China and Beijing in Northern China, is essential to our business growth. We intend to use a portion of the proceeds from this offering to expand our logistics network to accommodate increasing volumes of customer orders, enhance customer services, provide better coverage across China, invest in IT system and mobile channel, and other general purposes. As part of our expansion plan, we expect to add more logistics centers in the future. In 2012, we started to provide our own delivery service in Shanghai and may expand our in-house delivery service coverage to other areas. However, we do not have experience in operating our own logistics centers and delivery operations. As a result, we cannot assure you that our plans to operate our own logistics centers and delivery operations will be successful. The expansion of our logistics network will put pressure on our managerial, financial, operational and other resources. We cannot assure you that we will be able to locate suitable facilities on commercially acceptable terms

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in accordance with our expansion plan. Nor can we assure you that we will be able to recruit qualified managerial and operational personnel to support our expansion plan. If we are unable to secure new facilities for the expansion of our logistics operations, or to effectively control expansion-related expenses, our business, prospects, financial condition and results of operations could be materially and adversely affected.

Uncertainties regarding the growth and sustained profitability of the online retail market in China, in particular, the development of the online flash sales business model, could adversely affect our business, prospects, financial condition and results of operations.

        All of our net revenue is generated through an online retail business model, and in particular, an online flash sales business model. While online retail businesses have existed in China since the 1990s, only recently have a limited number of these companies become profitable. The flash sales business model originated in Europe in 2001 and then spread to the U.S. The business model was not introduced to China until recently. The long term viability and prospects of the online retail industry, particularly companies utilizing an online flash sales business model, and B2C e-commerce business generally in China, remain untested and subject to significant uncertainty. Our business, financial condition and results of operations will depend on numerous factors affecting the development of the online flash sales business and, more broadly, the online retail and e-commerce businesses in China, which may be beyond our control. These factors include the general economic conditions in China, the growth of internet usage, the confidence in and level of e-commerce and online spending, the emergence of alternative retail channels or business models, the success of marketing and brand building efforts by e-commerce and flash sales companies, and the development of payment, logistics, after-sale and other services associated with e-commerce and flash sales.

The proper functioning of our IT systems is essential to our business. Any failure to maintain the satisfactory performance, security and integrity of our website and systems will materially and adversely affect our business, reputation, financial condition and results of operations.

        Our IT systems mainly include technology infrastructure supporting our vipshop.com user-interface website, as well as our customer service, enterprise resource planning, warehouse and logistics management, product information management, business intelligence and administration management systems. The satisfactory performance, reliability and availability of our IT systems are critical to our success, our ability to attract and retain customers and our ability to maintain a satisfactory customer experience and level of customer service.

        Our servers may be vulnerable to computer viruses, user traffic boom that exceeds the capacity of our servers, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, website slowdown or unavailability, delays in transaction processing, loss of data or the inability to accept and fulfill customer orders. We can provide no assurance that we will not experience such unexpected interruptions. We can provide no assurance that our current security mechanisms will be sufficient to protect our IT systems from any third-party intrusions, viruses or hacker attacks, information or data theft or other similar activities. Any such future occurrences could damage our reputation and result in a material decrease in our revenue. We have experienced one instance of system failure in January 2013 caused by unexpectedly large user traffic during a discount campaign, which was subsequently resolved.

        Additionally, we expect to use a portion of the proceeds of this offering to continue to upgrade and improve our IT systems to support our business growth. However, we cannot assure you that we will be successful in executing these system upgrade and improvement strategies. In particular, our systems may experience interruptions during upgrades, and the new technologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. If our existing or future IT systems do not function properly, it could cause system disruptions and slow response times, affecting data transmission, which in turn, could materially and adversely affect our business, financial condition and results of operations.

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If we fail to successfully adopt new technologies or adapt our website and systems to changing customer requirements or emerging industry standards, our business, financial condition and results of operations may be materially and adversely affected.

        To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our website. The online retail industry is characterized by rapid technological evolution, changes in end user requirements and preferences, frequent introductions of new products and services embodying new technologies and the emergence of new industry standards and practices that could render our existing proprietary technologies and systems obsolete. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in our business, enhance our existing services, develop new services and technologies that address the increasingly sophisticated and varied needs of our existing and prospective customers, and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of website and other proprietary technology entails significant technical and business risks. We can provide no assurance that we will be able to use new technologies effectively or adapt our website, proprietary technologies and transaction-processing systems to meet customer requirements or emerging industry standards. If we are unable to accurately project the need for such system expansion or upgrade or to adapt our systems in a cost-effective and timely manner in response to changing market conditions or customer requirements, whether for technical, legal, financial or other reasons, our business, prospects, financial condition and results of operations could be materially and adversely affected.

Our wide variety of accepted payment methods subjects us to third-party payment processing-related risks.

        We accept payments using a variety of methods, including cash on delivery, bank transfers, online payments with credit cards and debit cards issued by major banks in China, and payment through third-party online payment platforms, such as alipay.com and tenpay.com. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. We may also be subject to fraud and other illegal activities in connection with the various payment methods we offer, including online payment and cash on delivery options. We also rely on third parties to provide payment processing services. For example, we use third-party delivery companies for our cash on delivery payment options. If these companies become unwilling or unable to provide these services to us, or if their services quality deteriorates, our business could be disrupted. We are also subject to various rules, regulations and requirements, regulatory or otherwise, governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers or facilitate other types of online payments, and our business, financial condition and results of operations could be materially and adversely affected.

The security of operations of, and fees charged by, third-party online payment platforms may have material and adverse effects on our business.

        Currently, we accept payments through third-party online payment platforms, such as alipay.com and tenpay.com. In 2012, 38.0% of our total net revenues were collected through online payment systems. We expect that an increasing amount of our sales will be conducted over the internet as a result of the growing use of online payment systems. In all these online payment transactions, secured transmission of confidential information such as customers' credit card numbers and personal information over public networks is essential to maintain consumer confidence.

        We do not have control over the security measures of our third party online payment vendors, and security breaches of the online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential customer information and could, among other things, damage

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our reputation and the perceived security of all of the online payment systems that we use. If a well-publicized internet or mobile network security breach were to occur, users concerned about the security of their online financial transactions may become reluctant to purchase on our website even if the publicized breach did not involve payment systems or methods used by us. In addition, there may be billing software errors that would damage customer confidence in these online payment systems. If any of the above were to occur and damage our reputation or the perceived security of the online payment systems we use, we may lose customers and customers may be discouraged from purchasing on our website, which may have an adverse effect on our business.

        In addition, there are currently only a limited number of third party online payment systems in China, such as alipay.com and tenpay.com. If any of these major payment systems decides to significantly increase the percentage fee they charge us for using their payment systems, our results of operations may be materially and adversely affected.

Our growth and profitability depend on the level of consumer confidence and spending in China.

        Our business, financial condition and results of operations are sensitive to changes in overall economic and political conditions that affect consumer spending in China. The retail industry, including the online retail sector in general and the flash sales business in particular, is highly sensitive to general economic changes. Online purchases tend to decline significantly during recessionary periods and substantially all of our net revenue is derived from online retail sales in China. Many factors outside of our control, including inflation and deflation, interest rates, volatility of equity and debt securities markets, taxation rates, employment and other governmental policies can adversely affect consumer confidence and spending. The domestic and international political environments, including military conflicts and political turmoil or social instability, may also adversely affect consumer confidence and reduce spending, which could in turn materially and adversely affect our business, financial condition and results of operations.

We may incur liability for counterfeit or unauthorized products sold or information posted on our website.

        We have been and may continue to be subject to allegations that some of the items sold on our website are counterfeited or without authorization from the relevant brand owner. In 2010, 2011 and 2012, we worked with 411, 1,075 and 2,759 brand partners, respectively. We can provide no assurance that measures we have adopted in the course of sourcing such products to ensure their authenticity or authorization and to minimize potential liability of infringing third parties' rights will be effective. Any inadvertent sales of counterfeit, non-authentic or unauthorized items, or public perception of such incidents, could harm our reputation, impair our ability to attract and retain customers and cause us to incur additional costs to respond to any incident of this nature. In the event that counterfeit products, unauthorized products or products, images, logos or any other information on our website that otherwise infringes third parties' rights are sold or posted on our website, we could also face infringement claims. We have occasionally received claim letters alleging our infringement of third-party rights. Although we have not suffered any material adverse impact due to these claims, we cannot assure you that in the future, we will not be required to allocate significant resources and incur material expenses regarding such claims. We could be required to pay substantial damages or to refrain from the sale of relevant products in the event that a claimant prevails in any proceedings against us. Forms of potential liabilities under PRC law if we negligently participated or assisted in infringement activities associated with counterfeit goods include injunctions to cease infringing activities, rectification, compensation and administrative penalties. Moreover, our reputation could be negatively affected due to the negative publicity of any infringement claim against us. Any third-party claims may have a material adverse effect on our business, prospects, financial condition and results of operations.

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Failure to protect confidential information of our customers and our network against security breaches could damage our reputation and brand and substantially harm our business and results of operations.

        A significant challenge to e-commerce and communications is the secure transmission of confidential information over public networks. Currently, all product orders and, in some cases, payments for products we offer, are made through our website and systems. In such transactions, maintaining security for the transmission of confidential or private information on our website and systems, such as customers' personal information, payment related information and transaction information, is essential to maintain consumer confidence in our website and systems.

        We have adopted rigorous security policies and measures, including encryption technology, to protect our proprietary data and customer information. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining such confidential or private information we hold as a result of our customers' visits on our website. Such individuals or entities obtaining our customers' confidential or private information may further engage in various other illegal activities using such information. In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our customers may elect to make payment for purchases at our website. Furthermore, our third-party delivery companies may also violate their confidentiality obligations and disclose or use information about our customers illegally. Although we do not believe that we will be held responsible for any such illegal activities, any negative publicity on our website's safety or privacy protection mechanism and policy could have a material adverse effect on our public image and reputation. We cannot assure you that similar events out of our control will not occur in the future, which could negatively affect our brand and reputation.

        In addition, the methods used by hackers and others engaged in illegal online activities are increasingly sophisticated and constantly evolving. Significant capital, managerial and other resources may be required to ensure and enhance information security or to address the issues caused by such security failure. Any perception by the public that e-commerce and transactions, or the privacy of user information, are becoming increasingly unsafe or vulnerable to attack could inhibit the growth of online retail and other online services generally, which may also in turn reduce the number of orders we receive and materially and adversely affect our business, financial condition and results of operations.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

        We regard our trademarks, service marks, domain names, trade secrets, proprietary technologies and other intellectual property as critical to our business. We rely on a combination of intellectual property laws and contractual arrangements, including confidentiality agreements and license agreements with our employees, brand partners and others, to protect our proprietary rights. As of December 31, 2012, we own 12 registered trademarks, copyrights to 17 software products developed by us relating to various aspects of our operations, and 34 registered domain names, including vipshop.com, vipshop.com.cn, vipshop.cn and vipshop.net. See "Business—Intellectual Property."

        It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality agreements and license agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Policing any unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to

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prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

Future strategic alliances or acquisitions may have a material adverse effect on our business, financial condition and results of operations.

        We may pursue selected strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including opportunities that can help us promote our brand to new customers and brands, expand our product offerings and improve our technology infrastructure. We may also pursue strategic initiatives with brands and platforms in international markets.

        Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our business. We may have little ability to control or monitor the actions of our partners. To the extent a strategic partner suffers any negative publicity as a result of its business operations, our reputation may be negatively affected by virtue of our association with such party.

        In addition, although we have no current acquisition plans, we may consider entering into strategic acquisition of other companies, businesses, assets or technologies that are complementary to our business and operations as part of our growth strategy. Strategic acquisitions and subsequent integrations of newly acquired businesses would require significant managerial and financial resources and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our growth and business operations. The costs of identifying and consummating acquisitions may be significant. We may also incur significant expenses in obtaining approvals from shareholders and relevant government authorities in China and elsewhere in the world. Our failure to consummate acquisitions could also require us to pay certain pre-negotiated fees and expenses. Acquired businesses or assets may not generate expected financial results and may incur losses. In addition, acquisitions could also require the use of substantial amounts of cash, issuances of equity or debt securities, incurrence of significant goodwill and related impairment charges, amortization expenses for intangible assets and exposure to potential unknown liabilities of the acquired businesses or assets. The cost and duration of integrating newly acquired businesses could also materially exceed our expectations. Any such negative developments could have a material adverse effect on our business, financial condition and results of operations.

Any interruption in the operation of our logistics centers or data centers for an extended period may have an adverse impact on our business.

        Our ability to process and fulfill orders accurately and provide high quality customer service depends on the efficient and uninterrupted operation of our four regional logistics centers and our self-owned servers located in data centers operated by major PRC internet datacenter providers. Our regional logistics centers and data centers may be vulnerable to damage caused by fire, flood, power loss, telecommunications failure, break-ins, earthquake, human error and other events. We have developed a disaster tolerant system which includes real-time data mirroring, daily off-line data back-up and redundancy and load balancing. However, we do not carry business interruption insurance. The occurrence of any of the foregoing risks could have a material adverse effect on our business, prospects, financial condition and results of operations.

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We may be subject to product liability claims if people or properties are harmed by the products we sell.

        We sell products manufactured by third parties, some of which may be defectively designed or manufactured. As a result, sales of such products could expose us to product liability claims relating to personal injury or property damage and may require product recalls or other actions. Third parties subject to such injury or damage may bring claims or legal proceedings against us as the retailer of the product. We do not currently maintain any third-party liability insurance or product liability insurance in relation to products we sell. As a result, any material product liability claim or litigation could have a material and adverse effect on our business, financial condition and results of operations. Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defending them and could have a negative impact on our reputation.

We have limited insurance coverage which could expose us to significant costs and business disruption.

        Risks associated with our business and operations include, but are not limited to, damage to properties due to fire, explosions and other accidents, business interruption due to power shortages or network failure, product liability claims, transportation damages, losses of key personnel and risks posed by natural disasters including storms, floods and earthquakes, any of which may result in significant costs or business disruption. We have maintained insurance coverage we consider necessary and sufficient for our business, and customary for the industry in which we operate, including all risk property insurance covering our equipment, facilities, inventories and other properties. However, as the insurance industry in China is still in an early stage of development, insurance companies in China currently offer limited business-related insurance products. We do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient to prevent us from any loss to be sustained or that we will be able to successfully claim our losses under our current insurance policy on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

Our business depends on the continuing efforts of our management. If we lose their services, our business may be severely disrupted.

        Our business operations depend on the continuing efforts of our management, particularly the executive officers named in this prospectus. If one or more of our management were unable or unwilling to continue their employment with us, we might not be able to replace them in a timely manner, or at all. We may incur additional expenses to recruit and retain qualified replacements. Our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected. In addition, our management may join a competitor or form a competing company. We can provide no assurance that we will be able to successfully enforce our contractual rights included in the employment agreements we have entered into with our management team, in particular in China, where all these individuals reside. As a result, our business may be negatively affected due to the loss of one or more members of our management.

If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected.

        We intend to hire and retain additional qualified employees to support our business operations and planned expansion. Our future success depends, to a significant extent, on our ability to attract, train and retain qualified personnel, particularly management, technical, marketing and other operational personnel with expertise in the online retail industry. Our experienced mid-level managers are instrumental in implementing our business strategies, executing our business plans and supporting our business operations and growth. Since our industry is characterized by high demand and intense

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competition for talent, we can provide no assurance that we will be able to attract or retain qualified staff or other highly skilled employees that we will need to achieve our strategic objectives. In addition, our ability to train and integrate new employees into our operations may also be limited and may not meet the demand for our business growth on a timely fashion, or at all. If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected.

Failure to renew our current leases or locate desirable alternatives for our facilities could materially and adversely affect our business.

        We lease various properties for offices, logistics centers, data centers and customer service centers. We may not be able to successfully extend or renew such leases and may therefore be forced to relocate our affected operations. This could disrupt our operations and result in significant relocation expenses, which could adversely affect our business, financial condition and results of operations. In addition, we compete with other businesses for premises at certain locations or of desirable sizes. As a result, even though we could extend or renew our leases, rental payments may significantly increase as a result of the high demand for the leased properties. In addition, we may not be able to locate desirable alternative sites for our facilities as our business continues to grow and such failure in relocating our affected operations could affect our business and operations.

Our use of leased properties could be challenged by third parties, which may cause interruptions to our business operations.

        Some of our lessors do not have proper ownership certificates for the properties we lease, or have other restrictions on their ownership of the properties. In particular, our office in Guangzhou is located on land allocated by local government, and the lessor has not obtained the relevant governmental approvals for leasing these premises. In addition, most of our leasehold interests in leased properties have not been registered with relevant PRC government authorities as required by the PRC law. According to PRC laws, rules and regulations, the failure to register the lease agreement will not affect its effectiveness between the tenant and the landlord, however, the landlord and the tenant may be subject to administrative fines of up to RMB10,000 each for such failure to register the lease. As of the date of this prospectus, we are not aware of any claims or actions being contemplated or initiated by government authorities or any third parties with respect to our leasehold interests in or use of such properties. However, we cannot assure you that our use of such leased properties will not be challenged by the governmental authorities or third parties alleging ownership of such properties. In the event that our use of properties is successfully challenged, we may be forced to relocate the affected operations. We can provide no assurance that will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from third parties' challenges on our use of such properties. As a result, our business, financial condition and results of operations may be materially and adversely affected.

If we fail to implement and maintain an effective system of internal controls or fail to remediate the control deficiencies in our internal control over financial reporting that has been identified, we may be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.

        Prior to our initial public offering in March 2012, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. During the audits of our consolidated financial statements as of December 31, 2009, 2010 and 2011, and for the period from August 22 to December 31, 2008 and the years ended December 31, 2009, 2010 and 2011 in connection with the initial public offering of our ADSs in March 2012, we identified one "material weakness" in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB, and

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other control deficiencies. The material weakness identified related to the lack of comprehensive U.S. GAAP accounting policies, financial reporting and internal control procedures. In particular, we did not have a comprehensive accounting policies manual and financial reporting and closing procedure manual for our finance department, and we did not have sufficient personnel to build and maintain formalized accounting policies and financial policies and financial reporting procedures in accordance with U.S. GAAP. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting."

        During 2012, we identified one "significant deficiency" in our internal control over financial reporting as defined in the standards established by PCAOB, and other control deficiencies. The significant deficiency relates to the deficient calculation mechanism of our e-Wallet system. We plan to implement a number of measures to address these control deficiencies that have been identified. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Control Over Financial Reporting." However, we cannot assure you that these and other remedial measures will remediate these control deficiencies.

        We are now subject to the Sarbanes-Oxley Act of 2002 as a public company in the United States. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2013. In addition, once we cease to be an "emerging growth company" as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. As a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

        In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.

As an "emerging growth company," we will not be required to have auditor attestation of the effectiveness of our internal controls.

        We are an "emerging growth company" as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various requirements that are applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company, which may be for as long as five years following our initial public offering in March 2012. As a result of our current status as an emerging growth company, our investors may not have access to certain information that they may deem important.

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        The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Our business, financial condition and results of operations, as well as our ability to obtain financing, may be adversely affected by the downturn in the global or Chinese economy.

        The global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and it is facing new challenges, including the escalation of the European sovereign debt crisis since 2011 and the slowdown of the Chinese economy in 2012. Economic conditions in China are sensitive to global economic conditions. Our business and operations are primarily based in China and substantially all of our revenues are derived from our operations in China. Accordingly, our financial results have been, and are expected to continue to be, affected by the economy and online retail industry in China. Although the economy in China has grown significantly in the past decades, any severe or prolonged slowdown in the global and/or Chinese economy could reduce our customers' expenditures for our products, which in turn may adversely affect our results of operations and financial condition. The growth rate of China's GDP decreased in 2012, and it is uncertain whether this economic slowdown will continue into 2013 and beyond. The online retail industry is particularly sensitive to economic downturns, and the macroeconomic environment in China may affect our business and prospects. A prolonged slowdown in China's economy may lead to a reduced level of online purchasing activities, which could materially and adversely affect our business, financial condition and results of operations.

        Moreover, a slowdown in the global or China's economy or the recurrence of any financial disruptions may have a material and adverse impact on financings available to us. The weakness in the economy could erode investors' confidence, which constitutes the basis of the credit markets. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world's leading economies, including China. There have also been concerns over unrest in the Middle East and Africa, which have resulted in volatility in oil and other markets, and over the possibility of a war involving Iran. There have also been concerns about the economic effect of the earthquake, tsunami and nuclear crisis in Japan and tensions in the relationship between China and Japan. The recent financial turmoil affecting the financial markets and banking system may significantly restrict our ability to obtain financing in the capital markets or from financial institutions on commercially reasonable terms, or at all. Any prolonged slowdown in the global or Chinese economy may have a negative impact on our business, results of operations and financial condition, and continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.

Our results of operations are subject to quarterly fluctuations due to a number of factors that could adversely affect our business and the trading price of our ADSs.

        We experience seasonality in our business, reflecting a combination of seasonal fluctuations in internet usage and traditional retail seasonality patterns. For example, we generally experience less user traffic and purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Furthermore, sales in the traditional retail industry are significantly higher in the fourth quarter of each calendar year than in the preceding three quarters. Due to the foregoing factors, our financial condition and results of operations for future quarters may continue to fluctuate and our historical quarterly results may not be comparable to future quarters. As a result, the trading price of our ADSs may fluctuate from time to time due to seasonality.

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Risks Relating to Our Corporate Structure and Restrictions on Our Industry

Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to online commerce and the distribution of internet content in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our website.

        Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates internet access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and other government regulations. These laws and regulations also include limitations on foreign ownership in PRC companies that provide internet content distribution services. Specifically, foreign investors are not allowed to own more than 50% of the equity interests in any entity conducting an internet content distribution business. The Ministry of Industry and Information Technology, or the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular, in July 2006. The MIIT Circular reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign invested enterprises and obtain business operating licenses for internet content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an internet content provision, or ICP, license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China.

        We are a Cayman Islands company and our PRC subsidiary, Vipshop China, is considered a wholly foreign owned enterprise. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into between (a) Vipshop China, (b) Vipshop Information, our consolidated affiliated entity, and (c) shareholders of Vipshop Information. Vipshop Information holds the licenses and permits that are essential to the operation of our business. For a detailed description of these licenses and permits, see "Regulations." Vipshop Information is a PRC limited liability company owned by our co-founders and directors, all of whom are PRC citizens. As a result of these contractual arrangements, we exert control over Vipshop Information and consolidate its operating results in our financial statements under U.S. GAAP. For a detailed description of these contractual arrangements, see "Our Corporate History and Structure."

        In the opinion of our PRC counsel, Han Kun Law Offices, our current ownership structure, the ownership structure of our PRC subsidiaries and our consolidated affiliated entity, each as described in this prospectus, are in compliance with existing PRC laws, rules and regulations, and the contractual arrangements between Vipshop China, our consolidated affiliated entity and its shareholders, each as described in this prospectus, are not in violation of any existing PRC laws, rules and regulations. There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, we cannot assure you that PRC government authorities will not ultimately take a view contrary to or otherwise different from that of our PRC counsel.

        In or around September 2011, various media sources reported that the China Securities Regulatory Commission, or CSRC, had prepared a report proposing pre-approval by a competent central government authority of offshore listings by China-based companies with variable interest entity structures, such as ours, that operate in industry sectors subject to foreign investment restrictions. However, it is unclear whether CSRC officially issued or submitted such a report to a higher level government authority or what any such report provides, or whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or what they would provide. If our ownership structure, contractual arrangements and businesses of our company, Vipshop China or our consolidated affiliated entity are found to be in violation of any existing or future PRC laws or regulations, the relevant governmental authorities, including CSRC, would have broad discretion in

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dealing with such violation, including levying fines, confiscating our income or the income of Vipshop China or our consolidated affiliated entity, revoking the business licenses or operating licenses of Vipshop China or our consolidated affiliated entity, shutting down our servers or blocking our website, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from this offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations.

We rely on contractual arrangements with our consolidated affiliated entity and its shareholders for the operation of our business, which may not be as effective as direct ownership. If our consolidated affiliated entity and its shareholders fail to perform their obligations under these contractual arrangements, we may have to resort to arbitration or litigation to enforce our rights, which may be time-consuming, unpredictable, expensive and damaging to our operations and reputation.

        Because of PRC restrictions on foreign ownership of internet-based businesses in China, we depend on contractual arrangements with our consolidated affiliated entity, Vipshop Information, in which we have no ownership interest, to partly conduct our operations. These contractual arrangements, governed by PRC law, are intended to provide us with effective control over our consolidated affiliated entity and allow us to obtain economic benefits from it. Although we have been advised by our PRC counsel, Han Kun Law Offices, that these contractual arrangements are valid, binding and enforceable under current PRC laws, these contractual arrangements may not be as effective in providing control as direct ownership. For example, our consolidated affiliated entity and its shareholders could breach their contractual arrangements with us by, among other things, failing to operate our online retail business in an acceptable manner or taking other actions that are detrimental to our interests. If we hold controlling equity interest in our consolidated affiliated entity, we would be able to exercise our shareholder rights to effect changes to its board of directors, which in turn could implement changes at the management and operational level of the consolidated affiliated entity. However, under the current contractual arrangements, if our consolidated affiliated entity or its shareholders fail to perform their obligations under these contractual arrangements, we may have to incur substantial costs to enforce such arrangements, and rely on legal remedies, including arbitration and litigation, under PRC law, which may not be sufficient or effective. In particular, the contractual arrangements provide that any dispute arising from these arrangements will be submitted to the China International Economic and Trade Arbitration Commission South China Sub-Commission for arbitration, the ruling of which will be final and binding. The legal framework and system in China, particularly those relating to arbitration proceedings, is not as developed as other jurisdictions such as the United States. As a result, significant uncertainties relating to the enforcement of legal rights through arbitration, litigation and other legal proceedings remain in China, which could limit our ability to enforce these contractual arrangements and exert effective control over our consolidated affiliated entity. If we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations and damage our reputation, and we may not be able to consolidate the financial results of Vipshop Information into our consolidated financial statements in accordance with U.S. GAAP. See "—Risks Relating to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us."

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The shareholders of our consolidated affiliated entity have potential conflicts of interest with us, which may adversely affect our business.

        Each shareholder of our consolidated affiliated entity is a shareholder and director of our company. Equity interest held by each of these shareholders in our company is less than its interest in our consolidated affiliated entity as a result of our introduction of DCM Entities and Sequoia Entities as shareholders of our company. In addition, such shareholders' equity interest in our company will be further diluted as a result of this offering as well as any future offering of equity securities. As a result, conflicts of interest may arise as a result of such dual shareholding and governance structure.

        Each of these shareholders is also a director of our company, and has a duty of care and loyalty to our company and to our shareholders as a whole under Cayman Islands law. Under the contractual arrangements with our consolidated affiliated entity and its shareholders, (a) we may replace any such individual as a shareholder of our consolidated affiliated entity at our discretion, and (b) each of these individuals has executed a power of attorney to appoint Vipshop China or its designated third party to vote on their behalf and exercise shareholder rights of our consolidated affiliated entity. However, we cannot assure you that these individuals will act in the best interests of our company should any conflicts of interest arise, or that any conflicts of interest will be resolved in our favor. These individuals may breach or cause our consolidated affiliated entity to breach the existing contractual arrangements. If we cannot resolve any conflicts of interest or disputes between us and any of these individuals, we would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.

We may lose the ability to use and enjoy assets held by our consolidated affiliated entity that are important to the operation of our business if such entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

        As part of our contractual arrangements with our consolidated affiliated entity, such entity holds certain assets that are important to the operation of our business. If our consolidated affiliated entity goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If our consolidated affiliated entity undergoes a voluntary or involuntary liquidation proceeding, the unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Our contractual arrangements with our consolidated affiliated entity may result in adverse tax consequences to us.

        We may be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between Vipshop China and our consolidated affiliated entity were not entered into on an arm's length basis and therefore constitute favorable transfer pricing arrangements. If this occurs, the PRC tax authorities could request that our consolidated affiliated entity adjust its taxable income, if any, upward for PRC tax purposes. Such a pricing adjustment could adversely affect us by increasing our consolidated affiliated entity's tax expenses without reducing our tax expenses, which could subject our consolidated affiliated entity to late payment fees and other penalties for underpayment of taxes. The PRC Enterprise Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm's length principles. As a result, our contractual arrangements with our consolidated affiliated entity may result in adverse tax consequences to us.

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If our consolidated affiliated entity fails to obtain and maintain the requisite assets, licenses and approvals required under PRC law, our business, financial condition and results of operations may be materially and adversely affected.

        Foreign investment and the internet industry in China are highly regulated by the PRC government and numerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governing various aspects of the internet industry. See "Regulations." Our PRC subsidiaries and consolidated affiliated entity are required to obtain and maintain certain assets relevant to its business as well as applicable licenses or approvals from different regulatory authorities in order to provide its current services. These assets and licenses are essential to the operation of our business and are generally subject to annual review by the relevant governmental authorities. Furthermore, our PRC subsidiaries and our consolidated affiliated entity may be required to obtain additional licenses. If we fail to obtain or maintain any of the required, assets, licenses or approvals, our continued business operations in the internet industry may subject it to various penalties, such as confiscation of illegal net revenue, fines and the discontinuation or restriction of our operations. Any such disruption in the business operations of our consolidated affiliated entity will materially and adversely affect our business, financial condition and results of operations. For instance, we have recently started a pilot program to provide our own delivery service in Shanghai. We do not currently charge additional fees for such service. Under PRC law, we are required to obtain a road transportation permit and an express delivery service permit from relevant governmental authorities to provide delivery service. As of the date of this prospectus, we have not obtained all the relevant permits. As a result, we may be subject to penalties, such as fines and ban on providing such service in the future.

Risks Relating to Doing Business in China

Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

        Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

        The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China's economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

        While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control

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the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.

Uncertainties with respect to the PRC legal system could adversely affect us.

        We conduct our business primarily through Vipshop China, our PRC subsidiary, and Vipshop Information, our consolidated affiliated entity in China. Our operations in China are governed by PRC laws and regulations. Vipshop China is a foreign invested enterprise and is subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to foreign invested enterprises. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.

        In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual or tort rights. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

        Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until some time after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related businesses and companies.

        The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violations of applicable laws and regulations. Issues, risks and uncertainties relating to PRC regulation of the internet-related business include, but are not limited to, the following:

    We only have contractual control over our website. We do not directly own our website through our subsidiaries due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including internet content provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.

    There are uncertainties relating to the regulation of the internet-related business in China, including evolving licensing practices. This means that some of our permits, licenses or operations may be subject to challenge, or we may fail to obtain permits or licenses that may be deemed necessary for our operations or we may not be able to obtain or renew certain permits or licenses. If we fail to maintain any of these required licenses or approvals, we may be subject

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      to various penalties, including fines and discontinuation of or restriction on our operations. Any such disruption in our business operations may have a material and adverse effect on our results of operations.

    New laws and regulations may be promulgated that will regulate internet activities, including online retail businesses. If these new laws and regulations are promulgated, additional licenses may be required for our operations. If our operations do not comply with these new regulations after they become effective, or if we fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.

        The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain any new licenses required under any new laws or regulations. There are also risks that we may be found to violate the existing or future laws and regulations given the uncertainty and complexity of China's regulation of internet-related business.

Regulation and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable for content that is displayed on our website.

        China has enacted laws and regulations governing internet access and the distribution of products, services, news, information, audio-video programs and other content through the internet. The PRC government has prohibited the distribution of information through the internet that it deems to be in violation of PRC laws and regulations. If any of our internet content were deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. We may also be subject to potential liability for any unlawful actions of our customers or users of our website or for content we distribute that is deemed inappropriate. It may be difficult to determine the type of content that may result in liability to us, and if we are found to be liable, we may be prevented from operating our website in China.

The audit report included in this prospectus are prepared by auditors who are not inspected fully by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection and we may be adversely affected by the outcome of the administrative proceedings brought by the SEC against five accounting firms in China

        As an auditor of companies that are publicly traded in the United States and a firm registered with the PCAOB, Deloitte Touche Tohmatsu is required by the laws in the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and the professional standards of the PCAOB. However, because we have substantial operations within the People's Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese government authorities, our auditor is not currently inspected fully by the PCAOB.

        Inspections of other auditors conducted by the PCAOB outside of China have at times identified deficiencies in those auditors' audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor's audits and its quality control procedures. As a result, shareholders may be deprived of the benefits of PCAOB inspections, and may

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lose confidence in our reported financial information and procedures and the quality of our financial statements.

Fluctuations in exchange rates may have a material adverse effect on your investment.

        The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and elsewhere in the world. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under this policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Since then, Renminbi started to appreciate against U.S. dollar and reached one of its historical high point in July 2008. Thereafter, the Renminbi was traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high point. In June 2010, the PRC government announced that its plan to increase the flexibility of Renminbi exchange rate. Since that time, the Renminbi has gradually appreciated against the U.S. dollar, though there have been brief periods when the U.S. dollar appreciated against the Renminbi. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar.

        All of our net revenues and most of our expenses are denominated in Renminbi. Any significant revaluation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, an appreciation of Renminbi against the U.S. dollar would reduce the amount of Renminbi we would receive if we need to convert U.S. dollars into Renminbi. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.

        Limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. We did not enter into any hedging transactions to hedge our exposure to the risks relating to fluctuations in exchange rates. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Governmental control of currency conversion may limit our ability to utilize our revenue effectively and affect the value of your investment.

        The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenue in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange, or the SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of the SAFE, cash generated from the operations of Vipshop China in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain the SAFE's approval to use cash generated from the operations of our PRC subsidiaries and consolidated affiliated entity to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency

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other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

We principally rely on dividends and other distributions on equity paid by Vipshop China in China to fund our cash and financing requirements, and any limitation on the ability of Vipshop China to make payments to us could have a material adverse effect on our ability to conduct our business.

        We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from Vipshop China in China for our cash requirements, including for the service of any debt we may incur. Our subsidiaries' ability to distribute dividends is based upon their distributable earnings which are mainly derived from the payments for products and services from our consolidated affiliated entity. Current PRC regulations permit our PRC subsidiaries to pay dividends to Vipshop HK only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China and our consolidated affiliated entity is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. These reserves are not distributable as cash dividends. As of December 31, 2012, we had, on a consolidated basis, accumulated losses of US$176.0 million, representing losses incurred in Vipshop China, our consolidated affiliated entity and certain subsidiaries. As a result, such entities in China are not able to distribute dividends to us until their accumulated losses have been made up. Furthermore, if Vipshop China in China incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to Vipshop HK could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to Vipshop China in China.

        Any funds we transfer to Vipshop China, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration with relevant governmental authorities in China. According to the relevant PRC regulations on foreign invested enterprises in China, capital contributions to Vipshop China are subject to the approval of the PRC Ministry of Commerce or its local branches and registration with other governmental authorities in China. In addition, (a) any foreign loan procured by Vipshop China is required to be registered with the SAFE or its local branches, and (b) Vipshop China may not procure loans which exceed the difference between its registered capital and its total investment amount as approved by the PRC Ministry of Commerce or its local branches. Any medium or long term loan to be provided by us to our consolidated affiliated entity must be approved by the National Development and Reform Commission and the SAFE or its local branches. We may not obtain these government approvals or complete such registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to receive such approvals or complete such registration, our ability to use the proceeds of this offering and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

        On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign Invested Enterprises, or SAFE Circular 142. SAFE Circular 142 regulates the conversion by a

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foreign invested enterprise of foreign currency into Renminbi by restricting the usage of converted Renminbi. SAFE Circular 142 provides that any Renminbi capital converted from registered capital in foreign currency of a foreign invested enterprise may only be used for purposes within the business scope approved by PRC governmental authority and such Renminbi capital may not be used for equity investments within the PRC unless otherwise permitted by the PRC law. In addition, SAFE strengthened its oversight of the flow and use of the Renminbi capital converted from registered capital in foreign currency of a foreign invested enterprise. The use of such Renminbi capital may not be changed without SAFE approval, and such Renminbi capital may not in any case be used to repay Renminbi loans if the proceeds of such loans have not been utilized. As a result, we are required to apply Renminbi funds converted from the net proceeds we expect to receive from this offering within the business scope of Vipshop China. SAFE Circular 142 may significantly limit our ability to transfer the net proceeds from this offering or any other offering of additional equity securities to Vipshop China or invest in or acquire any other companies in the PRC. Furthermore, the SAFE promulgated SAFE Circular 59 on November 9, 2010, which tightens the regulation over settlement of net proceeds from offshore offerings. In particular, it is specifically required that any net proceed settled from offshore offerings shall be applied in the manner described in the offering documents. The SAFE also promulgated SAFE Circular 45 in November 2011, which, among other things, restrict a foreign-invested enterprise from using Renminbi funds converted from its registered capital to provide entrusted loans or repay loans between non-financial enterprises. Violations of these circulars could result in severe monetary or other penalties. SAFE Circular 142, SAFE Circular 59 and SAFE Circular 45 may significantly limit our ability to convert, transfer and use the net proceeds from this offering and any offering of additional equity securities in China, which may adversely affect our business, financial condition and results of operations.

The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, and, if required, we cannot assure you that we will be able to obtain such approval.

        On August 8, 2006, six PRC regulatory agencies promulgated the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009. This regulation, among other things, requires offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of CSRC, prior to listing their securities on an overseas stock exchange. The implementation and application of this regulation remains unclear. Our PRC counsel, Han Kun Law Offices, has advised us that, based on their understanding of the current PRC laws, rules and regulations:

    CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours as described in this prospectus are subject to this regulation; and

    given that (a) we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of PRC domestic companies, and (b) there is no provision in the M&A Rules that explicitly classifies contractual arrangements as a type of transaction subject to this regulation, we are not required to submit an application to CSRC for its approval of the listing and trading of our ADSs on the NYSE.

        Because there has been no official interpretation or clarification of this regulation since its adoption, there is uncertainty as to how this regulation will be interpreted or implemented. If it is determined that CSRC approval is required for our initial public offering or this offering, we may face sanctions by CSRC or other PRC regulatory agencies for failure to seek CSRC's approval for our initial public offering or this offering. These sanctions may include fines and penalties on our operations in the PRC (although to our knowledge, no definitive rules or interpretations have been issued to determine or quantify such fines or penalties), delays or restrictions on the repatriation of the proceeds

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from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC subsidiaries, or other actions that may have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable to us, to halt this offering before the settlement and delivery of the ADSs that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ADSs we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

The M&A Rules establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions.

        The M&A Rules established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008, were triggered. In addition, PRC national security review rules which became effective on September 1, 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

PRC regulations relating to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

        The SAFE has promulgated several regulations, including the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents' Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or Circular 75, effective on November 1, 2005 and its implementation rules. These regulations require PRC residents and PRC corporate entities to register with local branches of the SAFE in connection with their direct or indirect offshore investment activities. These regulations are applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. Under these foreign exchange regulations, PRC residents who make, or have prior to the implementation of these foreign exchange regulations made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with the SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its filed registration with the local branch of the SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of the SAFE. If any PRC shareholder fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contribution into its subsidiary in China.

        All of our shareholders that we are aware of being subject to the SAFE regulations have completed all necessary registrations with the local SAFE branch as required by Circular 75. We cannot

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assure you, however, that all of these individuals may continue to make required filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with the SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiaries' ability to distribute dividends to, or obtain foreign-exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

        Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

Failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

        In December 2006, the People's Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account. In January 2007, the SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen's participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by the SAFE in March 2007. Under these rules, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with the SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.

        We and our PRC resident employees who participate in the employee stock incentive plans, which we adopted in March 2011 and March 2012, respectively, have been subject to these regulations since our company became a publicly-listed company in the United States in March 2012. We will assist our PRC option grantees to complete the required registrations and procedures. If we or our PRC option

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grantees fail to comply with these regulations, we or our PRC option grantees may be subject to fines and other legal or administrative sanctions. See "Regulations—Regulations on Stock Incentive Plans."

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

        Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the State Administration of Taxation, or the SAT, on December 10, 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (a) has an effective tax rate less than 12.5% or (b) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer. Using a "substance over form" principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction. In addition, the PRC resident enterprise may be required to provide necessary assistance to support the enforcement of SAT Circular 698.

        There is uncertainty as to the application of SAT Circular 698. For example, while the term "Indirect Transfer" is not clearly defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax rates in foreign tax jurisdictions, and the process and format of the reporting of an Indirect Transfer to the competent tax authority of the relevant PRC resident enterprise remain unclear. In addition, there are not any formal declarations with regard to how to determine whether a foreign investor has adopted an abusive arrangement in order to reduce, avoid or defer PRC tax. SAT Circular 698 may be determined by the tax authorities to be applicable to our non-resident shareholders who acquired our shares outside of the open market and subsequently sell our shares in our private financing transactions or in the open market, including in this offering, if any of such transactions were determined by the tax authorities to lack reasonable commercial purpose. As a result, we and our non-resident investors may become at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698, which may have a material adverse effect on our financial condition and results of operations or such non-resident shareholders' investments in us.

It is unclear whether we will be considered a PRC "resident enterprise" under the PRC Enterprise Income Tax Law and, depending on the determination of our PRC "resident enterprise" status, our global income may be subject to the 25% PRC enterprise income tax, which could have a material adverse effect on our results of operations.

        Under the PRC Enterprise Income Tax Law, or the EIT Law, and its implementation rules, which became effective in January 2008, an enterprise established outside of the PRC with a "de facto management body" within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules of the EIT Law define the term "de facto management bodies" as "establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel,

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accounting, properties, etc., of an enterprise." On April 22, 2009, the State Administration of Taxation, or the SAT, issued a circular, or Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a PRC-controlled enterprise that is incorporated offshore is located in China. Further, Circular 82 states that certain PRC-controlled enterprises will be classified as "resident enterprises" if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders' meetings; and half or more of the senior management or directors having voting rights. In addition, the SAT issued a bulletin on July 27, 2011, effective September 1, 2011, providing more guidance on the implementation of Circular 82. This bulletin clarifies matters including resident status determination, post-determination administration and competent tax authorities. See "Regulations—PRC Enterprise Income Tax Law and Individual Income Tax Law." Although both Circular 82 and the bulletin only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the determining criteria set forth in Circular 82 and the bulletin may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of all offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. In addition to the uncertainty regarding how the new resident enterprise classification may apply, it is also possible that the rules may change in the future, possibly with retroactive effect. Although we do not believe that our legal entities organized outside of the PRC constitute PRC resident enterprises, it is possible that the PRC tax authorities could reach a different conclusion. In such case, we may be considered a resident enterprise and may therefore be subject to the enterprise income tax at 25% on our global income as well as PRC enterprise income tax reporting obligations. If we are considered a resident enterprise and earn income other than dividends from our PRC subsidiaries, a 25% enterprise income tax on our global income could significantly increase our tax burden and materially and adversely affect our cash flow and profitability.

Dividends payable to our foreign investors and gains on the sale of our ADSs or ordinary shares by our foreign investors may become subject to taxes under PRC tax laws.

        Under the EIT Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Similarly, any gain realized on the transfer of ADSs or ordinary shares by such investors is also subject to PRC tax at a rate of 10%, subject to any reduction or exemption set forth in relevant tax treaties, if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our ordinary shares or ADSs, and any gain realized from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and would as a result be subject to PRC taxation. See "Regulations—PRC Enterprise Income Tax Law and Individual Income Tax Law." Furthermore, if we are deemed a PRC resident enterprise, dividends payable to investors that are non-PRC individual investors and any gain realized on the transfer of ADSs or ordinary shares by investors may be subject to PRC tax at a rate of 20%, subject to any reduction or exemption set forth in applicable tax treaties. It is unclear whether, if we are considered a PRC resident enterprise, holders of our ADSs or ordinary shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas (although we do not expect to withhold at treaty rates if any withholding is required). If dividends payable to our non-PRC investors, or gains from the transfer of our ordinary shares or ADSs by such investors are subject to PRC tax, the value of your investment in our ordinary shares or ADSs may be adversely affected.

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The enforcement of the Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

        On June 29, 2007, the Standing Committee of the National People's Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008 and was amended on December 28, 2012. The Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time employment, probation, consultation with labor union and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. According to the Labor Contract Law, an employer is obliged to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. The employer must pay severance to an employee where a labor contract is terminated or expires, with certain exceptions. In addition, the government has continued to introduce various new labor-related regulations after the effectiveness of the Labor Contract Law. Among other things, it is required that that annual leave ranging from five to 15 days be made available to employees and that the employee be compensated for any untaken annual leave days in the amount of three times of the employee's daily salary, subject to certain exceptions. As a result of these new regulations designed to enhance labor protection and increasing labor costs in China, our labor costs are expected to increase. In addition, as the interpretation and implementation of these new regulations are still evolving, we cannot assure you that our employment practice will at all times be deemed in compliance with the new regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

Our failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

        Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations. We have not made adequate employee benefit payments as required under applicable PRC labor laws. Accruals for the underpaid amounts as recorded were nil, US$89 thousand, US$0.5 million, US$1.6 million and US$2.2 million as of December 31, 2008, 2009, 2010, 2011 and 2012, respectively. Our failure in making contributions to various employee benefit plans and in complying with applicable PRC labor-related laws may subject us to late payment penalties. If we are subject to such penalties in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

An occurrence of a widespread health epidemic or other outbreaks could have a material adverse effect on our business, financial condition and results of operations.

        Our business could be adversely affected by the effects of Influenza A virus subtype H1N1, or the H1N1 virus, Severe Acute Respiratory Syndrome, or SARS, avian influenza or other epidemics or outbreaks on the economic and business climate. A prolonged outbreak of any of these illnesses or other adverse public health developments in China or elsewhere in the world could have a material adverse effect on our business operations. Such outbreaks could significantly impact the online retail industry and cause a temporary closure of the facilities we use for our operations. Such impact or closures would severely disrupt our operations and adversely affect our business, financial condition and results of operations. Our operations could be disrupted if any of our employees or employees of our partners were suspected of having the H1N1 virus, SARS or avian influenza, since this could require us or our partners to quarantine some or all of such employees or disinfect the facilities used for our operations and may deter our customers or potential customers from purchasing or accepting our products. In addition, our business, financial condition and results of operations could be adversely affected to the extent that an outbreak harms the global or Chinese economy in general, such as wars, acts of terrorism, snowstorms, earthquakes, fire, floods, environmental accidents, power shortage or communication interruptions.

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Risks Relating to this Offering

The market price for our ADSs has fluctuated and may be volatile.

        The market price for our ADSs has fluctuated since we first listed our ADSs. Since our ADSs became listed on the NYSE on March 23, 2012, the trading price of our ADSs have ranged from US$4.12 to US$26.19 per ADS, and the last reported trading price on February 20, 2013 was US$23.36 per ADS.

        The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

    actual or anticipated fluctuations in our quarterly results of operations and changes of our expected results;

    announcements by us or our competitors of new services, acquisitions, strategic relationships, joint ventures or capital investments;

    additions to or departures of our senior management personnel;

    detrimental negative publicity about us, our competitors or our industry;

    changes in financial estimates by securities research analysts;

    regulatory developments affecting us, our brand partners or our industry;

    changes in the economic performance or market valuations of other internet, e-commerce or online retail companies in China;

    fluctuations of exchange rates between the Renminbi and the U.S. dollar;

    release or expiry of lock-up or other transfer restrictions on our outstanding shares or ADSs; and

    sales or perceived potential sales of additional equity securities or ADSs.

        In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of any particular companies. These market fluctuations may also have a material adverse effect on the market price of our ADSs.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of our ADSs for return on your investment.

        We currently intend to retain most, if not all, of our available funds and any future earnings after this offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.

        Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no assurance that our ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.

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Substantial future sales or perceived potential sales of our ADSs, ordinary shares or other equity securities in the public market could cause the price of our ADSs to decline.

        Sales of our ADSs, ordinary shares or other equity securities in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have            ordinary shares outstanding, including            ordinary shares represented by ADSs, assuming the underwriters do not exercise their option to purchase additional shares. All ADSs representing our ordinary shares sold in this offering will be freely transferable by persons other than our "affiliates" without restriction or additional registration under the U.S. Securities Act of 1933, as amended, or the Securities Act. The remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of the 90-day lock-up period beginning from the date of this prospectus (if applicable to such holder), subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. Any or all of these shares may be released prior to the expiration of the lock-up period at the discretion of the representatives. To the extent shares are released before the expiration of the lock-up period and sold into the market, the market price of our ADSs could decline.

        Certain holders of our ordinary shares will have the right to cause us to register under the Securities Act the sale of their shares, subject to the 90-day lock-up period in connection with this offering. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market could cause the price of our ADSs to decline.

You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

        Except as described in this prospectus and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attached to ordinary shares represented by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attached to ordinary shares represented by the ADSs. Upon receipt of your voting instructions, the depositary will vote the underlying ordinary shares in accordance with these instructions. See "Description of Share Capital—Memorandum and Articles of Association—Voting Rights" and "Description of American Depositary Shares—Voting Rights."

        We cannot assure you that you will receive the voting materials in time to instruct the depositary to vote the ordinary shares underlying your ADSs, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will as a result not have the opportunity to exercise a right to vote. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. Although you may directly exercise your right to vote by withdrawing the ordinary shares underlying your ADSs, you may not be able to do so, on a timely basis or at all, to allow you to vote with respect to any specific matter.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings, and you may not receive cash dividends if it is impractical to make them available to you.

        We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such

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rights or securities or to endeavor to cause a registration statement, if filed, to be declared effective. There might not be an exemption from registration under the Securities Act available to us for our rights offering. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

        The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property to you.

You may be subject to limitations on transfer of your ADSs.

        Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law, we conduct substantially all of our operations in China and substantially all of our directors and officers reside outside the United States.

        We are incorporated in the Cayman Islands and conduct substantially all of our operations in China through our PRC subsidiaries and consolidated affiliated entity. Substantially all of our directors and officers reside outside the United States and a substantial portion of their assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities."

        Our corporate affairs are governed by our memorandum and articles of association, as amended and restated from time to time, and by the Companies Law (2012 Revision) and common law of the Cayman Islands. The rights of shareholders to take legal action against us and our directors, actions by minority shareholders and the fiduciary responsibilities of our directors are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which provides persuasive, but not binding, authority in a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to investors. In addition, shareholders in Cayman Islands companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.

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        As a result, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Our management has discretion as to the use of the net proceeds from this offering, and such use may not produce income or increase our ADS price.

        We intend to use the net proceeds of this offering to expand our fulfillment capabilities, further enhance our IT systems, as well as for general corporate purposes. However, our management will have considerable discretion in the application of the net proceeds received by us from this offering. For more information, see "Use of Proceeds." You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to maintain profitability or increase our ADS price. The net proceeds from this offering may be placed in investments that do not produce income or even depreciate.

Our memorandum and articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.

        Our third amended and restated memorandum and articles of association contain certain provisions that could limit the ability of third parties to acquire control of our company, including a provision that grants authority to our board directors to establish from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. The provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.

Our existing shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders.

        Upon the completion of this offering, our co-founders and shareholders, Mr. Eric Ya Shen and Mr. Arthur Xiaobo Hong, will beneficially own an aggregate of      % of our outstanding shares, and our pre-IPO investors will beneficially own an aggregate of      % of our outstanding shares, assuming the underwriters do not exercise their option to purchase additional ADSs.

        As a result, our existing shareholders have substantial influence over our business and corporate matters, including without limitation, decisions regarding mergers and consolidations, asset disposals and director elections. They may exercise their shareholder rights in a way that they believe is in their best interest, which may conflict with the interest of our other shareholders. These actions may be taken even if they are opposed by our other shareholders, including those who purchase ADSs in this offering. Our concentrated ownership structure may also discourage, delay or prevent a change in control of our company, which could deprive our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. For more information regarding our principal shareholders, see "Principal and Selling Shareholders."

We may be classified as a passive foreign investment company for United States federal income tax purposes, which could subject United States investors in the ADSs or ordinary shares to significant adverse United States income tax consequences.

        Depending upon the value of our ADSs and ordinary shares and the nature of our assets and income over time, we could be classified as a "passive foreign investment company", or "PFIC," for

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United States federal income tax purposes. Although the law in this regard is unclear, we treat Vipshop Information as being owned by us for United States federal income tax purposes, not only because we control its management decisions but also because we are entitled to substantially all of the economic benefits associated with this entity, and, as a result, we combine this entity's operating results in our consolidated financial statements. If it were determined, however, that we are not the owner of Vipshop Information for United States federal income tax purposes, we would likely be treated as a PFIC for the current taxable year or any future taxable year.

        Assuming that we are the owner of Vipshop Information for United States federal income tax purposes, and based upon our current income and assets (taking into account the proceeds from this offering) and projections as to the value of our ADSs and ordinary shares following the offering, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. While we do not expect to become a PFIC, if, among other matters, our market capitalization is less than anticipated or subsequently declines, we may be a PFIC for the current or future taxable years. The determination of whether we are or will be a PFIC will also depend, in part, on the composition of our income and assets, which will be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, including ascertaining the fair market value of our assets on a quarterly basis and the character of each item of income we earn, we can provide no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

        If we were to be classified as a PFIC in any taxable year, a U.S. Holder (as defined in "Taxation—Material United States Federal Income Tax Considerations") would be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of United States federal income tax that a U.S. Holder could derive from investing in a non-United States corporation that does not distribute all of its earnings on a current basis. Further, if we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares. For more information see the section titled "Taxation—Material United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations."

We incurred increased costs as a result of being a public company, and we cannot predict or estimate the amount of additional future costs we may incur or the timing of such costs.

        As a public company, we have incurred significant accounting, legal and other expenses that we did not incur when we were a private company, including additional costs associated with our public company reporting obligations. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the NYSE, requires significantly heightened corporate governance practices for public companies, including Section 404 relating to internal control over financial reporting. As a company with less than US$1.0 billion in revenues for our last fiscal year, we qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

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        We expect these and other rules and regulations applicable to public companies to increase our accounting, legal and financial compliance costs and to make certain corporate activities more time-consuming and costly. After we are no longer an "emerging growth company," we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with reasonable certainty the amount of additional costs we may incur or the timing of such costs.

        In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company's securities. If we were involved in a class action suit, it could divert a significant amount of our management's attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

        This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Industry Overview," "Business" and "Taxation." All statements other than statements of historical facts are forward-looking statements. Known and unknown risks, uncertainties and other factors, including those listed under "Risk Factors," may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

        You can identify some of these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "is/are likely to," "potential," "continue" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements relating to:

    our goals and strategies;

    our future business development, results of operations and financial condition;

    the expected growth of the online discount retail market in China;

    our ability to attract customers and brand partners and further enhance our brand recognition;

    our expectations regarding demand for and market acceptance of flash sales products and services;

    competition in our industry;

    fluctuations in general economic and business conditions in China; and

    assumptions underlying or related to any of the foregoing.

        These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Moreover, we operate in a continuously evolving environment. Additional risks and uncertainties that we have not considered or currently deem to be immaterial may adversely affect us. We cannot assess the impact of all risks on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should thoroughly read this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

        This prospectus also contains certain data and information, which we obtained from various government and private publications, including the Frost & Sullivan Report. Although we believe that the publications and reports are reliable, we have not independently verified the data. Statistical data in these publications includes projections that are based on a number of assumptions. If any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

        The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we refer to in this prospectus completely and with the understanding that our actual future results may be materially different from what we expect.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from this offering of approximately US$             million, or approximately US$             million if the underwriters exercise their option to purchase additional shares in full, after deducting underwriting discounts and commissions and US$             million in estimated offering expenses payable by us. These estimates are based upon an assumed public offering price of US$            per ADS (the closing trading price of our ADSs on the NYSE on                  , 2013). A US$1.00 increase or decrease in the assumed public offering price of US$         per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease the net proceeds to us from this offering by US$         million, after deducting the underwriting discount and estimated offering expenses payable by us and no other change to the number of ADSs offered by us as set forth on the cover page of this prospectus.

        We plan to use net proceeds of this offering as follows:

    approximately US$             million to fund capital expenditures for expanding our logistics network and fulfillment capabilities;

    approximately US$             million to fund capital expenditures for further enhancing our IT systems and infrastructure, including mobile technologies; and

    the balance for general corporate purposes, including funding working capital and potential investments in and acquisitions of complementary businesses, although we are not currently negotiating any such transactions.

        The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that a certain portion or all of the net proceeds we receive from this offering are not immediately applied for the above purposes, we plan to invest the net proceeds in short-term interest-bearing debt instruments or bank deposits.

        In using the proceeds of this offering, as an offshore holding company, we are permitted under the PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions and to our PRC consolidated affiliated entity only through loans, subject to satisfaction of applicable government registration and approval requirements. Capital contributions to our PRC subsidiaries must be approved by the PRC Ministry of Commerce or its local counterpart and then registered with the State Administration for Industry and Commerce, or the SAIC, or its local counterpart. The PRC Ministry of Commerce or its local counterpart is generally required to process the relevant approvals or deny our applications within 90 working days and the SAIC or its local counterpart is required to process the relevant registrations or deny our applications within 15 working days. Loans extended by us to Vipshop China cannot exceed statutory limits and must be registered with the SAFE or its local branch. The SAFE or its local branch is required to process the relevant registrations or deny our applications within 20 working days. The actual time taken, however, may be longer due to administrative delays. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. If we fail to satisfy these requirements on a timely basis, our ability to remit the funds received from this offering to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business. See "Risk Factors—Risks Relating to Doing Business in China—PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to Vipshop China in China."

        We will not receive any of the proceeds from the sale of the ADSs by the selling shareholders.

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DIVIDEND POLICY

        We have not paid in the past and do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

        Our board of directors has discretion as to whether to distribute dividends, subject to the approval of our shareholders and applicable laws. Even if our board of directors decides to declare dividends, their form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual and statutory restrictions and other factors that the board of directors may deem relevant.

        Holders of our ADSs will be entitled to receive dividends, if any, subject to the terms of the deposit agreement, to the same extent as the holders of our ordinary shares. Cash dividends will be paid to the depositary of our ADSs in U.S. dollars, which will distribute them to the holders of ADSs according to the terms of the deposit agreement. Other distributions, if any, will be paid by the depositary to the holders of ADSs in any means it deems legal, fair and practical. See "Description of American Depositary Shares."

        We are a holding company incorporated in the Cayman Islands. We principally rely on dividends from our subsidiaries in China and Hong Kong for our cash needs. To pay dividends to us, our subsidiaries in China and Hong Kong need to comply with the applicable regulations. See "Risk Factors—Risks Relating to Doing Business in China—We principally rely on dividends and other distributions on equity paid by Vipshop China in China to fund our cash and financing requirements, and any limitation on the ability of Vipshop China to make payments to us could have a material adverse effect on our ability to conduct our business."

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CAPITALIZATION

        The following table sets forth our capitalization as of December 31, 2012:

    on an actual basis; and

    on an as adjusted basis to reflect the sale of                ordinary shares in the form of ADSs by us at the public offering price of US$          per ADS (based on the last sale price of our ADSs on                  , 2013), and assuming that the underwriters do not exercise their option to purchase additional ADSs in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

        You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of December 31, 2012  
 
  Actual   As Adjusted(2)  
 
  (US$)
 

Loans due to a shareholder(1)

    789,700     789,700  

Equity:

             

Ordinary shares US$0.0001 par value, 471,620,833 shares authorized; 101,284,881 shares issued and outstanding,             shares issued and outstanding on an as adjusted basis

    10,128        

Additional paid-in capital

    258,368,448        

Accumulated losses

    (176,025,335 )   (176,025,335 )

Accumulated other comprehensive income

    229,573     229,573  
           

Total shareholders' equity

    82,582,814        
           

Total capitalization(3)

    83,372,514        
           

(1)
Loans due to a shareholder was unsecured, interest free and repayable upon demand.

(2)
The as adjusted information discussed above is illustrative only. A US$1.00 increase or decrease in the assumed public offering price of US$             per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease the amounts representing total shareholders' equity and total capitalization by US$         million, after deducting the underwriting discount and estimated offering expenses payable by us and assuming no exercise of the underwriter's option to purchase additional ADSs from us.

(3)
Total capitalization is the sum of loans due to a shareholder and total shareholders' equity.

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DILUTION

        Our net tangible book value as of December 31, 2012 was approximately US$0.82 per ordinary share and US$1.63 per ADS. Net tangible book value per ordinary share represents the amount of total tangible assets, minus the amount of total liabilities, divided by the total number of ordinary shares outstanding. Dilution is determined by subtracting net tangible book value per ordinary share and the additional proceeds we will receive from this offering from the assumed offering price per ordinary share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

        Without taking into account any other changes in such net tangible book value after December 31, 2012, other than to give effect to the estimated net proceeds we will receive from the issuance and sale of                    ADSs in this offering at the assumed offering price of US$            per ADS (based on the last sale price of our ADSs on                 , 2013 as reported by the NYSE), after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2012 would have been US$            per outstanding ordinary share, or US$            per ADS. This represents an immediate increase in net tangible book value of US$            or       % per ordinary share, or US$            or      % per ADS, to our existing shareholders and an immediate dilution in net tangible book value of US$            or       % per ordinary share, or US$            or      % per ADS, to investors purchasing ADSs in this offering.

        Assuming the underwriters' option to purchase additional shares is exercised in full, our as adjusted net tangible book value as of December 31, 2012 would have been US$            per outstanding ordinary share, or US$            per ADS. This represents an immediate increase in net tangible book value of US$            or      % per ordinary share, or US$            or      % per ADS, to our existing shareholders and an immediate dilution in net tangible book value of US$            or      % per ordinary share, or US$            or      % per ADS, to investors purchasing ADSs in this offering.

        The following table illustrates such dilution, assuming either no exercise or full exercise at the underwriters' option to purchase additional shares:

 
  No Exercise   Full Exercise

Assumed public offering price per ordinary share

       

Net tangible book value per ordinary share as of December 31, 2012

       

As adjusted net tangible book value per ordinary share as of December 31, 2012, to give effect to this offering

       

Amount of dilution in net tangible book value per ordinary share to investors purchasing ADSs in this offering

       

Amount of dilution in net tangible book value per ADS to investors purchasing ADSs in this offering

       

        A US$1.00 change in the assumed public offering price of US$            per ADS would, in the case of an increase, increase and, in the case of a decrease, decrease our as adjusted net tangible book value as described above by US$         million, the net tangible book value per ordinary share and per ADS by US$            per ordinary share and by US$            per ADS, and the dilution per ordinary share and per ADS to new investors in this offering by US$ per ordinary share and US$            per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual public offering price of our ADSs and other terms of this offering determined at pricing.

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        The following table summarizes, on an as adjusted basis as of December 31, 2012, the differences between the existing shareholders as of December 31, 2012, and the new investors with respect to the number of ordinary shares purchased from us in this offering, the total consideration paid and the average price per ordinary share paid at the assumed public offering price of US$            per ADS, before deducting estimated underwriting discounts and commissions and estimated offering expenses.

 
  Ordinary Shares
Purchased
  Total
Consideration
   
   
 
  Average
Price Per
Ordinary
Share
   
 
  Average
Price Per
ADSs
 
  Number   Percent   Amount   Percent

Existing shareholders

                       

New investors in this offering

                       
                         

Total

                       

        As of the date of this prospectus, there were 9,105,342 ordinary shares issuable upon exercise of outstanding stock options and vesting of restricted shares at a weighted average exercise price of US$0.97 per ordinary share, and there were 7,465,842 ordinary shares available for future issuance upon the exercise of future grants under our stock incentive plans. To the extent that any of these options are exercised, there will be further dilution to new investors.

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MARKET PRICE INFORMATION FOR OUR ADSs

        Our ADSs, each representing two of our ordinary shares, have been listed on the NYSE since March 23, 2012. Our ADSs trade under the symbol "VIPS." The following table provides the high and low trading prices for our ADSs on the NYSE for the periods indicated.

        The last reported trading price for our ADSs on the NYSE on February 20, 2013 was US$23.36 per ADS.

 
  Trading Price
Per ADS
 
 
  High
(US$)
  Low
(US$)
 

Monthly High and Low

             

February 2013 (through February 20, 2013)

    26.19     18.03  

January 2013

    22.81     15.65  

December 2012

    19.31     11.75  

November 2012

    13.96     9.9  

October 2012

    10.67     7.19  

September 2012

    7.67     5.72  

August 2012

    6.1     4.76  

Quarterly High and Low

             

First Quarter 2013 (through February 20, 2013)

    26.19     15.65  

Fourth Quarter 2012

    19.31     7.19  

Third Quarter 2012

    7.67     4.76  

Second Quarter 2012

    6.38     4.12  

First Quarter 2012 (from March 23, 2012 to March 31, 2012)

    6.23     4.25  

Annual High and Low

             

2012 (from March 23, 2012 to December 31, 2012)

    19.31     4.12  

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ENFORCEABILITY OF CIVIL LIABILITIES

        We were incorporated in the Cayman Islands in order to enjoy certain benefits, such as political and economic stability, a favorable tax system, the absence of exchange control or currency restrictions and the availability of professional and support services. However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include a less developed body of Cayman Islands securities laws that provide significantly less protection to investors as compared to the laws of the United States, and the potential lack of standing by Cayman Islands companies to sue before the federal courts of the United States.

        Our organizational documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

        Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. A majority of our officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

        We have appointed Law Debenture Corporate Services Inc., as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

        Han Kun Law Offices, our counsel as to PRC law, has advised us that there is uncertainty as to whether the courts of China would:

    recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

    entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

        Han Kun Law Offices has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

        Han Kun Law Offices has also advised us that in the event that shareholders originate an action against a company in China for disputes related to contracts or other property interests, the PRC court may accept a course of action if (a) the subject of the action is located within the PRC, (b) the company (as defendant) has seizable properties within the PRC, (c) the company has a representative organization within the PRC, or (d) the parties choose to submit to jurisdiction of PRC court in the contract. The action may be initiated by the shareholder through filing a complaint with the PRC court. The PRC court will determine whether to accept the complaint in accordance with the PRC Civil

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Procedures Law. The shareholder may participate in the action by itself or entrust any other person or PRC legal counsel to participate on behalf of such shareholder. Foreign citizens and companies will have the same right as PRC citizens and companies in an action unless such foreign country restricts rights of PRC citizens and companies.

        Travers Thorp Alberga, our counsel as to Cayman Islands law, has advised us that there is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in the circumstances described below, recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. While there is no binding authority on this point, this is likely to include, in certain circumstances, a non-penal judgment of a United States court imposing a monetary award based on the civil liability provisions of the U.S. federal securities laws.

        Travers Thorp Alberga has further advised us that a judgment obtained in the United States will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere. Neither the United States or the PRC has a treaty with the Cayman Islands providing for reciprocal recognition and enforcement of judgments of courts of the United States or the PRC respectively in civil and commercial matters.

        Travers Thorp Alberga has also advised us that any shareholder of a company incorporated in the Cayman Islands may bring an action on behalf of the company within the jurisdiction of the Cayman Islands to enforce a right vested in the company. The process of bringing an action by a shareholder is begun by issuing a writ. This action must be performed by local Cayman Islands legal counsel on behalf of the shareholder, who will act on the shareholders' behalf during the entire litigation process. The residency or citizenship of a shareholder does not impact a shareholder's ability to bring an action in the Cayman Islands.

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OUR CORPORATE HISTORY AND STRUCTURE

        We are a holding company incorporated in the Cayman Islands and conduct our business through our subsidiaries and consolidated affiliated entity in China. We started our operations in August 2008 when our founders established Vipshop Information in China. In order to facilitate foreign investment in our company, our founders incorporated Vipshop Holdings Limited, an offshore holding company in Cayman Islands, in August 2010. In October 2010, Vipshop Holdings established Vipshop HK, a wholly owned subsidiary, in Hong Kong. Subsequently, Vipshop HK established a wholly owned PRC subsidiary, Vipshop China, in January 2011.

        During 2011 and 2012, Vipshop China established the five wholly owned PRC subsidiaries to support our regional business expansion, namely, Vipshop Kunshan, Vipshop Jianyang, Vipshop Beijing, Vipshop Tianjin and Pinwei Software.

        The following diagram illustrates our corporate structure as of the date of this prospectus:

GRAPHIC


(1)
Shareholders of Vipshop Information include our co-founders and shareholders Eric Ya Shen, Arthur Xiaobo Hong, Bin Wu and Xing Peng, holding 52.0%, 26.0%, 11.6% and 10.4% of the total equity interests in Vipshop Information, respectively.

(2)
An intermediary holding company.

(3)
A subsidiary primarily engaged in warehousing, logistics, product procurement, research and development, technology development and consulting businesses.

(4)
Subsidiaries primarily engaged in warehousing and logistics businesses in the respective cities of Chengdu, Kunshan, Beijing and Tianjin and their respective nearby regions.

(5)
A subsidiary primarily engaged in software development and information technology support.

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        Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government regulates internet access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and other government regulations. We are a Cayman Islands company and our PRC subsidiary, Vipshop China, is a wholly foreign owned enterprise. As a wholly foreign owned enterprise, Vipshop China is restricted from holding the licenses that are necessary for our online operation in China. To comply with these restrictions, we conduct our operations partly through Vipshop Information, our consolidated affiliated entity in China. Vipshop Information operates our website and holds the licenses necessary to conduct our internet-related operations in China.

        Our wholly owned subsidiary Vipshop China has entered into a series of contractual arrangements with our consolidated affiliated entity, Vipshop Information, and its shareholders, which enable us to:

    exercise effective control over Vipshop Information;

    receive substantially all of the economic benefits of Vipshop Information through service fees, which are equal to 100% of Vipshop Information's net income and may be adjusted at Vipshop China's sole discretion, in consideration for the technical and consulting services provided by Vipshop China; and

    have an exclusive option to purchase, or designate one or more person(s) to purchase, all of the equity interests in Vipshop Information to the extent permitted under PRC laws, regulations and legal procedures.

        We do not have any equity interest in Vipshop Information. However, as a result of contractual arrangements, we are considered the primary beneficiary of Vipshop Information, and we treat it as our consolidated affiliated entity under U.S. GAAP. We have consolidated the financial results of Vipshop Information in our consolidated financial statements included in this prospectus in accordance with U.S. GAAP.

        We face risks with respect to the contractual arrangements with our consolidated affiliated entity and its shareholders. If our consolidated affiliated entity or its shareholders fail to perform their obligations under the contractual arrangements, our ability to enforce the contractual arrangements that give us effective control over the consolidated affiliated entity may be limited. If we are unable to maintain effective control over our consolidated affiliated entity, we would not be able to continue to consolidate its financial results. The revenues generated by our directly owned subsidiaries, apart from revenues earned in respect of the relevant contractual arrangements with Vipshop Information, are primarily derived from our product promotion activities for brands. In the years ended December 31, 2010, 2011 and 2012, our subsidiaries contributed in aggregate approximately nil, 0.37% and 0.02%, respectively, of our total consolidated net revenues, exclusive of revenues derived from Vipshop Information. As of December 31, 2010, 2011 and 2012, our holding company and our subsidiaries accounted for an aggregate of nil, 63.70% and 56.53%, respectively, of our consolidated total assets (excluding assets attributable to transactions with Vipshop Information). For a detailed description of the regulatory environment that necessitates the adoption of our corporate structure, see "Regulations." For a detailed description of the risks associated with our corporate structure, see "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry."

        The following is a summary of the material provisions of the agreements among our wholly owned PRC subsidiary Vipshop China, our consolidated affiliated entity Vipshop Information and the shareholders of Vipshop Information. For more complete information you should read these agreements in their entirety. Directions on how to obtain copies of these agreements are provided in this prospectus under "Where You Can Find Additional Information."

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Contractual Arrangements with Our Consolidated Affiliated Entity

Agreements that Provide Us Effective Control over Our Consolidated Affiliated Entity

        Equity Interest Pledge Agreement.    Under the amended and restated pledge agreement among Vipshop China, Vipshop Information and its shareholders, the shareholders of Vipshop Information pledged all of their equity interests in Vipshop Information to Vipshop China to guarantee Vipshop Information's performance of its obligations under the exclusive business cooperation agreement. If any event of default as provided for therein occurs, including the failure by Vipshop Information to perform its contractual obligations under the exclusive business cooperation agreement, Vipshop China, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests. Without Vipshop China's prior written consent, shareholders of Vipshop Information shall not transfer or otherwise dispose of, or create or allow the creation of any encumbrance on the pledged equity interests. The equity interest pledge agreement will remain in full force and effect until all of the obligations of Vipshop Information under the exclusive business cooperation agreement have been duly performed or terminated. We have completed registering the pledge of the equity interests in Vipshop Information with the local branch of the State Administration for Industry and Commerce.

        Exclusive Option Agreement.    Under the amended and restated exclusive option agreement among Vipshop China, Vipshop Information and the shareholders of Vipshop Information, Vipshop Information's shareholders grant Vipshop China an exclusive option to purchase, or designate one or more person(s) to purchase, all or part of their respective equity interests in Vipshop Information at a purchase price of RMB10, subject to any adjustments as may be required by the applicable PRC laws and regulations at the time. Vipshop China may exercise the option by issuing a written notice to Vipshop Information. Without Vipshop China's written consent, Vipshop Information and its shareholders may not transfer, sell, pledge or otherwise dispose of, or create any encumbrance on, any assets, business or equity or beneficiary interests of Vipshop Information. This agreement will remain in full force and effect for a term of ten years from the date of execution and may be extended for a period to be determined by Vipshop China.

        Powers of Attorney.    Under the powers of attorney, the shareholders of Vipshop Information each irrevocably appointed Vipshop China as their attorney-in-fact to act on their behalf and exercise all of their rights as shareholders of Vipshop Information, including the right to attend shareholder meetings, to exercise voting rights, to appoint directors and senior management of Vipshop Information, and to effect transfers of all or part of their equity interests in Vipshop Information pursuant to the equity interest pledge agreements and exclusive option agreements. Vipshop China has the right to appoint any individual or entity to exercise the power of attorney on its behalf. Each power of attorney will remain in full force and effect until the shareholder ceases to hold any equity interests in Vipshop Information.

Agreements that Transfer Economic Benefits to Us

        Exclusive Business Cooperation Agreement.    Under the amended and restated exclusive business cooperation agreement between Vipshop China and Vipshop Information, Vipshop Information agrees to engage Vipshop China as its exclusive provider of technical, consulting and other services in relation to its business operations. In consideration of such services, Vipshop Information will pay to Vipshop China service fees which amount to all of Vipshop Information's net income. The service fees may be adjusted at Vipshop China's sole discretion based on the services rendered and the operational needs of Vipshop Information. Vipshop Information contributed approximately 100%, 99.63% and 99.98%, respectively, of our total consolidated net revenues in the years ended December 31, 2010, 2011 and 2012. Vipshop China shall exclusively own any intellectual property arising from the performance of this agreement. The term of this agreement is ten years from the execution date of October 8, 2011 and may be extended for a period to be determined by Vipshop China. Vipshop China may terminate

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this agreement at any time by giving 30 days prior written notice. Vipshop Information has no right to terminate this agreement unless Vipshop China commits gross negligence or fraud.

        Exclusive Purchase Framework Agreement.    Under the exclusive purchase framework agreement between Vipshop China and Vipshop Information, Vipshop Information agrees to purchase products or services exclusively from Vipshop China or its subsidiaries. Vipshop Information and its subsidiaries must not purchase from any third party products or services that Vipshop China is capable of providing. Vipshop Information must pay Vipshop China for its products an amount, which includes a service fee, based on the unit price and the quantity of the products ordered by Vipshop Information, within five days after receipt of invoices issued by Vipshop China. The term of this agreement is five years from September 1, 2011. If neither party objects in writing and both parties remain cooperating at the expiration of the agreement, the parties will continue to be bound by this agreement until a new agreement is entered into. Vipshop China may terminate this agreement at any time by giving 15 days prior written notice. Vipshop Information has no right to terminate this agreement unless Vipshop China commits gross negligence or fraud.

        In October 2012, we effected transfer of 10.4% of equity interest from one of the former shareholder of Vipshop Information to Mr. Eric Ya Shen, our co-founder, chief executive officer and an existing shareholder of Vipshop Information, and amended the original contractual arrangements we had with Mr. Shen to reflect this transfer. As of December 31, 2012, shareholders of Vipshop Information include our co-founders and shareholders Eric Ya Shen, Arthur Xiaobo Hong, Bin Wu and Xing Peng, holding 52.0%, 26.0%, 11.6% and 10.4% of the total equity interests in Vipshop Information, respectively.

        In the opinion of Han Kun Law Offices, our PRC legal counsel:

    the ownership structures of our consolidated affiliated entity and Vipshop China comply with all existing PRC laws and regulations;

    the contractual arrangements among Vipshop China and Vipshop Information and its shareholders that are governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and

    each of Vipshop China and our consolidated affiliated entity has all necessary corporate power and authority to conduct its business as described in its business scope under its business license. The business licenses of Vipshop China and our consolidated affiliated entity are in full force and effect. Each of Vipshop China and our consolidated affiliated entity is capable of suing and being sued and may be the subject of any legal proceedings in PRC courts. To the best of Han Kun Law Offices' knowledge after due inquires, none of Vipshop China, our consolidated affiliated entity or their respective assets is entitled to any immunity, on the grounds of sovereignty, from any action, suit or other legal proceedings; or from enforcement, execution or attachment.

        We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC legal counsel that if the PRC government finds that the agreements that establish the structure for operating our online commerce and the distribution of internet content in China do not comply with relevant PRC government restrictions on foreign investment in value-added telecommunication, we could be subject to severe penalties, including being prohibited from continuing operations. See "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry—Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to online commerce and the distribution of internet content in China. If the PRC government finds that the structure we have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our website." and "Risk Factors—Risks Relating to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us."

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

        You should read the following information concerning us in conjunction with our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        Our selected consolidated statements of income (loss) data presented below for the years ended December 31, 2010, 2011 and 2012 and our selected consolidated balance sheets data as of December 31, 2011 and 2012 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our selected consolidated statements of income (loss) data presented below for the period from August 22 to December 31, 2008 and 2009 and our selected consolidated balance sheet data as of December 31, 2008, 2009 and 2010 have been derived from our audited consolidated financial statements not included in this prospectus. Our audited consolidated financial statements are prepared in accordance with U.S. GAAP. Our historical results for any period presented are not necessarily indicative of results to be expected for any future period.

 
  For the period
from August 22
to December 31,
2008(1)
  For the year ended December 31,  
 
  2009   2010   2011   2012  
 
  US$   US$   %   US$   %   US$   %   US$   %  
 
  (in US$, except percentages and number of shares and per share data)
 

Selected Consolidated Statements of Income (Loss) Data:

                                                       

Net revenues

    1,087     2,804,830     100.0     32,582,115     100.0     227,142,876     100.0     692,112,964     100.0  

Cost of goods sold(2)

    (886 )   (2,576,191 )   (91.8 )   (29,374,315 )   (90.2 )   (183,801,334 )   (80.9 )   (537,637,860 )   (77.7 )
                                       

Gross profit

    201     228,639     8.2     3,207,800     9.8     43,341,542     19.1     154,475,104     22.3  

Operating expenses(3):

                                                       

Fulfillment expenses(4)

    (84,641 )   (611,333 )   (21.8 )   (5,809,118 )   (17.8 )   (45,478,327 )   (20.0 )   (96,523,444 )   (13.9 )

Marketing expenses

        (303,509 )   (10.8 )   (2,438,066 )   (7.5 )   (15,253,325 )   (6.7 )   (32,272,629 )   (4.7 )

Technology and content expenses

    (8,480 )   (103,235 )   (3.7 )   (562,120 )   (1.7 )   (5,516,361 )   (2.4 )   (14,644,113 )   (2.1 )

General and administrative expenses

    (226,145 )   (650,786 )   (23.2 )   (2,843,583 )   (8.7 )   (84,575,539 )   (37.3 )   (25,541,812 )   (3.7 )
                                       

Total operating expenses

    (319,266 )   (1,668,863 )   (59.5 )   (11,652,887 )   (35.7 )   (150,823,552 )   (66.4 )   (168,981,998 )   (24.4 )

Other income

    3,596     59,470     2.1     78,675     0.2     564,182     0.2     2,563,321     0.4  
                                       

Loss from operations

    (315,469 )   (1,380,754 )   (49.2 )   (8,366,412 )   (25.7 )   (106,917,828 )   (47.1 )   (11,943,573 )   (1.7 )
                                       

Loss before income tax

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (8,765,901 )   (1.3 )

Income tax expenses

                                (706,173 )   (0.1 )
                                       

Net loss

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (9,472,074 )   (1.4 )

Deemed dividend on issuance of Series A Preferred Shares

                        (49,214,977 )   (21.7 )        
                                       

Net loss attributable to ordinary shareholders

    (315,426 )   (1,380,707 )   (49.2 )   (8,365,848 )   (25.7 )   (156,486,502 )   (68.9 )   (9,472,074 )   (1.4 )
                                       

Net loss per share:

                                                       

Basic

    (0.01 )   (0.03 )       (0.18 )       (3.38 )       (0.11 )    

Diluted

    (0.01 )   (0.03 )       (0.18 )       (3.38 )       (0.11 )    

Weighted average number of shares used in computing net loss per share:

                                                       

Basic

    47,775,000     47,775,000           47,775,000           46,255,574           88,849,206        

Diluted

    47,775,000     47,775,000           47,775,000           46,255,574           88,849,206        

Net loss per ADS(5)

                                                       

Basic

    (0.01 )   (0.06 )       (0.35 )       (6.77 )       (0.21 )    

Diluted

    (0.01 )   (0.06 )       (0.35 )       (6.77 )       (0.21 )    

(1)
We commenced operations in August 2008 but only commenced sales of our products on our vipshop.com website in December 2008. We incurred significant operating expenses and generated limited sales in the period from August 22 to

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    December 31, 2008. As a result, percentages for this period are not meaningful for investors to evaluate our results of operations and are not presented in this table.

(2)
Excluding shipping and handling expenses, and including inventory write down which amounted to nil, US$31.7 thousand, US$2.6 million, US$1.7 million and US$12.2 million in the period from August 22 to December 31, 2008, and the years ended December 31, 2009, 2010, 2011 and 2012, respectively.

(3)
Including share-based compensation expenses as set forth below:

 
  For the period
from August 22
to December 31,
2008
  For the year ended December 31,  
 
  2009   2010   2011   2012  
 
  (in US$)
 

Allocation of share-based compensation expenses*:

                               

Fulfillment expenses

                297,095     292,866  

Marketing expenses

                184,404     169,100  

Technology and content expenses

                729,420     897,133  

General and administrative expenses

                72,716,983     6,237,850  
                       

Total

                73,927,902     7,596,949  
                       

*
The share-based compensation expenses for 2011 included (a) US$63.9 million in share-based compensation expenses in connection with the unvested shares of our co-founders; (b) US$6.2 million in shared-based compensation expenses in connection with a transfer of ordinary shares between our co-founders; and (c) US$3.8 million share-based compensation expenses in connection with share options granted to executive officers and employees. In addition, unrecognized share-based compensation expenses as of December 31, 2011 were US$19.8 million, which were related to the unvested share options granted to our executive officers and employees. The unrecognized share-based compensation expenses were expected to be recognized over a weighted-average period of 3.06 years on a straight-line basis as of December 31, 2011. The share-based compensation expenses for 2012 included US$7.6 million share-based compensation expenses in connection with share options and non-vested shares granted to our executive officers, independent directors, employees and a consultant. The unrecognized share-based compensation expenses related to share options and non-vested shares were US$14.5 million and US$2.1 million, and were expected to be recognized over a weighted-average period of 2.45 years and 3.62 years on a straight-line basis as of December 31, 2012 respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Share-Based Compensation" for details.
(4)
Including shipping and handling expenses, which amounted to US$157, US$0.3 million, US$4.3 million, US$29.4 million and US$53.9 million in the period from August 22 to December 31, 2008, and the years ended December 31, 2009, 2010, 2011 and 2012, respectively.

(5)
Each ADS represents two ordinary shares.

 
  As of December 31,  
 
  2008   2009   2010   2011   2012  
 
   
   
  (in US$)
   
   
 

Selected Consolidated Balance Sheets Data:

                               

Cash and cash equivalents

    12,258     287,720     1,111,091     44,954,778     124,472,629  

Total current assets

    125,574     2,584,046     15,567,836     158,278,041     381,952,106  

Total assets

    229,720     2,739,835     17,132,690     167,435,320     398,917,120  

Total liabilities

    399,404     4,289,798     27,244,271     149,146,118     316,334,306  

Total shareholders' (deficit) equity

    (169,684 )   (1,549,963 )   (10,111,581 )   18,289,202     82,582,814  

        The following table presents selected operating data for the periods indicated:

 
  For the year ended December 1,  
 
  2009   2010   2011   2012  

New active customers (in thousands)

    38     255     1,330     3,307  

Repeat customers (in thousands)

    14     155     903     2,625  

Total orders (in thousands)

    71     927     7,269     21,919  

Orders placed by repeat customers (in thousands)

    47     804     6,681     20,457  

Brand partners

    76     411     1,075     2,759  

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled "Selected Consolidated Financial and Operating Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

Overview

        We are China's leading online discount retailer for brands as measured by total revenues in 2011, the number of registered members as of December 31, 2012 and the number of monthly unique visitors in December 2012, according to the Frost & Sullivan Report. We offer high-quality branded products to consumers in China through flash sales on our vipshop.com website.

        Since our inception in August 2008, we have attracted a large and growing number of customers and popular brands. As of December 31, 2012, we had 26.8 million registered members and over 4.9 million cumulative customers, and have promoted and sold products for over 5,800 domestic and international brands. We have built a highly engaged and loyal customer base that contributes to our growth and also enables us to attract new customers primarily through word-of-mouth referrals. A majority of our customers have placed orders to purchase products from us more than once. Orders placed by our repeat customers accounted for 86.7%, 91.9% and 93.2% of our total orders in 2010, 2011 and 2012, respectively.

        We began our operations in August 2008 and have grown significantly since then. In 2010, 2011 and 2012, we fulfilled over 0.9 million, over 7.2 million and over 21.9 million customer orders, respectively, and we generated total net revenues of US$32.6 million, US$227.1 million and US$692.1 million, respectively. In 2010, 2011 and 2012, we incurred net losses of US$8.4 million, US$107.3 million and US$9.5 million, respectively. Our net loss in 2011 and 2012 reflected non-cash share-based compensation expenses in an aggregate amount of US$73.9 million and US$7.6 million, respectively. We recorded net profit of US$6.3 million in the fourth quarter of 2012, the first time we achieved profitability after tax.

Key Factors Affecting Our Results of Operations

        Our business and operating results are affected by general factors affecting the online retail market in China, including China's overall economic growth, the increase in per capita disposable income, the growth in consumer spending and retail industry and the expansion of internet penetration. Unfavorable changes in any of these general factors could affect the demand for products we sell and could materially and adversely affect our results of operations.

        Our results of operations are also affected by the regulations and industry policies related to the online retail market. Although we have generally benefited from the Chinese government's policies to encourage economic growth, we are also affected by the complexity, uncertainties and changes in the PRC regulation of the internet industry. Due to PRC legal restrictions on foreign equity ownership of and investment in the online retail sector in China, we rely on contractual arrangements with our consolidated affiliated entity, Vipshop Information, and its shareholders to conduct most of our business in China. We face risks associated with our control over our consolidated affiliated entity, as our control is based upon contractual arrangements rather than equity ownership. For a description of these contractual arrangements, see "Our Corporate History and Structure." For a detailed description of the regulatory environment that necessitates the adoption of our corporate structure, see

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"Regulations." For a detailed description of the risks associated with our corporate structure, see "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry."

        While our business is influenced by general factors affecting our industry, our operating results are more directly affected by certain company specific factors, including:

Our Ability to Attract and Retain Customers

        Attracting and retaining customers has been our key focus since our inception. We measure our effectiveness in attracting and retaining customers through several key performance indicators, including our active customers, repeat customers, total orders and orders placed by repeat customers. The following table sets forth these indicators for the periods presented:

 
  For the year ended
December 31,
 
 
  2010   2011   2012  
 
  (in thousands)
 

Active customers

    276     1,491     4,110  

Repeat customers

    155     903     2,625  

Total orders

    927     7,269     21,919  

Orders placed by repeat customers

    804     6,681     20,457  

        Our growth has been driven by increases in all four key performance indicators set forth above. The increase in our active customers has been primarily attributable to the growth of the number of our registered members from 1.2 million in 2010 to 12.1 million in 2011 and to 26.8 million in 2012. The increase in our total orders has primarily resulted from the increase in orders placed by repeat customers. In 2010, 2011 and 2012, 86.7% , 91.9% and 93.2%, respectively, of our total orders were placed by repeat customers. Our total number of repeat customers was 0.2 million, 0.9 million and 2.6 million in 2010, 2011 and 2012, respectively, representing 56.2%, 60.6% and 63.9%, respectively, of the total number of our active customers during the same periods. As our business is still at a high growth phase and in light of our ability to develop a highly engaged and loyal customer base, we expect continuing growth in all four key performance indicators set forth above in the foreseeable future.

Our Ability to Establish and Maintain Relationships with Brand Partners

        It is crucial for us to establish and maintain mutually beneficial relationships with our brand partners. We rely on our relationships with brand partners to offer products and services that appeal to our existing and potential customers. In particular, our ability to source popular and high quality products and services, as well as our ability to offer them at attractive prices, depends on our ability to develop mutually beneficial relationships with our brand partners. Our results of operations and financial condition are also significantly affected by the pricing, return and deposit terms we negotiate with and obtain from our brand partners.

    Availability, popularity and quality.  We rely on our brand partners to make available sufficient quantities of high quality products for offering on our vipshop.com website. In the years ended December 31, 2010, 2011 and 2012, we offered 0.5 million, 1.2 million and 5.1 million SKUs for sale and organized 1,354, 11,549 and 29,207 sales events on our website, respectively. For the three months ended December 31, 2012, we organized an average of 2,874 sales events on our website per month. By December 31, 2012, we had promoted and sold products for over 5,800 domestic and international brands. As we continue to focus on building long-term relationships with our brand partners, we plan to implement framework agreements with our brand partners with supplemental supply orders and to engage more brand partners on an exclusive basis.

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    Pricing.  Our ability to offer our products at deeply discounted prices depends heavily on our ability to negotiate favorable pricing terms with our brand partners. Our revenues and profit margins would be materially and adversely affected if we fail to secure adequate supplies of quality products at favorable pricing terms from our brand partners.

    Return and deposit.  We seek to minimize our working capital requirements and the liquidity risk of our operations. Our agreements with brand partners typically contain contractual rights to return unsold items to our brand partners on an unconditional basis. In addition, we seek to enter into long-term relationships with our brand partners and to pay lower deposits on the inventory we purchase from brand partners. Our ability to obtain favorable return and deposit terms depends on our ability to maintain favorable relationships with our brand partners.

        To date, our customers and brand partners have been increasing in parallel as a result of the powerful network effects achieved through our online discount retail model. As we gain more customers and achieve greater sales volumes, we have emerged as a channel capable of selling significant volumes of discounted branded products in a very short period of time. In turn, our sales capability allows us to attract more brands and products, which further helps us attract more customers.

Our Ability to Invest in Growth while Improving Operating Efficiency

        We are a fast-growing company and we have proactively invested, and intend to continue making necessary investments to support our growth. We are adding more logistics centers and establishing our own in-house delivery capabilities. We intend to improve our IT systems, upgrade our web-interface and enhance mobile functionality. We also plan to continue marketing and promoting our vipshop.com brand. As a result, the availability of financing and resources for our expansion plans, as well as our ability to control expenses associated with our business growth is key to our operating results. Our total operating expenses represented 35.7%, 66.4% and 24.4% of our total net revenues in 2010, 2011 and 2012, respectively. Our total operating expenses for 2011 and 2012 included share-based compensation expenses of US$73.9 million and US$7.6 million, respectively. Excluding share-based compensation expenses, our total operating expenses represented 33.9% and 23.3% of our total net revenues on a non-GAAP basis in 2011 and 2012, respectively. We expect our operating expenses to increase in absolute terms in the foreseeable future in light of our anticipated expansion and investment plans. As our business further grows, we believe we will be able to take advantage of economies of scale and the strength of our online business model to further improve our operating efficiency over time.

Key Components of Results of Operations

Net Revenues

        We derive revenues from the sale of products offered on our website. Generally, we offer our customers an unconditional right of returning products purchased for a period of seven days upon receipt of products, and the associated revenues are recognized when the return period expires. Our net revenues are recorded net of value added tax and related surcharges.

        The following table sets forth the key factors that directly affect our net revenues for the periods indicated:

 
  For the year ended
December 31,
 
 
  2010   2011   2012  

Active customers (in thousands)

    276     1,491     4,110  

Average net revenues per active customer (US$)

    118     152     168  

Total orders (in thousands)

    927     7,269     21,919  

Average orders per active customer

    3.3     4.9     5.3  

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Cost of Goods Sold

        Our cost of goods sold consists of cost of merchandise sold and inventory write-downs. We procure inventory from our brand partners and our inventory is recorded at the lower of cost or estimated marketable value. Cost of inventory is determined using the identified cost of the specific item sold.

Operating Expenses

        Our operating expenses consist of (a) fulfillment expenses, (b) marketing expenses, (c) technology and content expenses and (d) general and administrative expenses. The following table sets forth the components of our operating expenses both in absolute amount and as a percentage of total net revenues for the periods indicated:

 
  For the year ended December 31,  
 
  2010   2011   2012  
 
  US$   %   US$   %   US$   %  
 
  (in US$, except percentages)
 

Fulfillment expenses

    5,809,118     17.8     45,478,327     20.0     96,523,444     13.9  

Marketing expenses

    2,438,066     7.5     15,253,325     6.7     32,272,629     4.7  

Technology and content expenses

    562,120     1.7     5,516,361     2.4     14,644,113     2.1  

General and administrative expenses

    2,843,583     8.7     84,575,539     37.3     25,541,812     3.7  
                           

Total operating expenses

    11,652,887     35.7     150,823,552     66.4     168,981,998     24.4  
                           

        Fulfillment expenses.    Fulfillment expenses primarily consist of shipping and handling expenses, packaging expenses and logistics center rental expenses, as well as compensation and benefits of our logistics staff. Our shipping and handling expenses amounted to US$4.3 million, US$29.4 million and US$53.9 million in 2010, 2011 and 2012, respectively. Historically, we primarily relied on our regional logistics center in Guangdong Province in Southern China for our fulfillment services. In September, November and December 2011, we started operating our new logistics centers in Jiangsu Province in Eastern China, Sichuan Province in Western China and Beijing in Northern China, respectively, to enhance our fulfillment capacity. Throughout 2012, we were able to fully utilize the regional logistics centers and warehouses. By utilizing these regional logistics centers and warehouses, we were able to rely more on quality regional and local couriers, which generally have lower average delivery charges than national delivery companies. This shift to regional delivery companies reduced our shipping and handling expense per order and partially offset the increase in fulfillment expenses. We expect to continue to invest in our logistics network and warehousing capacity to support our long-term growth. We expect our fulfillment expenses to continue to increase in absolute amount as a result of our continued business growth and continue to constitute one of the largest components of our operating expenses.

        Marketing expenses.    Marketing expenses primarily represent advertising expenses incurred in connection with our brand promotional activities, as well as compensation and benefits of our marketing staff. Historically, we have benefited from viral marketing resulting from word-of-mouth referrals from our customers who often expressed their excitement on social media platforms regarding their purchases on our website. As we enhance our brand awareness by engaging in additional brand promotional activities, we expect our marketing expenses to increase in the foreseeable future.

        Technology and content expenses.    Technology and content expenses primarily consist of the compensation and benefits of our IT staff, telecommunications expenses, and expenses incurred in creating content for our sales events on our websites, including model fees and professional photography expenses. As we continue to expand our IT capabilities to support our anticipated growth, we expect our technology and content expenses to continue to increase in the foreseeable future.

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        General and administrative expenses.    General and administrative expenses primarily consist of compensation and benefits of our headquarters and administrative staff, rental expenses, costs for professional services and other administrative and overhead expenses. As our business further grows and we continue to incur increased costs related to our ongoing compliance and reporting obligations under U.S. securities laws as a public company, we expect our general and administrative expenses to continue to increase in the foreseeable future.

Seasonality

        Our results of operations are subject to seasonal fluctuations. For example, our revenues are relatively lower during the holidays in China, particularly during the Chinese New Year period which occurs in the first quarter of the year, when customers tend to do less shopping, both online and offline. Furthermore, sales in the retail industry are typically significantly higher in the fourth quarter of the year than in the preceding three quarters. This seasonality of our business, however, was not apparent historically as each quarter had greater revenues than the prior quarter due to the rapid growth in sales that we experienced in recent years.

Taxation

Cayman Islands

        We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax in the Cayman Islands. In addition, our payment of dividends to our shareholders, if any, is not subject to withholding tax in the Cayman Islands.

Hong Kong

        Our subsidiary incorporated in Hong Kong is subject to the uniform tax rate of 16.5%. Under the Hong Kong tax laws, it is exempted from the Hong Kong income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on the remittance of dividends. No provision for Hong Kong tax has been made in our consolidated financial statements, as our Hong Kong subsidiary had not generated any assessable income for the years ended December 31, 2010, 2011 and 2012.

PRC

        Our PRC subsidiaries and the consolidated affiliated entity are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Under the PRC EIT Law and its implementation rules, both of which became effective on January 1, 2008, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, unless they qualify for certain exceptions. Our subsidiaries and the consolidated affiliated entity in the PRC are all subject to the tax rate of 25% for the periods presented, except for Vipshop Jianyang that enjoyed the following preferential tax treatment. Vipshop Jianyang was classified as a domestically-owned enterprise in the western regions that is in an industry sector encouraged by the PRC government. We expect that Vipshop Jianyang will obtain final approval from the local tax bureau to enjoy a preferential tax rate of 15% for the year ended December 31, 2012 before its annual EIT filing in 2013. Accordingly, Vipshop Jianyang has accrued for income tax expenses using the tax rate of 15% for the year ended December 31, 2012. The term "domestically-owned enterprise in an industry sector encouraged by the PRC government" as used herein refers to any enterprise with its primary business falling into the scopes of the encouraged industries stipulated in the existing related policies, including Industrial Restructuring Guidance Catalogue (2011), Industrial Restructuring Guidance Catalogue (2005), Catalogue for the Guidance of Foreign Investment Industries (Revised in 2007), and Catalogues of

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Foreign-invested Advantage Industries in Central-Western Areas (2008 Revision), and the annual primary business revenue of which accounts for more than 70% of the total enterprise revenue.

        We evaluate the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of December 31, 2010, 2011 and 2012, we did not have any unrecognized tax benefits. We do not anticipate any significant increase to our liability for unrecognized tax benefit within the next 12 months. We will classify interest and penalties related to income tax matters, if any, in income tax expense.

        Under the PRC Enterprise Income Tax Law and its implementation rules, dividends from Vipshop China paid out of profits generated after January 1, 2008, are subject to a withholding tax of 10%, unless there is a tax treaty with China that provides for a different withholding arrangement. Distributions of profits generated by Vipshop China before January 1, 2008 are exempt from PRC withholding tax.

        Under the PRC Enterprise Income Tax Law, an enterprise established outside of the PRC with "de facto management bodies" within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term "de facto management bodies" as establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise. The SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, on April 22, 2009. Circular 82 provides certain specific criteria for determining whether the "de facto management body" of a Chinese-controlled offshore-incorporated enterprise is located in China. In addition, the SAT issued a bulletin on July 27, 2011, effective September 1, 2011, providing more guidance on the implementation of Circular 82. This bulletin clarifies matters including resident status determination, post-determination administration and competent tax authorities. Although both Circular 82 and the bulletin only apply to offshore enterprises controlled by PRC enterprises, not those controlled by PRC individuals, the determining criteria set forth in Circular 82 and the bulletin may reflect the SAT's general position on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. Although we do not believe that our legal entities organized outside of the PRC constitute PRC resident enterprises, it is possible that the PRC tax authorities could reach a different conclusion. See "Risk Factors—Risks Relating to Doing Business in China—It is unclear whether we will be considered a PRC `resident enterprise' under the PRC Enterprise Income Tax Law and, depending on the determination of our PRC `resident enterprise' status, our global income may be subject to the 25% PRC enterprise income tax, which could have a material adverse effect on our results of operations." However, even if one or more of our legal entities organized outside of the PRC were characterized as PRC resident enterprises, we do not expect any material change in our net current tax payable balance and the net deferred tax balance as none of these entities had any profit during the periods presented in the consolidated financial statements included elsewhere in this prospectus.

        The amount of tax loss carry forwards of our PRC subsidiaries and consolidated affiliated entity was US$4.3 million, US$25.8 million and US$7.7 million as of December 31, 2010, 2011 and 2012, respectively. We have provided a valuation allowance for the full amount of the deferred tax assets relating to the future benefit of net operating loss carry forwards of our PRC subsidiaries and consolidated affiliated entity, as our management is not able to conclude that the future realization of such net operating loss carry forwards is more likely than not.

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Internal Control Over Financial Reporting

        Prior to our initial public offering in March 2012, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. During the audits of our consolidated financial statements as of December 31, 2009 and 2010 and 2011 and for the years ended December 31, 2009, 2010 and 2011 in connection with the initial public offering of our ADSs in March 2012, we identified one "material weakness" in our internal control over financial reporting, as defined in the standards established by the PCAOB, and other control deficiencies. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

        The above material weakness related to the lack of comprehensive U.S. GAAP accounting policies, financial reporting and internal control procedures. In particular, we did not have a comprehensive accounting policies manual and financial reporting and closing procedure manual for our finance department, and we did not have sufficient personnel to build and maintain formalized accounting policies and financial policies and financial reporting procedures in accordance with U.S. GAAP.

        Throughout 2012, we have implemented a number of measures to address the material weakness and other control deficiencies that have been identified, including, among other things, establishment of a separate internal audit department; and successful implementation of resource planning and warehouse management systems as well as formalized stock-taking systems; development of an accounting manual including formal procedures and policies for U.S. GAAP closing and reporting; engagement of a reputable consulting firm to help us review and improve all procedures and policies for the purposes of compliance with applicable U.S. securities regulations and accounting principles and rules. We have also hired officers and personnel with finance, accounting, SEC reporting and U.S. GAAP experience. For example, we hired for our U.S. GAAP department two more staff members who are licensed CPAs. During 2012, we determined that the above-mentioned material weakness has been remediated.

        During 2012, we identified one "significant deficiency" in our internal control over financial reporting as defined in the standards established by PCAOB, and other control deficiencies. The significant deficiency relates to the deficient calculation mechanism of our e-Wallet system. We plan to commit sufficient IT resources to re-write and upgrade the e-Wallet program and establish internal control procedures over the system discrepancies. We also plan to implement a number of measures to address other control deficiencies that have been identified.

        However, we cannot assure you that we will remediate our control deficiencies in a timely manner. See "Risk Factors—Risks Relating to Our Business and Industry—If we fail to implement and maintain an effective system of internal controls or fail to remediate the material weakness in our internal control over financial reporting that has been identified, we may be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected."

Results of Operations

        The following table sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our net revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this

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prospectus. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.

 
  For the year ended December 31,  
 
  2010   2011   2012  
 
  US$   %   US$   %   US$   %  
 
  (in US$, except percentages)
 

Net revenues

    32,582,115     100.0     227,142,876     100.0     692,112,964     100.0  

Cost of goods sold(1)

    (29,374,315 )   (90.2 )   (183,801,334 )   (80.9 )   (537,637,860 )   (77.7 )
                           

Gross profit

    3,207,800     (9.8 )   (43,341,542 )   (19.1 )   154,475,104     22.3  

Operating expenses(2):

                                     

Fulfillment expenses(3)

    (5,809,118 )   (17.8 )   (45,478,327 )   (20.0 )   (96,523,444 )   (13.9 )

Marketing expenses

    (2,438,066 )   (7.5 )   (15,253,325 )   (6.7 )   (32,272,629 )   (4.7 )

Technology and content expenses

    (562,120 )   (1.7 )   (5,516,361 )   (2.4 )   (14,644,113 )   (2.1 )

General and administrative expenses

    (2,843,583 )   (8.7 )   (84,575,539 )   (37.3 )   (25,541,812 )   (3.7 )
                           

Total operating expenses

    (11,652,887 )   (35.7 )   (150,823,552 )   (66.4 )   (168,981,998 )   (24.4 )

Other income

    78,675     0.2     564,182     0.2     2,563,321     0.4  
                           

Loss from operations

    (8,366,412 )   (25.7 )   (106,917,828 )   (47.1 )   (11,943,573 )   (1.7 )

Interest expense

            (494,509 )   (0.2 )   (222,868 )   (0.0 )

Interest income

    564     0.0     122,437     0.1     3,558,013     0.5  

Exchange gain (loss)

            18,375     0.0     (157,473 )   (0.0 )
                           

Loss before income tax

    (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (8,765,901 )   (1.3 )

Income tax expense

                    (706,173 )   (0.1 )
                           

Net loss

    (8,365,848 )   (25.7 )   (107,271,525 )   (47.2 )   (9,472,074 )   (1.4 )

Deemed dividend on issuance of Series A Preferred Shares

            (49,214,977 )   (21.7 )        
                           

Net loss attributable to ordinary shareholders

    (8,365,848 )   (25.7 )   (156,486,502 )   (68.9 )   (9,472,074 )   (1.4 )
                           

(1)
Excluding shipping and handling expenses, and including inventory write down which amounted to US$2.6 million, US$1.7 million and US$12.2 million in the years ended December 31, 2010, 2011 and 2012, respectively.

(2)
Including share-based compensation expenses as set forth below:

 
  For the year ended December 31,  
 
  2010   2011   2012  
 
  (in US$)
 

Allocation of share-based compensation expenses*

                   

Fulfillment expenses

        (297,095 )   (292,866 )

Marketing expenses

        (184,404 )   (169,100 )

Technology and content expenses

        (729,420 )   (897,133 )

General and administrative expenses

        (72,716,983 )   (6,237,850 )
               

Total

        (73,927,902 )   (7,596,949 )
               

*
The share-based compensation expenses for 2011 included (a) US$63.9 million in share-based compensation expenses in connection with the unvested shares of our co-founders; (b) US$6.2 million in shared-based compensation expenses in connection with a transfer of ordinary shares between our co-founders; and (c) US$3.8 million share-based compensation expenses in connection with share options granted to executive officers and employees. In addition, unrecognized share-based compensation expenses as of December 31, 2011 were US$19.8 million, which were related to the unvested share options granted to our executive officers and employees. The unrecognized share-based compensation expenses were expected to be recognized over a weighted-average period of 3.06 years on a straight-line basis as of December 31, 2011. The share-based compensation

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    expenses for 2012 included US$7.6 million share-based compensation expenses in connection with share options and non-vested shares granted to our executive officers, independent directors, employees and a consultant. The unrecognized share-based compensation expenses related to share options and non-vested shares were US$14.5 million and US$2.1 million, and were expected to be recognized over a weighted-average period of 2.45 years and 3.62 years on a straight-line basis as of December 31, 2012 respectively. See "—Critical Accounting Policies—Share-Based Compensation" for details.

(3)
Including shipping and handling expenses, which amounted to US$4.3 million, US$29.4 million and US$53.9 million in the years ended December 31, 2010, 2011 and 2012, respectively.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Net revenues

        Our total net revenues increased from US$227.1 million in 2011 to US$692.1 million in 2012, primarily attributable to the increase in the number of active customers and total orders. The number of our active customers increased significantly from 1.5 million in 2011 to 4.1 million in 2012. The number of our total orders increased from over 7.2 million in 2011 to 21.9 million in 2012, mainly due to the increase in both the number of active customers during the period and the number of average orders per active customer from 4.9 in 2011 to 5.3 in 2012. Consequently, our average net revenues per active customer also increased from US$152 in 2011 to US$168 in 2012. The increases in the foregoing key factors were primarily due to our further optimized product selection, the increase in the number of sales events, the increase in the number of SKUs available on our website as well as the high-quality customer services we provide. We established three logistics centers and set up several regional subsites within our website during 2011, the full utilization of which in 2012 allowed us to cater our product offerings to regional customer demographics and offer additional sales events and SKUs. 93.2% of the total orders we fulfilled in 2012 were placed by repeat customers, as compared to 91.9% in 2011.

Cost of goods sold

        Our cost of goods sold increased from US$183.8 million in 2011 to US$537.6 million in 2012, primarily attributable to the significant increase in products procured from our brand partners in line with our significantly higher sales volume.

        We recorded US$1.7 million and US$12.2 million in inventory write-downs in 2011 and 2012, respectively. Such write-downs primarily reflected the estimated market value of damaged or obsolete inventory. The increase in write-downs in 2012 is in line with the significant increase in our inventory and was also due to the more comprehensive accounting policy we established in 2012 in assessing inventory write-downs, which is made possible as our business grow and we acquire more experience and historical data on inventory management.

Gross profit and gross margin

        As a result of the foregoing, our gross profit increased from US$43.3 million in 2011 to US$154.5 million in 2012. Our gross margin increased from 19.1% in 2011 to 22.3% in 2012, primarily due to increased economies of scale in sourcing merchandise from our suppliers which in turn increased our bargaining power.

Operating expenses

        Our operating expenses increased from US$150.8 million in 2011 to US$169.0 million in 2012, primarily due to the following factors:

    Fulfillment expenses.  Our fulfillment expenses increased from US$45.5 million in 2011 to US$96.5 million in 2012. Shipping and handling expenses, the largest component of our fulfillment expenses during these periods, increased from US$29.4 million in 2011 to

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      US$53.9 million in 2012. These increases were primarily attributable to the significant increase in our sales volume and the number of orders fulfilled, higher staff compensation and benefits and increase in rental expenses in connection with our expanded warehouse facilities. In 2012, we fulfilled over 21.9 million customer orders, as compared to over 7.2 million customer orders in 2011. Our fulfillment expenses as a percentage of our total net revenues decreased from 20.0% in 2011 to 13.9% in 2012, primarily due to our shift of strategy towards using regional and local delivery services and capacity expansion of regional warehouses. Throughout 2012, we were able to fully utilize the regional logistics centers and warehouses in Guangdong Province, Jiangsu Province, Sichuan Province and Beijing. In addition, our regional logistics centers and warehouses enabled us to rely more on quality regional and local couriers, which generally have lower average delivery charges than national delivery companies. This shift to regional delivery companies reduced our shipping and handling expense per order and partially offset the increase in fulfillment expenses.

    Marketing expenses.  Our marketing expenses increased from US$15.3 million in 2011 to US$32.3 million in 2012, primarily attributable to our increased marketing and brand promotion activities. However, our marketing expenses as a percentage of our total net revenues decreased from 6.7% in 2011 to 4.7% in 2012 as our net revenues increased at a faster pace during the same period, which demonstrated our ability to control marketing expenses and leverage word-of-mouth referrals.

    Technology and content expenses.  Our technology and content expenses increased from US$5.5 million in 2011 to US$14.6 million in 2012, primarily attributable to the headcount increase of our IT personnel in connection with our expansion of IT capacities and increased compensation and benefit. However, as a percentage of our total net revenues, our technology and content expenses decrease from 2.4% to 2.1% during the same periods as our net revenues increased at a faster pace during the applicable periods.

    General and administrative expenses.  Our general and administrative expenses decreased from US$84.6 million in 2011 to US$25.5 million in 2012, and as a percentage of our total net revenues, decreased from 37.2% to 3.7% during the same periods. The significant decrease in our general and administrative expenses was primarily due to our cost-control efforts and reduced share-based compensation expenses from US$72.7 million in 2011 to US$6.2 million in 2012.

Other income

        Our other income amounted to US$2.6 million in 2012, as compared to US$0.6 million in 2011. Our other income in 2012 was primarily due to income derived from providing ancillary services to our suppliers, project-based government grants and tax rebates.

Interest expense

        Our interest expense decreased from US$0.5 million in 2011 to US$0.2 million in 2012 primarily due to repayment of our bank loans.

Interest income

        Our interest income increased from US$0.1 million in 2011 to US$3.6 million in 2012 primarily due to our increased cash balance which we used for bank deposits and other investment activities.

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Exchange gain/loss

        We had an exchange loss of US$157.5 thousand in 2012 as a result of loss incurred when converting our cash balance denominated in U.S. dollars into Renminbi during our operations, which was primarily attributable to the appreciation of the Renminbi against the U.S. dollar in 2012.

Net loss

        As a result of the foregoing, we recorded a net loss of US$9.5 million in 2012 as compared to a net loss of US$107.3 million in 2011.

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net revenues

        Our total net revenues increased from US$32.6 million in 2010 to US$227.1 million in 2011, primarily attributable to the increase in the number of active customers and total orders. The number of our active customers increased significantly from 0.3 million in 2010 to 1.5 million in 2011. The number of our total orders increased from over 0.9 million in 2010 to over 7.2 million in 2011, mainly due to the increase in both the number of active customers and the number of average orders per active customer during the period. The increases in the number of active customers and average orders per active customer were primarily due to our further optimized product selection, the increase in our number of sales events, and the increase in the number of SKUs available on our website. We added three logistics centers and set up several regional subsites within our website during 2011, which allowed us to cater our product offerings to regional customer demographics and offer additional sales events and SKUs. Our average net revenues per active customer increased from US$118 in 2010 to US$152 in 2011, mainly attributable to the increase in average orders per active customer from 3.3 in 2010 to 4.9 in 2011. 91.9% of the total orders we fulfilled in 2011 were placed by repeat customers, as compared to 86.7% in 2010.

Cost of goods sold

        Our cost of goods sold increased from US$29.4 million in 2010 to US$183.8 million in 2011, primarily attributable to the significant increase in products procured from our brand partners in line with our significantly higher sales volume.

        We recorded US$2.6 million and US$1.7 million in inventory write-downs in 2010 and 2011, respectively. Such write-downs primarily reflected the estimated market value of damaged or obsolete inventory.

Gross profit and gross margin

        As a result of the foregoing, our gross profit increased from US$3.2 million in 2010 to US$43.3 million in 2011. Our gross margin increased from 9.8% in 2010 to 19.1% in 2011, primarily due to the growth in revenues and increased economies of scale in sourcing merchandise from our suppliers which in turn increased our bargaining power. We recorded a lower amount of inventory write-downs in 2011, which also contributed to our gross margin increase during the period.

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Operating expenses

        Our operating expenses increased from US$11.7 million in 2010 to US$150.8 million in 2011 primarily due to our significant business expansion and the US$73.9 million share-based compensation expenses recorded in 2011.

    Fulfillment expenses.  Our fulfillment expenses increased from US$5.8 million in 2010 to US$45.5 million in 2011. Shipping and handling expenses, the largest component of our fulfillment expenses during these periods, increased from US$4.3 million in 2010 to US$29.4 million in 2011. These increases were primarily attributable to the significant increase in our sales volume and the number of orders fulfilled, higher staff compensation and benefits and increase in rental expenses in connection with our expanded warehouse facilities. In 2011, we fulfilled over 7.2 million customer orders, as compared to over 0.9 million customer orders in 2010. Our fulfillment expenses as a percentage of our total net revenues increased from 17.8% in 2010 to 20.0% in 2011, primarily due to a more geographically diverse customer base, improved packaging quality, and increased rentals and other expenses incurred associated with the additional logistics centers. Until September 2011, we relied on one logistics center in Guangdong Province in Southern China to support our increasingly national customer base. As we expanded our sales nationwide in 2011, we added logistics centers in Jiangsu Province in Eastern China, Sichuan Province in Western China and Beijing in Northern China. By utilizing these regional logistics centers, we were able to rely more on quality regional and local couriers, which generally have lower average delivery charges than national delivery companies. This shift to regional delivery companies reduced our shipping and handling expense per order and partially offset the increase in fulfillment expenses caused by the factors discussed above.

    Marketing expenses.  Our marketing expenses increased from US$2.4 million in 2010 to US$15.3 million in 2011, primarily attributable to our increased marketing and brand promotion activities. However, our marketing expenses as a percentage of our total net revenues decreased from 7.5% in 2010 to 6.7% in 2011 as our net revenues increased at a faster pace during the same period.

    Technology and content expenses.  Our technology and content expenses increased from US$0.6 million in 2010 to US$5.5 million in 2011, and as a percentage of our total net revenues, increased from 1.7% to 2.4% during the same periods. The increase in our technology and content expenses was primarily attributable to higher IT staff compensation and expenses incurred in creating and maintaining content for our significantly increased number of sales events, including professional photography expenses for the curation of products in sales events.

    General and administrative expenses.  Our general and administrative expenses increased from US$2.8 million in 2010 to US$84.6 million in 2011, and as a percentage of our total net revenues, increased from 8.7% to 37.3% during the same periods. The significant increase in our general and administrative expenses was primarily due to an increase in share-based compensation expenses of US$72.7 million and increases in administrative staff compensation and benefits mainly attributable to an increase in headcount and higher rental expenses. For details of our share-based compensation expenses, see "—Critical Accounting Policies—Share-Based Compensation."

Other income

        Our other income amounted to US$0.6 million in 2011, as compared to US$78.7 thousand in 2010. Our other income in 2011 was primarily due to income derived from providing ancillary services to our suppliers and a project-based government grant.

Interest expense

        Our interest expense increased from nil in 2010 to US$0.5 million in 2011 primarily due to an increase in our bank borrowing.

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Interest income

        Our interest income increased from US$564 in 2010 to US$0.1 million in 2011 primarily due to the increased amount of cash held in our bank deposits and the interest earned on short-term investment products .

Exchange gain

        Our exchange gain increased from nil in 2010 to US$18.4 thousand in 2011, primarily attributable to the appreciation of the Renminbi against the U.S. dollar on the cash balance denominated in Renminbi.

Net loss

        As a result of the foregoing, we recorded a net loss of US$107.3 million in 2011 as compared to a net loss of US$8.4 million in 2010.

Selected Quarterly Results of Operations

        The following table presents our unaudited consolidated results of operations for the three-month periods ended on the dates indicated. You should read the following table in conjunction with our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited consolidated quarterly financial information on the same basis as our audited consolidated financial statements. This unaudited consolidated financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair representation of our financial position and operating results for the quarters presented.

 
  For the three months ended  
 
  March 31,
2011
  June 30,
2011
  September 30,
2011
  December 31,
2011
  March 31,
2012
  June 30,
2012
  September 30,
2012
  December 31,
2012
 
 
  (unaudited, in US$)
 

Net revenues

    28,872,040     40,557,739     52,507,268     105,205,829     101,262,023     135,279,785     155,944,583     299,626,573  

Cost of goods sold

    (23,949,749 )   (33,129,354 )   (42,511,012 )   (84,211,219 )   (79,837,020 )   (105,727,006 )   (121,180,318 )   (230,893,516 )
                                   

Gross profit

    4,922,291     7,482,385     9,996,256     20,994,610     21,425,003     29,552,779     34,764,265     68,733,057  

Operating expenses(1)

                                                 

Fulfillment expenses(2)

    (6,026,465 )   (8,427,225 )   (11,432,449 )   (19,592,188 )   (16,877,142 )   (20,540,533 )   (21,703,487 )   (37,402,282 )

Marketing expenses

    (1,655,106 )   (2,317,286 )   (4,559,574 )   (6,721,359 )   (5,873,102 )   (6,593,048 )   (7,310,957 )   (12,495,522 )

General and administrative expenses

    (3,514,259 )   (15,198,844 )   (10,352,062 )   (55,510,374 )   (5,756,147 )   (5,575,356 )   (6,321,337 )   (7,888,972 )

Technology and content expenses

    (493,883 )   (850,118 )   (1,190,921 )   (2,981,439 )   (2,433,157 )   (2,656,044 )   (3,218,857 )   (6,336,055 )
                                   

Total operating expenses

    (11,689,713 )   (26,793,473 )   (27,535,006 )   (84,805,360 )   (30,939,548 )   (35,364,981 )   (38,554,638 )   (64,122,831 )

Other income

    56,724     63,873     116,386     327,199     841,428     369,609     538,739     813,545  
                                   

(Loss) gain from operations

    (6,710,698 )   (19,301,215 )   (17,422,364 )   (63,483,551 )   (8,673,117 )   (5,442,593 )   (3,251,634 )   5,423,711  

Interest expense

        (17.188 )   (189,745 )   (287,576 )   (186,725 )   (33,977 )   (1,197 )   (969 )

Interest income

    687     4,313     13,665     103,772     165,939     375,826     1,372,350     1,643,898  

Exchange (loss) gain

        (181,211 )   57,158     142,428     107,664     (678,866 )   424,454     (10,725 )
                                   

(Loss) income before income taxes

    (6,710,011 )   (19,495,301 )   (17,541,286 )   (63,524,927 )   (8,586,239 )   (5,779,610 )   (1,456,027 )   7,055,975  

Income tax expenses

                                (706,173 )
                                   

Net (loss) income

    (6,710,011 )   (19,495,301 )   (17,541,286 )   (63,524,927 )   (8,586,239 )   (5,779,610 )   (1,456,027 )   6,349,802  

Deemed dividend on issuance of Series A Preferred Shares

    (49,214,977 )                            
                                   

Net (loss) income attributable to ordinary shareholders

    (55,924,988 )   (19,495,301 )   (17,541,286 )   (63,524,927 )   (8,586,239 )   (5,779,610 )   (1,456,027 )   6,349,802  
                                   

(1)
Including share-based compensation expenses, which amounted to US$2.5 million, US$12.4 million, US$6.7 million, US$52.3 million, US$2.1 million, US$1.6 million, US$2.1 million and US$1.8 million in the three month periods ended March 31, 2011, June 30, 2011, September 30, 2011, December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012, respectively.

(2)
Including shipping and handling expenses, which amounted to US$3.9 million, US$5.2 million, US$7.3 million, US$13.0 million, US$9.4 million, US$12.0 million, US$13.0 million and US$19.5 million in the three month periods ended March 31, 2011, June 30, 2011, September 30, 2011 and December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012 and December 31, 2012, respectively.

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        The following table sets forth our historical unaudited consolidated selected quarterly results of operations for the periods indicated, as a percentage of total net revenues.

 
  For the three months ended  
 
  March 31,
2011
  June 30,
2011
  September 30,
2011
  December 31,
2011
  March 31,
2012
  June 30,
2012
  September 30,
2012
  December 31,
2012
 
 
  (unaudited)
 

Net revenues

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

Cost of goods sold

    (83.0 )%   (81.7 )%   (81.0 )%   (80.0 )%   (78.8 )%   (78.2 )%   (77.7 )%   (77.1 )%
                                   

Gross profit

    17.0 %   18.3 %   19.0 %   20.0 %   21.2 %   21.8 %   22.3 %   22.9 %

Operating expenses

                                                 

Fulfillment expenses

    (20.9 )%   (20.8 )%   (21.8 )%   (18.6 )%   (16.7 )%   (15.2 )%   (13.9 )%   (12.5 )%

Marketing expenses

    (5.7 )%   (5.7 )%   (8.7 )%   (6.4 )%   (5.8 )%   (4.9 )%   (4.7 )%   (4.2 )%

General and administrative expenses

    (12.2 )%   (37.5 )%   (19.7 )%   (52.8 )%   (5.7 )%   (4.1 )%   (4.1 )%   (2.6 )%

Technology and content expenses

    (1.7 )%   (2.1 )%   (2.2 )%   (2.8 )%   (2.4 )%   (2.0 )%   (2.1 )%   (2.1 )%
                                   

Total operating expenses

    (40.5 )%   (66.1) %   (52.4 )%   (80.6 )%   (30.6 )%   (26.1 )%   (24.7 )%   (21.4 )%

Other income

    0.2 %   0.2 %   0.2 %   0.3 %   0.8 %   0.3 %   0.3 %   0.3 %
                                   

(Loss) gain from operations

    (23.2 )%   (47.6 )%   (33.2 )%   (60.3 )%   (8.6 )%   (4.0 )%   (2.1 )%   1.8 %

Interest expense

        (0.0 )%   (0.3 )%   (0.3 )%   (0.2 )%   (0.0 )%   (0.0 )%   (0.0 )%

Interest income

    0.0 %   0.0 %   0.0 %   0.1 %   0.2 %   0.3 %   0.9 %   0.5 %

Exchange (loss) gain

        (0.5 )%   0.1 %   0.1 %   0.1 %   (0.5 )%   0.3 %   (0.0 )%
                                   

(Loss) income before income taxes

    (23.2 )%   (48.1 )%   (33.4 )%   (60.4 )%   (8.5 )%   (4.3 )%   (0.9 )%   2.4 %

Income tax expenses

                                (0.2 )%
                                   

Net (loss) income

    (23.2 )%   (48.1 )%   (33.4 )%   (60.4 )%   (8.5 )%   (4.3 )%   (0.9 )%   2.1 %

Deemed dividend on issuance of Series A Preferred Shares

    (170.5 )%                            
                                   

Net (Loss) income attribute to ordinary shareholders

    (193.7 )%   (48.1 )%   (33.4 )%   (60.4 )%   (8.5 )%   (4.3 )%   (0.9 )%   2.1 %
                                   

        We have experienced continuing growth in our quarterly total net revenues for the eight quarters in the period from January 1, 2011 to December 31, 2012. During these quarters, we experienced continued increases in both the number of active customers and customer orders in each quarter. Our results of operations are subject to seasonal fluctuations. For example, our revenues are relatively lower during the holidays in China, particularly during the Chinese New Year period which occurs in the first quarter of the year, when customers tend to do less shopping, both online and offline. Furthermore, sales in the retail industry are typically significantly higher in the fourth quarter of the year due to higher average prices for winter clothing. This seasonality of our business, however, was not apparent historically due to the rapid growth in sales that we experienced in recent years. We recorded net profit of US$6.3 million in the fourth quarter of 2012, the first time we achieved profitability after tax.

        Our fulfillment expenses as a percentage of total net revenues have been steadily decreasing on a quarterly basis from the third quarter of 2011 through the fourth quarter of 2012. Historically, we primarily relied on our regional logistics center in Guangdong Province in Southern China to support our fulfillment services throughout China. In September, November and December 2011, we started operating our three new logistics centers in Jiangsu Province in Eastern China, Sichuan Province in Western China and Beijing in Northern China, respectively, to enhance our fulfillment capacity and support our nationwide expansion. By utilizing these regional logistics centers, we were able to rely more on quality regional and local couriers, which generally had lower average delivery charges than the charges by national delivery companies. This shift of strategy partially offset our fulfillment expenses incurred in connection with our more geographically diverse customer base and increased rentals and other expenses incurred associated with the management and maintenance of these additional logistics centers.

        Our marketing and general and administrative expenses, each as a percentage of total net revenues, have also been decreasing sequentially in the five most recent quarters. Our revenues grew at a faster speed during these periods despite the cost-control efforts we put in place with respect to advertising, marketing and administrative expenses, which demonstrates our continued improvement in operational efficiency and the viral marketing effect we achieved.

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        We offer our customers an unconditional right of return for seven days upon their receipt of products from us. From our inception until December 31, 2012, we deferred revenues at each fiscal quarter until the return period expired. As a result of this revenue recognition policy, our deferred revenues adjustments amounted to US$5.3 million, US$6.7 million, US$11.4 million, US$16.7 million, US$17.8 million, US$16.7 million, US$32.6 million and US$45.7 million for each of the eight quarters in the period from January 1, 2011 to December 31, 2012, respectively. For additional details of our revenue recognition policy, see "—Critical Accounting Policies—Revenue recognition."

Liquidity and Capital Resources

        Prior to our initial public offering in March 2012, we financed our operations primarily through the issuance of preferred shares in private placements, unsecured and interest-free working capital loans provided by our shareholders and other related parties and bank loans and in 2011, from cash generated from operating activities. As of December 31, 2010, 2011 and 2012, we had US$1.1 million, US$45.0 million and US$124.5 million, respectively, in cash and cash equivalents. Our cash and cash equivalents primarily consist of cash on hand, short-term bank demand deposits and highly liquid investments with maturities of less than three months. We believe that our current cash and cash equivalents, our anticipated cash flows from operations together with our expected receipt of the net proceeds from this offering will be sufficient to meet our anticipated working capital requirements and capital expenditures for the 12 months following this offering. We may, however, need additional capital in the future to fund our continued operations.

        We had held-to-maturity securities with an aggregate outstanding amount of US$86.1 million as of December 31, 2012.

        We intend to use a portion of the net proceeds from this offering to further expand our operations. We may, however, require additional cash due to changing business conditions or other future developments, including any investments, expansions or acquisitions that we may decide to pursue. For additional information, see "Use of Proceeds" and "—Capital Expenditures."

        As of December 31, 2011 and 2012, our inventory balances amounted to US$69.7 million and US$144.0 million, respectively. During the same periods, our accounts payable amounted to US$88.0 million and US$193.5 million, respectively. These increases reflected a significant growth in our sales volumes and scale of operations and the related increase in products procured from our brand partners. Our inventory turnover days were 56 days in 2010, 77 days in 2011 and 73 days in 2012. Inventory turnover days for a given period equal average inventory balances at the beginning and the end of the period divided by total cost of goods sold during the period and then multiplied by the number of days during the period. Our accounts payable turnover days were 58 days in 2010, 96 days in 2011 and 96 days in 2012. Accounts payable turnover days for a given period is equal to average accounts payable balances at the beginning and the end of the period divided by total cost of goods sold during the period and multiplied by the number of days during the period. The increase of inventory turnover days and accounts payable turnover days from 2010 to 2011 was mainly because of the additional inventory required to support our accelerated sales growth while we continued to maintain favorable payment terms with our brand partners. The minor decrease in inventory turnover days from 2011 to 2012 was mainly because of the improvement we achieved in supply chain management. We expect the accounts payable turnover days to decrease over the long term while we continue to strengthen our relationship with brand partners and optimize the payment work flow. We generally have the right to return unsold items within a period after the end of a sales event. We typically pay for the purchase order in installments with the last installment paid upon full settlement of the unsold items or returned products we receive from customers. For some brand partners, we pay a deposit ranging from 10% to 15% of the total price for each purchase order. For some products, such as certain sporting goods, which we do not have the right to return the unsold products to the brand

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partners, we have been able to utilize our strong marketing expertise regarding customer preferences to achieve quick inventory turnover.

        The following table sets forth a summary of our cash flows for the periods indicated:

 
  For the year ended December 31,  
 
  2010   2011   2012  
 
  (in US$)
 

Net cash (used in) from operating activities

    (6,573,521 )   1,306,775     111,569,205  

Net cash used in investing activities

    (1,522,333 )   (23,813,556 )   (83,216,464 )

Net cash provided by financing activities

    9,137,221     66,785,746     50,170,648  

Cash and cash equivalents at beginning of year

    287,720     1,111,091     44,954,778  

Cash and cash equivalents at end of year

    1,111,091     44,954,778     124,472,629  

Operating activities

        Net cash from operating activities amounted to US$111.6 million in 2012, which was primarily attributable to a net loss of US$9.5 million, adjusted for certain non-cash expenses consisting primarily of share-based compensation expenses of US$7.6 million and changes in operating assets and liabilities. The adjustment for changes in operating assets and liabilities primarily reflected a significant increase in inventories of US$86.4 million, an increase in account receivable of US$2.9 million and an increase in other receivables of US$0.6 million as a result of our increased sales volume and scale of operations. These increases were partially offset by a significant increase in accounts payable of US$105.4 million, primarily attributable to the increased procurement of inventories in connection with our expanded business and our ability to maintain favorable payment terms with our brand partners, an increase in advances from customers of US$40.6 million, primarily attributable to our significant sales growth.

        Net cash from operating activities amounted to US$1.3 million in 2011, which was primarily attributable to a net loss of US$107.3 million, adjusted for certain non-cash expenses consisting primarily of share-based compensation expenses of US$73.9 million and changes in operating assets and liabilities. The adjustment for changes in operating assets and liabilities primarily reflected a significant increase in inventories of US$64.0 million, an increase in advances to suppliers of US$7.7 million and an increase in other receivables of $8.8 million as a result of our increased sales volume and scale of operations. These increases were partially offset by a significant increase in accounts payable of US$79.7 million, primarily attributable to the increased procurement of inventories in connection with our expanded business and our ability to maintain favorable payment terms with our brand partners, an increase in advances from customers of US$13.1 million, primarily attributable to increased sales volume, and an increase in accrued expenses and other current liabilities of US$23.0 million, primarily reflecting an increase in accrued shipping and handling expenses, accrued advertising expenses, accrued payroll and social benefit provisions. The significant increases in inventories and accounts payable resulted from our significant sales growth and the related increase in products procured from our brand partners in 2011.

        Net cash used in operating activities amounted to US$6.6 million in 2010, which was primarily attributable to a net loss of US$8.4 million, adjusted for an inventory write-down and changes in operating assets and liabilities. The inventory write-downs of US$2.6 million primarily reflected the estimated market value of damaged or obsolete inventory. In addition, in the process of our implementation of new IT systems, the relocation of our warehouse and the implementation of improved inventory count procedures, some of our inventory stock items were not properly recorded in the inventory ledger, resulting in a subsequent write-down of the discrepancies in 2010. The adjustment for changes in operating assets and liabilities primarily reflected an increase in inventory of US$8.5 million and an increase in advances to suppliers of US$4.7 million, both reflecting our

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significant increase in sales in 2010. These increases were partially offset by an increase in accounts payable of US$7.2 million, reflecting our increase in the procurement of inventories to support our business growth; an increase in accrued expenses and other current liabilities of US$3.2 million, reflecting an increase in accrued shipping and handling expenses, other tax payable and accrued advertising expense; and an increase in advances from customers of US$2.1 million, reflecting our increased sales volume in 2010.

Investing activities

        Net cash used in investing activities amounted to US$1.5 million, US$23.8 million and US$83.2 million in the years ended December 31, 2010, 2011 and 2012, respectively. Our net cash used in investing activities in each period was attributable to capital expenditure relating to our leasehold improvements, as well as purchases of office and other operating equipment, motor vehicles and IT software. In addition, net cash used in investing activities in 2012 was also attributable to purchase of held-to-maturity security of US$101.3 million.

Financing activities

        Net cash provided by financing activities amounted to US$50.2 million in 2012, primarily attributable to net proceeds of US$62.7 million received from our initial public offering in March 2012. In addition, we repaid bank borrowing of US$12.7 million in 2012.

        Net cash provided by financing activities amounted to US$66.8 million in 2011, primarily attributable to the proceeds from the issuance of series A and series B preferred shares in an aggregate amount of US$51.7 million, shareholders loans of US$1.5 million, the US$1.5 million proceeds from the issuance of ordinary shares and net proceeds from bank borrowings of US$12.7 million.

        Net cash provided by financing activities amounted to US$9.1 million in the years ended December 31, 2010, primarily reflecting unsecured and interest free working capital loans provided by our related parties.

Capital Expenditures

        Our capital expenditures amounted to US$1.5 million, US$9.6 million and US$12.4 million in the years ended December 31, 2010, 2011 and 2012, respectively. In the past, our capital expenditures were principally used for leasehold improvements, as well as purchases of office and other operating equipment, and IT software. Our future capital expenditures, which are expected to increase significantly in 2013 and 2014, will primarily be used to further expand our fulfillment capabilities and enhance our website and IT systems. We plan to fund these capital expenditures through our existing cash balances, as well as the proceeds of this offering. For additional details, see "Use of Proceeds."

Contractual Obligations

        We lease office space and certain equipment under non-cancelable operating lease agreements that expire at various dates from March 2013 through December 2020. These lease agreements provide for periodic rental increases based on both contractually agreed upon incremental rates and on the general inflation rate as agreed upon by us and our lessors. In the years ended December 31, 2010, 2011 and 2012, we incurred rental expenses of US$0.5 million, US$3.2 million and US$7.5 million, respectively. Our purchase obligations as of December 31, 2010 amounted to US$1.2 million, representing our contracted purchase of products from our brand partners. Our purchase obligations as of December 31, 2011 amounted to US$29.9 million, representing our contracted purchase of products from our brand partners. Our purchase obligations as of December 31, 2012 amounted to US$1.1 million, representing property, equipment and software contract.

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        The following table sets forth our minimum lease payments under all non-cancelable leases and purchase obligations as of December 31, 2012:

 
   
  Payment due by period  
 
  Total   Less than
1 year
  1 - 3 years   3 - 5 years   More than
5 years
 
 
  (in US$)
 

Operating lease obligations

    85,198,017     13,581,686     27,596,193     23,296,700     20,703,438  

Purchase obligations

    1,096,251     1,096,251              

Holding Company Structure

        Vipshop Holdings Limited is a holding company with no material operations of its own. We conduct our operations primarily through our wholly owned subsidiaries and our consolidated affiliated entity in China. As a result, our ability to pay dividends depends upon dividends paid by our wholly owned subsidiaries. If our wholly owned subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly owned subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our wholly owned PRC subsidiaries and our consolidated affiliated entity is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. As of December 31, 2012, we set aside general reserve of US$266,478.

Off-balance Sheet Commitments and Arrangements

        We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders' equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Inflation

        Inflation in China has not historically materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2010, 2011 and 2012 in China were increases of 4.6%, 4.1% and 2.5%, respectively. Although we have not been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

Market Risks

Interest rate risk

        Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest bearing demand deposits and held-to-maturity securities. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks

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due to changes in interest rates. We have not used any derivative financial instruments to manage our interest risk exposure.

Foreign exchange risk

        All of our revenues and most of our expenses are denominated in Renminbi. Our exposure to foreign exchange risk primarily relates to the U.S. dollar proceeds of this offering, most or substantially all of which we expect to convert into Renminbi over time for the uses discussed elsewhere under "Use of Proceeds." As the impact of foreign currency risk on our operations was not material in the past, we have not used any forward contracts, currency borrowings or derivative instruments to hedge our exposure to foreign currency exchange risk.

        The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions and China's foreign exchange policies. In July 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated significantly against the U.S. dollar over the following several years. However, the People's Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. Since reaching a high against the U.S. dollar in July 2008, the Renminbi traded within a narrow range against the U.S. dollar. As a consequence, the Renminbi has fluctuated significantly since July 2008 against other freely traded currencies such as Euro, in tandem with the U.S. dollar, and like the U.S. dollar it has depreciated against most other freely traded currencies since March 2009. In June 2010, the PRC government announced that it would increase the Renminbi exchange rate flexibility, and since that time, the Renminbi has gradually appreciated against the U.S. dollar. It is difficult to predict how long the current situation may last and when and how this relationship between the Renminbi and the U.S. dollar may change again.

        To the extent that we need to convert the U.S. dollars we receive from this offering into Renminbi to fund our operations, acquisitions, or for other uses within the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we receive from the conversion. To the extent that we seek to convert Renminbi into U.S. dollars, depreciation of the Renminbi against the U.S. dollar would have an adverse effect on the U.S. dollar amount we receive from the conversion. On the other hand, a decline in the value of the Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent of our financial results, the value of your investment in the company and the dividends that we may pay in the future, if any, all of which may have a material adverse effect on the prices of our ADS.

        The Renminbi has appreciated significantly against the U.S. dollar during the reporting periods presented, from a rate of RMB6.6000 to US$1.00 as of December 30, 2010 to a rate of RMB6.2301 to US$1.00 as of December 30, 2012. As all of our revenues and most of our expenses are denominated in Renminbi, the changes in the exchange rates of Renminbi against U.S. dollars have not historically materially impacted our results of operations. However, since our reporting currency in the financial statements is U.S. dollars, the translation effect on our revenues and expenses in our income statements has been increasing due to the accelerated appreciation of the Renminbi against the U.S. dollar during the reporting periods, and has been further magnified by the significant increases in our net revenues and total operating expenses during the corresponding periods. For example, during 2011, the Renminbi appreciated against the U.S. dollar from a rate of RMB6.6000 to US$1.00 as of January 3, 2011 to a rate of RMB6.2939 to US$1.00 as of December 30, 2011, resulting in a currency translation increase in our net revenues of US$10.8 million and a currency translation increase in our total operating expenses of US$3.6 million. During 2012, the Renminbi appreciated against the U.S. dollar from a rate of RMB6.2940 to US$1.00 as of January 3, 2012 to a rate of RMB6.2301 to US$1.00 as of December 31, 2012, resulting in a currency translation increase in our net revenues of US$7.1 million and a currency translation increase in our total operating expenses of US$1.6 million.

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        We are not currently subject to any significant direct foreign exchange risk and accordingly, we have not hedged exposures denominated in foreign currencies, nor do we have any other derivative financial instruments outstanding. Based on the amount of our cash and cash equivalents on hand as of December 31, 2012, a 1.0% change in the exchange rate between the Renminbi and the U.S. dollar would result in an increase or decrease of US$1.2 million to our cash and cash equivalents.

        We will receive net proceeds of approximately US$             million from this offering, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. Assuming that we convert the full amount of the net proceeds from this offering into Renminbi, a 1% appreciation of the Renminbi against the U.S. dollar, from a rate of RMB6.2301 to US$1.00 to a rate of RMB6.2924 to US$1.00, will result in a decrease of RMB                     million (US$             million) of the net proceeds from this offering.

Critical Accounting Policies

        We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reported amount of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and reported amounts of revenue and expenses during the reporting periods. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates.

        An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. Significant accounting estimates reflected in our financial statements include inventory write-down, revenue recognition cut off adjustments, valuation allowance for deferred tax assets, valuation of ordinary shares and preferred shares when the preferred shares were issued, valuation of stock options. Changes in facts and circumstances may result in revised estimates. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this prospectus.

Revenue recognition

        We recognize revenue when persuasive evidence of an arrangement exists, products are delivered, the price to the buyer is fixed or determinable and collectability is reasonably assured. We utilize delivery service providers to deliver goods to our customers directly from our own warehouses. We estimate and defer revenue and the related product costs that are in-transit to the customer, which generally takes about three days. The three-days estimate was determined based on the average delivery days for sales made during the last month of the reporting period, derived from customer locations and delivery reports. A one-day change in the estimated good in-transit period would result in an increase or decrease of US$4.6 million to our net revenues in 2012.

        We offer our customers an unconditional right of return for a period of seven days upon receipt of products. We defer revenue until the return period expires as we do not currently have sufficient historical sales information to reasonably estimate the amount of expected returns.

        Revenue was recorded on a gross basis, net of surcharges and value added tax of 17% of gross sales. Surcharges are sales related taxes representing the city maintenance and construction tax and

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education surtax. We have evaluated whether it is appropriate to record the gross amount of product sales and related costs or net amount earned as revenue. We recorded revenue on a gross basis because we have the following indicators for gross reporting: we are the primary obligor of the sales arrangements; we are subject to inventory risks of physical loss; we have latitude in establishing prices and discretion in selecting suppliers; and we assume credit risks on receivables from customers. We retain some general inventory risks despite our arrangements to return goods to some vendors within limited time periods. We generally have the right to return unsold items within a period after the end of a sales event. We typically pay for the purchase order in installments with the last installment paid upon full settlement of the unsold items or returned products we receive from customers. For some products, such as certain sporting goods, which we do not have the right to return the unsold products to the brand partners, we have been able to utilize our strong marketing expertise regarding customer preferences to achieve quick inventory turnover. On an overall basis, most of these above indicators support gross reporting.

Discount coupons and membership reward program

        We voluntarily provide discount coupons through certain cooperative websites or through public distributions during our marketing activities. These coupons are not related to prior purchases, and can only be utilized in conjunction with subsequent purchases on our platforms. These discount coupons are recorded as reduction of revenues at the time of use.

        We have established a membership reward program wherein our customers earn one point for each Renminbi spent on our platforms. Existing members may also receive extra reward points when customers referred by them make their first purchase. Membership reward points can be either exchanged into coupons to be used in connection with subsequent purchases, or exchanged into free gifts. The expiry dates of these reward points vary based on different individual promotional programs, while the coupons expire three months after redemption. We accrue liabilities for the estimated value of the points earned and expected to be redeemed, which are based on all outstanding reward points related to prior purchases at the end of each reporting period, as we do not currently have sufficient historical data to reasonably estimate the usage rate of these reward points. These liabilities reflect our management's best estimate of the cost of future redemptions. As of December 31, 2011 and 2012, we recorded deferred revenue related to reward points earned from prior purchases of $2.6 million and $10.5 million, respectively.

        We do not charge any membership fees to our registered members. New members who register on our platforms or existing members who introduce new members to us are granted free membership reward points, which can be used to redeem coupons for future purchases. These reward points are not related to prior purchases and are recorded as reduction of revenues at the time of use.

Other revenues

        We conduct product promotional activities for certain brands on our website. These revenues are recognized on a straight-line basis over the service periods, net of business tax of approximately 5% of service revenues or 6% value-added tax, or VAT, in certain pilot locations as a result of the pilot VAT reform program.

Cost of goods sold

        Our cost of goods sold primarily consists of the cost of merchandise sold and inventory write-downs. Our cost of goods sold does not include shipping and handling expenses, payroll, bonus and benefits of our logistic staff or logistics center rental expenses. Our cost of goods sold may not therefore be comparable to other companies which include such expenses in their cost of goods sold.

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        We recorded US$1.7 million and US$12.2 million in inventory write-downs in 2011 and 2012, respectively. Such write-downs primarily reflected the estimated market value of damaged or obsolete inventory. The increase in write-downs in 2012 is in line with the significant increase in our inventory and was also due to the more comprehensive policy we established in 2012 in assessing inventory write-downs, which is made possible as our business grow and we acquire more experience and historical data on inventory management.

Inventories

        Inventory is stated at the lower of cost or market. Cost of inventory is determined using the identified cost of the specific item sold. We take ownership, risks and rewards of the products purchased from brand partners but have the right to return unsold products to certain brand partners. Adjustments are recorded to write down the cost of inventory to the estimated market value for slow-moving merchandise and damaged goods. The amount of write down is also dependent upon factors such as whether the goods are returnable to vendors, inventory aging, historical and forecasted consumer demand, and promotional environment. Write-downs are recorded in cost of goods sold.

Share-Based Compensation

        Share-based payments made to employees, including employee stock options, ordinary shares transferred to employees with no consideration, and restricted shares issued to employees for which our company has a repurchase option, are recognized as compensation expenses over the requisite service periods. We measure the cost of employee services received in exchange for share-based compensation at the grant date fair value of the awards. We have elected to recognize compensation expense on a straight-line basis over the requisite service period for the entire award with graded vesting provided that the amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of share-based compensation expense to be recognized in future periods.

2011 stock incentive plan

        In March 2011, we adopted the 2011 Stock Incentive Plan, or the 2011 Plan, which authorizes us to issue up to an aggregate of 7,350,000 ordinary shares of our company to our employees, directors, officers and consultants.

2012 share incentive plan

        In March 2012, we adopted our 2012 Share Incentive Plan, under which we are authorized to issue up to an aggregate of 9,000,000 ordinary shares of our company to our employees, directors, officers and consultants. As of the date of this prospectus, we have granted options to purchase 231,658 ordinary shares of our company and 1,302,500 restricted shares.

Founders' unvested shares

        Mr. Eric Ya Shen, our chairman and chief executive officer and Mr. Arthur Xiaobo Hong, the vice chairman of our board of directors, who we collectively refer to as our founders, entered into a share restricted agreement with the series A preferred shares investors and us on February 21, 2011. The founders' unvested ordinary shares under the share restriction agreement were measured at the grant date fair value and recognized as compensation expense over the vesting periods. Of the shares held by the founders, 40% vested immediately, with the remaining shares to be vested in 36 equal and

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continuous monthly installments for each month starting from February 21, 2011, provided that the founders remain full-time employees of our company at the end of such month. Our company has the option to repurchase the ordinary shares held by our founders in the event a founder ceases to be a full-time employee of our company for any reason. We have an irrevocable and exclusive option to repurchase all the unvested shares held by our founders at par value, and all of the shares (including vested shares) held by the founders at fair market value. On April 11, 2011, our existing shareholders, our company and the series B preferred shares investors entered into an amended and restated share restriction agreement which superseded and replaced in its entirety the original agreement dated February 21, 2011. The amended and restated agreement included the Series B preferred shareholders as additional parties to the agreement, but did not change any of the significant terms of the original share restriction agreement. On December 8, 2011, our company, the ordinary shareholders, and holders of series A and series B preferred shares entered into an agreement to terminate the amended and restated share restriction agreement, which in substance accelerated the vesting of the founders' unvested ordinary shares to December 8, 2011. Therefore, for the year ended December 31, 2011, we recorded share-based compensation expense of US$63.9 million in connection with the unvested shares of the founders.

Ordinary shares transferred to the vice chairman of our board of directors

        On June 15, 2011, Elegant Motion Holdings Limited, a company wholly-owned by the Mr. Eric Ya Shen, transferred 1,521,007 ordinary shares to High Vivacity Holdings Limited, a company wholly-owned by Mr. Arthur Xiaobo Hong, an employee and vice chairman of our board of directors. The transfer of shares was intended to compensate Mr. Hong for his services as an employee of the Company. Mr. Shen determined the number of ordinary shares and executed the share transfer on June 10, 2011. We considered June 10, 2011 as the grant date of the share award. Accordingly, the transaction was recognized as share-based compensation for the past services of Mr. Hong on the grant date. We recognized share-based compensation of US$6.2 million on June 15, 2011, based on the fair value of our ordinary shares of US$4.08 per share on that date, multiplied by 1,521,007 ordinary shares transferred.

        The table below sets forth information concerning options, restricted shares and ordinary shares granted to our executives, other employees and a consultant by the end of 2012:

Grant Date
  Number of
ordinary shares
underlying options
grants / number of
ordinary shares granted
  Option exercise
price per share
  Fair value of
options at
date of grant
  Fair value of
ordinary shares
  Type of valuation(1)   Intrinsic
Value(2)

February 21, 2011

    18,632,250 (3)           3.43   Retrospective   N/A

March 18, 2011

    1,470,000     0.50     2.95     3.40   Retrospective    

    183,750     0.50     2.96     3.40   Retrospective    

    735,000     0.50     2.96     3.40   Retrospective    

    735,000     0.50     2.94     3.40   Retrospective    

    367,500     0.50     2.96     3.40   Retrospective    

March 28, 2011

    945,000     0.50     2.99     3.44   Retrospective    

June 15, 2011

    1,521,007             4.08   Retrospective   N/A

July 10, 2011

    50,000     0.50     3.86     4.31   Contemporaneous    

August 30, 2011

    819,638     2.52     3.32     4.78   Contemporaneous    

November 30, 2011

    551,250     2.52     4.61     6.36   Contemporaneous    

November 30, 2011

    1,310,000     2.50     4.43     6.36   Contemporaneous    

February 1, 2012

    204,910 (4)   2.52     3.60     4.70   Contemporaneous    

April 16, 2012

    452,000     2.50     1.24     2.51   Contemporaneous    

April 16, 2012

    101,138 (5)   2.50     1.45     2.51   Contemporaneous    

June 1, 2012

    367,500 (6)           2.76   Contemporaneous    

September 30, 2012

    340.000 (6)           3.75   Contemporaneous    

October 1, 2012

    34,000 (6)           3.70   Contemporaneous    

(1)
We did not have to prepare any financial statements in conformity with U.S. GAAP until we decided to pursue an initial public offering in the U.S. in the third quarter of 2011. In the process of preparing U.S. GAAP financial statements for our initial public offering, we significantly formalized and refined our projections. We believe that these refined projections are more reliable than

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    those previously used. Consequently, our valuations in determining the fair value of our ordinary shares before the availability of the revised financial projections, including as of February 21, 2011, March 18, 2011, March 28, 2011 and June 15, 2011, have all been prepared on a retrospective basis, while the valuations in determining the fair value of our ordinary shares as of July 10, 2011, August 30, 2011 and November 30, 2011, February 1, 2012 and April 16, 2012 have been prepared on a contemporaneous basis.

(2)
Intrinsic value is determined based on the difference between the public offering price and the exercise price of options.

(3)
The 18,632,250 shares were unvested restricted shares held by our founders as of February 21, 2011.

(4)
The 204,910 shares options were issued to our third party consultant. We measure the equity instruments at their then-current fair values at each of the financial reporting dates, and attributes the changes in those fair values over the future services period until the measurement date has been established.

(5)
The 101,138 shares were issued to two of our independent directors.

(6)
During 2012, a total of 741,500 non-vested shares were granted to an executive officer and employees under the 2012 stock incentive plan. The fair values of non-vested shares are measured at the fair value of our ordinary shares on the respective grant-dates.

        For the February 21, 2011 grants of restricted ordinary shares to our founders, we have calculated the ordinary share value to be US$3.43 per share. The fair value of the shares was determined with the assistance of a third-party valuation firm. To estimate the fair value of the ordinary shares, we first determined our enterprise value by means of a discounted cash flow analysis using the retrospective approach. The cash flow derived by management considered the nature of our business, our future business plan, specific business and financial risks, the stage of development of our operations, and economic and competitive elements affecting our business, industry and market. We also used other general assumptions, including the following: no major changes in the existing political, legal, fiscal and economic conditions in China; no major changes in the current taxation laws in the jurisdictions in which we operate; our ability to retain competent management, key personnel and technical staff to support our ongoing operations; and no significant deviations in industry trends and market conditions from our current economic forecasts. The cash flow is discounted using the weighted average cost of capital of 21.50%, which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 14% was applied to arrive at the estimated enterprise value. The lack of marketability discount takes into consideration the plans for and status of our initial public offering in March 2012.

        For the March 18, 2011, March 28, 2011, July 10, 2011 and August 30, 2011, November 30, 2011, February 1, 2012 and April 16, 2012 stock options grants, we have assessed the fair value of our options using the binomial option pricing model, which requires the input of highly subjective assumptions, including the options' expected exercise multiples, expected volatility, expected dividend yields and risk-free interest rates, and the fair value of the underlying ordinary shares on those dates.

        We have attributed the ordinary shares underlying the options a fair value of US$3.40 and US$3.44 as of March 18, 2011 and March 28, 2011, respectively, determined based on a retrospective valuation using the discounted cash flow method prepared with the assistance of the appraiser. For the ordinary shares underlying the options, we have attributed a fair value of US$4.78 and US$6.36 as of August 30, 2011 and November 30, 2011 respectively, determined based on a contemporaneous valuation using the discounted cash flow method, also prepared with the assistance of the appraiser. The methodology for the valuation of ordinary shares on March 18, 2011, March 28, 2011, August 30, 2011 and November 30, 2011 was similar to that used for the valuation of ordinary shares on February 21, 2011 as described above. The cash flow is discounted using the weighted average cost of capital of 21.5%, 21.5%, 20.0% and 19.5% on March 18, 2011, March 28, 2011, August 30, 2011, and November 30, 2011, respectively, which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 13%, 12%, 8%, and 6% was applied respectively to arrive at the estimated enterprise value.

        We have attributed to the ordinary shares underlying the options a fair value of US$4.31 as of July 10, 2011, determined based on the linear relationship between the fair value of the ordinary shares as of June 15, 2011 and the fair value of the ordinary shares as of August 30, 2011. We did not use the

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discounted cash flow method to determine the fair value of the ordinary shares as of July 10, 2011 because of:

    the substantially smaller number of options granted on July 10, 2011 as compared with those granted on March 18, 2011, March 28, 2011 and August 30, 2011; and

    our continuing business development according to our business plan between June 15, 2011 and August 30, 2011.

        In applying the binomial option pricing model on March 18, 2011, we also made the following assumptions: an expected dividend yield of 0%; a risk-free interest rate of 3.725%; an expected volatility of 56.68%; an option life of 10 years; and an expected exercise multiple of 2.8 times.

        In applying the binomial option pricing model on March 28, 2011, we also made the following assumptions: an expected dividend yield of 0%; a risk-free interest rate of 3.778%; an expected volatility of 56.53%; an option life of 10 years; and an expected exercise multiple of 2.2 times.

        In applying the binomial option pricing model on July 10, 2011, we also made the following assumptions: an expected dividend yield of 0%; a risk-free interest rate of 4.127%; and expected volatility of 55.26%; an option life of 10 years; and an expected exercise multiple of 2.2 times.

        In applying the binomial option pricing model on August 30, 2011, we also made the following assumptions: an expected dividend yield of 0%; a risk-free interest rate of 3.116%; and expected volatility of 54.99%; an option life of 10 years; and an expected exercise multiple of 2.8 times.

        In applying the binomial option pricing model on November 30, 2011, we also made the following assumptions: an expected dividend yield of 0%, a risk-free interest rate of 2.853%, an expected volatility of 54.00%, an option life of 10 years, and an expected exercise multiple of 2.2 times for 1,310,000 options granted to employees and 2.8 times for 551,250 options granted to executive officers.

        In applying the binomial option pricing model on April 16, 2012, we also made the following assumptions: an expected dividend yield of 0%, a risk-free interest rate of 3.002%, an expected volatility of 53.12%, an option life of 5.13 years for 452,000 options granted to employees and 7.3 years for the 101,138 options granted to the two independent directors, an expected exercise multiple of 2.2 times for 452,000 options granted to employees and 2.8 times the 101,138 options granted to the two directors.

        In applying the binomial option pricing model on December 31, 2012 for the re-measurement of the 204,910 options granted to a consultant in February 2012, we also made the following assumptions: an expected dividend yield of 0%, a risk-free interest rate of 2.5362%, an expected volatility of 51.33%, an option life of 4.5 years. Exercise multiple is not considered for options granted to non-employees.

        For the purpose of determining the estimated fair value of our share options, we believe that the expected volatility, the expected exercise multiples and the estimated share price of our ordinary shares are the most sensitive assumptions, since we were a privately-held company at the date we granted all our options in 2011 and in February 2012. Changes in these assumptions could significantly impact the estimated fair values of the options calculated by the binomial option pricing model, and change the share-based compensation expense materially in the future from that recorded in current period. Expected volatility was estimated based upon the average stock price volatility of comparable listed companies over a period comparable to the expected term of the options. We believe the average share price volatility of the selected comparable companies is a reasonable benchmark in estimating the expected volatility of our ordinary shares. The expected exercise multiple is the average ratio of the stock price to the exercise price of when employees would decide to voluntarily exercise their vested options. As we do not have sufficient information on past employee exercise history, we estimated the exercise multiples based on research conducted by Huddart and Lang (1995).

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        For the June 15, 2011 grants of ordinary shares, we have calculated the fair value of each ordinary share to be US$4.08, determined based on a retrospective valuation using the discounted cash flow method prepared with the assistance of the appraiser. The methodology for the valuation of ordinary shares on June 15, 2011 was similar to the valuation of ordinary shares on February 21, 2011, as described above. The cash flow was discounted using the weighted average cost of capital of 21.00%, which was benchmarked with discount rates of comparable listed companies. In addition, a lack of marketability discount of 10% was applied to arrive at the estimated enterprise value.

Income taxes

        Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

        As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. We account for income taxes using the liability method. Under this method, deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end and tax loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance when, based upon the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

        As of December 31, 2012, we have provided a valuation allowance for the full amount of the deferred tax assets relating to the future benefit of net operating loss carried forward of certain subsidiaries and the consolidated affiliated entity as we are not able to conclude that the future realization of those net operating loss carry forwards is more likely than not.

Recent Accounting Pronouncements

        In December 2011, the FASB issued an authoritative pronouncement on disclosures about offsetting assets and liabilities. Under this pronouncement, entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities borrowing and securities lending arrangements. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. We do not expect the adoption of this pronouncement to have a significant impact on its consolidated financial condition or results from operations.

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INDUSTRY OVERVIEW

        The retail industry globally is undergoing significant changes. The most notable trends driving these changes are the migration of offline retail sales to online channels and the rise of online discount channels as a key driver of sales volume. While the impact of these trends has been more evident in developed economies, the long-term potential to fundamentally transform traditional retail is expected to be greater in markets where the traditional retail sector remains underdeveloped. Consumers and brands in such markets tend to be more willing to adopt new online retail business models.

Rapidly Growing Domestic Retail Market

        The retail market in China is in the midst of an extended period of robust growth driven by increasing urbanization and higher levels of disposable income.

        Retail sales in China grew from RMB7.6 trillion in 2006 to RMB18.4 trillion in 2011, representing a CAGR of 19.2%, according to China's National Bureau of Statistics. According to the Frost & Sullivan Report, retail sales in China are expected to reach RMB23.7 trillion in 2013. Coupled with the fast growth of China's retail sales, China's domestic consumption pattern is undergoing significant development. Although China's historical economic growth has been largely driven by the investment in fixed assets and exports, the spending patterns of China's increasingly affluent population are expanding beyond basic daily necessities to encompass more lifestyle products and services. In 2011, private consumption made up 35.4% of China's GDP, compared to 71.2% in the U.S., according to the Economist Intelligence Unit. Retail sales are expected to continue to grow as a percentage of China's GDP as private consumption becomes a more important component of China's economy. According to the Frost & Sullivan Report, retail sales are projected to constitute 43.2% of China's GDP in 2015, compared to 39.0% in 2011.

Underdeveloped Traditional Retail Infrastructure

        The relatively early stage of development of China's retail market is characterized by several notable factors and trends:

        Highly fragmented:    The retail market in China is highly fragmented. For example, the combined market share of the top 20 retailers in China was 7% in 2011, compared with 24% in the U.S., according to the Frost & Sullivan Report.

        Insufficient coverage:    Retail coverage in China lags behind consumers' increasing purchasing power for lifestyle products and services. According to the Frost & Sullivan Report, retail space in China was approximately 2 square feet per capita in 2011, compared with approximately 24 square feet per capita in the U.S. The breadth of product offerings and brand selection is often restricted by limited retail space, particularly in China's smaller cities.

        Underdeveloped discount channels:    Chinese consumers are highly brand conscious and price sensitive, yet the availability of discount retailers and outlet malls within China's retail ecosystem is extremely limited. In contrast, more developed markets such as the U.S. have well-established, large scale discount retailers and outlet malls that sell a wide variety of products and brands at deeply discounted prices. According to the Frost & Sullivan Report, China's discount retail market size in 2011 and 2012 was US$15.1 billion and US$23.6 billion, respectively, compared with US$64.6 billion and US$67.8 billion in the U.S. China's discount retail market accounted for 0.5% and 0.7% of the total retail market in 2011 and 2012, respectively, compared with 1.4% and 1.4% for the same periods in the U.S., according to the Frost & Sullivan Report.

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Rise of E-commerce Channels

        Improvements in access to, and the functionality of, the internet are enabling Chinese consumers to more easily research and purchase products and services online. The migration of traditional retail to e-commerce is also facilitated by improving fulfillment and logistics networks, as well as the increased availability of online payment options. According to the Frost & Sullivan Report, the number of online shoppers in China grew from 80 million in 2008 to 187 million in 2011. The number is projected to grow to 363 million in 2015, representing a CAGR of 18.0% from 2011 to 2015, according to the same source. Although China's population of online shoppers has rapidly increased over the past few years, its growth potential remains strong due to China's lower penetration rate of online shopping as compared to developed countries. About 40.5% of China's total internet users shopped online in 2011, according to the Frost & Sullivan Report, compared to 67.6% in the U.S., according to Forrester Research.

        Driven by the increasing number of online shoppers, as well as higher purchase volumes per shopper, the online retail sales revenue in China is expected to grow from RMB785 billion in 2011 to RMB3,020 billion in 2015, representing a CAGR of 40.1%, according to the Frost & Sullivan Report. Online retail sales as a percentage of total retail sales in China is expected to increase from 4.3% in 2011 to 9.8% in 2015, according to the Frost & Sullivan Report, whereas such percentage in the United States is expected to increase from 6.8% in 2011 to 8.8% in 2015, according to Forrester Research.


Online retail sales in China

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            Source: Frost & Sullivan Report

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China B2C e-commerce market size

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            Source: Frost & Sullivan Report

        According to the Frost & Sullivan Report, apparel is the most popular e-commerce segment in China. The size of the apparel product segment of the Chinese B2C e-commerce market is forecast to grow from RMB30.9 billion in 2011 to RMB244.8 billion in 2015, representing a CAGR of 67.8%, according to the Frost & Sullivan Report. Apparel inventory accounts for approximately 50% of total apparel market value, according to a report by the Boston Consulting Group published in November 2011.

        Mobile commerce (m-commerce), which refers to e-commerce conducted by users on mobile devices, such as smart phones and tablet PCs, is a fast growing segment of e-commerce market. China's active m-commerce user population reached 98.0 million in 2011, representing a growth of 63.3% from 2010, according to the Frost & Sullivan Report. The number of active m-commerce users in China is expected to further increase to 359.0 million in 2015. The total transaction value of m-commerce amounted to RMB11.5 billion in 2011, a growth of 416.2% from 2010, according to the Frost & Sullivan Report. The total transaction value is expected to further increase to RMB257.4 billion in 2015.

Flourishing Discount Retail Market

        The size of the discount retail market in China reached RMB94.0 billion in 2011, and is projected to grow to RMB560.8 billion in 2015, representing a CAGR of 56.3%, according to the Frost & Sullivan Report. Frost & Sullivan expects that discount retail sales in China will continue to increase as discount retail channels become more developed and diversified.

        The discount apparel retail market is a significant segment of the discount retail market in China, representing 46.9% of total discount retail sales in China in 2011, according to the Frost & Sullivan Report. However, as other product categories experience rapid growth, the discount apparel retail market is expected to decrease to 41.9% of total discount retail sales in China in 2015, according to the Frost & Sullivan Report.

        In the U.S., discount apparel retail has gained market share in recent years, increasing from 11.9% of the total apparel retail market in 2006 to 14.2% in 2011, according to the Frost & Sullivan Report. China is expected to experience a similar trend as its retail market continues to develop. China's discount apparel retail market accounted for 4.7% of the total apparel retail market in 2011 and is expected to account for 14.9% of the total apparel retail market in 2015, according to the Frost & Sullivan Report.

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Discount retail market in China

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            Source: Frost & Sullivan Report

        Despite the strong consumer demand for high quality, authentic merchandise at deeply discounted prices, retailers have found challenges in effectively liquidating excess or aged inventory. Retailers typically allocate a separate area in their stores to offer promotional products. This approach cannibalizes sales of regularly priced goods in the same stores, erodes the image of the brands they carry, and decreases available shelf space for regularly priced products. As e-commerce has become an increasingly vibrant channel, some retailers have attempted to open online stores to liquidate excess or under-performing inventory. However, these retailers often discover unanticipated difficulties associated with running their online operations, including transaction processing and logistics and fulfillment challenges.

Emergence of the Flash Sales Market

        A flash sale is the online sale of a finite quantity of deeply discounted products or services for a limited period of time. Flash sales represents a new online retail format that utilizes the advantages of e-commerce while also addressing the consumer preference in China for acquiring goods and services at meaningful discounts without sacrificing quality or brand image. The model originated in Europe in 2001 and then spread to the U.S., with an early focus on selling women's apparel and accessories made by luxury brands. More recently, leading international flash sales companies have diversified their product offerings, moving into new categories, such as jewelry and travel, and catering to a broader base of consumers, including men and children.

        The market size of the flash sales industry in China is estimated to grow from RMB8.4 billion in 2011 to RMB104.2 billion in 2015, according to the Frost & Sullivan Report. According to the Frost & Sullivan Report, 48.4% of consumers in China who were surveyed stated that the most important reason they shop online is to procure goods at more attractive prices. Flash sales also address the challenges faced by traditional retailers by providing an off-premises channel to quickly and efficiently liquidate excess or aged inventory. In addition, unlike leading flash sales models in the U.S. and Europe, the flash sales market in China has quickly expanded beyond selling primarily luxury brands and services. China's flash sales market encompasses a broader range of brands and products, appealing to a larger base of consumers. While sales of apparel products comprised 57.1% of the total online flash sales market in China in 2011, they are projected to decrease to 43.1% of the total online flash

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sales market in 2015, as other growing product categories such as household goods, home decoration, beauty and cosmetics and other lifestyle products account for a larger portion of the market, according to the Frost & Sullivan Report.

        The growth in China's flash sales market is supported not only by the growth of e-commerce and retail sales, but also by Chinese consumers' growing demand for branded goods. In a 2011 Harris Interactive poll, 72% of Chinese respondents indicated that brand names are important to them and 67% indicated that they "needed their fashion to be branded", as opposed to 26% and 16% in the U.S., respectively. Consistent with the spontaneity of flash sales purchases, 40% of Chinese consumers made their most recent clothing purchase because "it caught their eye", compared to 19% in the U.S., according to the same Harris Interactive poll. As evidence of the effectiveness of viral marketing through word-of-mouth for flash sales, 89% of Chinese consumers would be likely to tell their friends about a great deal they received, according to Harris Interactive.


Flash sales market in China

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            Source: Frost & Sullivan Report

        We believe that significant competitive factors in the flash sales market include:

        Strong merchandising capabilities:    Consistently attracting consumers through the selection of carefully curated merchandise offered on flash sales websites engenders customer loyalty and enhances the viral marketing generated by users of the site. The ability to best capture consumer tastes and preferences is therefore an important element for succeeding in China's flash sales market.

        Economies of scale:    Brands prefer to deal with a limited number of flash sales partners to sell as much of their inventory as possible. Similarly, consumers tend to use and stick with websites offering a broad range of products so as to meet their shopping needs without the need to visit a large number of websites. Large scale flash sales companies will be better positioned to meet the preferences of brands and consumers, while also benefiting from economies of scale that spread fixed costs.

        Fulfillment and logistics expertise:    A flash sales website's ability to reliably and efficiently fulfill customer orders is a critical differentiating factor for customers choosing among different flash sales websites. Accordingly, it is crucial for a flash sales company to possess strong fulfillment capabilities that provide a positive customer experience, delivering products in a reliable and efficient manner and offering convenient return services.

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BUSINESS

OVERVIEW

        We are China's leading online discount retailer for brands as measured by total revenues in 2011, the number of registered members as of December 31, 2012 and the number of monthly unique visitors in December 2012, according to the Frost & Sullivan Report. We offer high-quality branded products to consumers in China through flash sales on our vipshop.com website. Flash sales represents a new online retail format combining the advantages of e-commerce and discount sales through selling a finite quantity of discounted products or services online for a limited period of time. Since our inception in August 2008, we have attracted a large and growing number of consumers and popular brands. We had 26.8 million registered members and over 4.9 million cumulative customers and promoted and sold products for over 5,800 domestic and international brands as of December 31, 2012.

        Our business model provides a unique online shopping experience for our customers. We offer new sales events daily with a curated selection of popular branded products at deeply discounted prices in limited quantities during limited time periods, creating the element of "thrill and excitement" associated with our unique customer shopping experience. Our strong merchandizing expertise enables us to select the brand composition and product mix of our daily sales events that appeal to our customers, which mostly consist of urban and educated individuals in China who are seeking lifestyle enhancements. We have built a highly engaged and loyal customer base that contributes to our sales growth, while also enabling us to attract new customers primarily through word-of-mouth referrals. A majority of our customers have purchased products from us more than once. Our total number of repeat customers was 0.2 million, 0.9 million and 2.6 million in 2010, 2011 and 2012, respectively, representing 56.2%, 60.6% and 63.9%, respectively of the total number of our active customers during the same periods. Orders placed by our repeat customers accounted for 86.7%, 91.9% and 93.2% of our total orders during the same periods.

        We are a preferred online flash sales channel in China for popular domestic and international brands. We believe that well-known and popular brands are attracted to our website and services because of our ability to monetize large volume of their inventory in short periods of time, increase consumer awareness of their brands and products, reach potential customers throughout China, and fulfill their demand for customer data analysis and inventory management. Among the brands who have promoted and sold products on our website, substantially all of them have returned to pursue additional sales opportunities with us. To date, we have the exclusive rights to sell selective products from over 700 brands.

        We strive to optimize every aspect of our operations as we continue to grow our business. We generally have the right to return unsold items for most of our products to our brand partners. Our logistics operations and inventory management systems are specifically designed to support the frequent sales events on our website and handle a large volume of inventory turnover. We use both leading delivery companies with nationwide coverage and quality regional or local couriers to ensure reliable and timely delivery. We have developed our IT infrastructure to support the surge of visitor traffic to our website during the peak hours of our daily flash sales. We believe that our efficient operational and management systems combined with our robust IT infrastructure set a solid foundation for our continuing growth.

        We began our operations in August 2008 and have grown significantly since then. In 2010, 2011 and 2012, we fulfilled over 0.9 million, over 7.2 million and over 21.9 million customer orders, respectively, and we generated total net revenues of US$32.6 million, US$227.1 million and US$692.1 million, respectively. In 2010, 2011 and 2012, we incurred net losses of US$8.4 million, US$107.3 million and US$9.5 million, respectively. Our net loss in 2011 and 2012 reflected non-cash share-based compensation expenses in an aggregate amount of US$73.9 million and US$7.6 million,

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respectively. We recorded net profit of US$6.3 million in the fourth quarter of 2012, the first time we achieved profitability on a net basis.

        PRC laws and regulations currently limit foreign ownership of companies that provide internet-based services, such as our online retail business. To comply with these restrictions, we conduct our online operations principally through our consolidated affiliated entity, Guangzhou Vipshop Information Technology Co., Ltd., or Vipshop Information. We face risks associated with our corporate structure, as our control over Vipshop Information is based upon contractual arrangements rather than equity ownership. See "Our Corporate History and Structure" and "Risk Factors—Risks Relating to Our Corporate Structure and Restrictions on Our Industry."

OUR VALUE PROPOSITION TO CONSUMERS AND BRANDS

        Since our inception on August 22, 2008, we have focused on building the leading online discount retail website in China. We believe that the success of vipshop.com is a direct result of the unique value proposition that we offer to both consumers and brands.

        For consumers, we provide a unique online shopping experience characterized by "thrill and excitement." The "thrill and excitement" experience for consumers arises from their discovery of the high quality items available for sale on our website each day and being able to purchase these high quality items at a significant discount to retail prices. We deliver this unique online shopping experience to consumers across China, providing them with access to carefully selected, high quality products from coveted brands which they might not otherwise have access to or have thought about purchasing.

        For brands, we offer a channel to create new consumer demand for their products and services and the ability to monetize their inventory quickly without compromising their brand promise. We provide a new and impactful marketing channel for brands to increase consumer awareness throughout China. We help brands expand their addressable market of potential customers by offering products at a price that entices new customers to try a brand's products that they may not otherwise have sampled or been able to afford. We also provide our customer behavior and transaction data to brands to help them refine their product development and sales and marketing strategies.

OUR STRENGTHS

        We are focused on revolutionizing the online shopping experience in China for both consumers and brands. We believe the following strengths have been critical to our success to date:

China's Leading Online Discount Retailer for Brands

        We are China's leading online discount retailer for brands as measured by total revenues in 2011, the number of registered members as of December 31, 2012 and the number of monthly unique visitors in December 2012, according to the Frost & Sullivan Report. We have experienced rapid growth since our inception in August 2008, serving mostly urban and educated consumers with growing discretionary income from cities across China. Our website, www.vipshop.com, attracted 1.7 million average daily unique visitors in December 2012 according to the Frost & Sullivan Report. We had 26.8 million registered members and over 4.9 million cumulative customers, and had promoted and sold products for over 5,800 domestic and international brands as of December 31, 2012. We have achieved our market leading position through our early mover advantage in gaining customers and brands, and providing them with a superior customer experience. This has allowed us to attract a critical mass of highly engaged and repeat customers and a large base of popular brands, which in turn drives powerful network effects, contributing to our fast growth.

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Highly Engaged and Loyal Customer Base

        We attract a highly engaged and loyal customer base. We engage our customers by providing a curated selection of popular branded products at substantial discounts, coupled with exceptional customer service. Our daily flash sales are particularly engaging to our customers. During the peak hours of our daily sales from 10 a.m. to 12 p.m. Beijing time, our website often attracts a surge of visitor traffic. As a result, we are able to continuously attract new customers and increase the spending and repeat purchase rate of existing customers. In 2012, we acquired 3.3 million new customers, compared to 1.3 million in 2011 and 0.3 million in 2010. Our average orders per active customer increased from 3.3 orders in 2010 to 4.9 orders in 2011 and to 5.3 orders in 2012. Our total number of repeat customers was 0.2 million, 0.9 million and 2.6 million in 2010, 2011 and 2012, respectively, representing 56.2%, 60.6% and 63.9%, respectively, of the total number of our active customers during the same periods. Orders placed by our repeat customers accounted for 86.7%, 91.9% and 93.2% of our total orders during the same periods.

Preferred Online Flash Sales Channel for Popular Brands

        We are a preferred online flash sales channel in China for popular domestic and international brands. As of December 31, 2012, we have promoted and sold products in China for over 5,800 domestic and international brands on our website. We carefully select prospective brand partners, choosing to work with only those that are well-known and offer high quality or popular products that our customers desire. We have an established track record of generating significant sales volume for brands in short periods of time, maximizing promotional impact of the brands due to the "thrill and excitement" impact of our flash sales model. Our large and highly engaged customer base also contributes to the success of creating a new sales channel for brands without tarnishing their brand promise.

        Among the brands who have promoted and sold products on our website, substantially all of them have returned to pursue additional sales opportunities with us, reflecting the strong value we provide to brands. To date, we have the exclusive rights to sell selective products from over 700 brands. As we augment the number of our brand partners, we have increasingly refined the selection criteria of brands and products. In addition, we are becoming a new preferred online channel for well-known international brands seeking to sell and promote their products in China.

Powerful Network Effects

        We have successfully increased our customers and brand partners in parallel through powerful network effects. Average daily unique visitors to our website grew to 1.7 million in December 2012, according to the Frost & Sullivan Report. As our total registered members and customers have rapidly grown, we have benefited from viral marketing that is the result of word-of-mouth referrals from our customers who often broadcast on social media platforms their excitement regarding their purchases on our website. As we gain more customers and achieve greater sales volumes, we have emerged as a channel capable of selling significant volumes of discounted branded products in very short periods of time. In turn, our sales capability allows us to attract more brands and products, which further enables us to attract more customers. In addition, since brands often prefer to work with leading online retailers to benefit from positive brand association, as well as generally better operational efficiencies, we have succeeded in becoming a preferred online channel for many brands. In December 2012, on average, we processed 126 thousand orders, returned 0.3 million product items to suppliers and received and sorted 50 thousand SKUs per day. Our leading position among both consumers and brands creates high barriers to entry for potential competitors.

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Superior Operational Expertise

        We strive to optimize every aspect of our operations to benefit our customers and brand partners.

        Optimized Product Selection.    We believe that we have developed strong merchandizing expertise as evidenced by our track record of consistently selecting branded products that appeal to our customer base. To maximize daily sales, we optimize the brand composition and product mix of our daily sales based on our superior knowledge of a product's availability and the needs of our customers.

        Low Working Capital Requirements.    We generally have the right to return unsold items for most of our products to our brand partners. We only pay a small deposit on inventory before it is sold. As a result, we do not require significant working capital to run our day-to-day operations.

        Proven Fulfillment Capabilities.    We have established a nationwide logistics network and warehousing capacity to help ensure a positive customer experience and to increase customer loyalty. Our logistics operations and inventory management systems are specifically designed to support the frequent sales events on our flash sales website and handle a large volume of inventory turnover. We use both leading delivery companies with nationwide coverage and quality regional or local couriers to ensure reliable and timely delivery.

        Robust IT Infrastructure.    We have implemented a robust IT infrastructure with automated inventory tracking, rapid customer fulfillment, comprehensive billing and superior customer service and support capabilities. Our IT systems seamlessly scale to handle the surge of visitor traffic our website generates during the peak hours of our daily sales. Moreover, our customer relationship management and business intelligence systems enable us to effectively gather, analyze and make use of customer behavior and transaction data. We utilize this information to refine our marketing initiatives for upcoming flash sales. We also provide selected data to our brand partners, enabling them to optimize their product development and sales and marketing strategies.

Experienced Management Team with Deep Industry Knowledge

        Our management team has diverse yet complementary backgrounds with deep industry expertise in e-commerce, retail, logistics and technology. Our management's extensive experience in the retail industry and well-established relationships with brands give us the knowledge and understanding of both consumers' and brands' needs and preferences. We believe that our management team's collective experience and strong execution capabilities will enable us to realize significant growth opportunities.

OUR STRATEGIES

        Our mission is to be the online shopping destination of choice for branded products and to become a lifestyle trendsetter for consumers in China. We plan to pursue the following strategies to grow our customer base, expand our ecosystem of brand partners, improve our platform, and ultimately achieve our mission:

Enhance Customer Experience and Loyalty through Innovation

        We continually strive to enhance our customer experience on our website by implementing new features and functionalities. We intend to continue to refine our web interface to offer a personalized shopping experience by presenting products and brands catered to individual preferences. We will also rely on proprietary data regarding our customer base to enhance our product and brand curation to reinforce our positioning as a trendsetter of desirable lifestyle products. We expect to introduce tiered membership levels and loyalty programs to reward our VIP customers with additional benefits, such as expedited delivery for their purchases. Taking advantage of the rapid growth of wireless internet-enabled devices such as smart phones and tablet PCs, we have introduced mobile applications for the

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iPad™, iPhone™, Android™ and Symbian™ devices in 2011 to increase our customer stickiness. In addition, we plan to invest further on our mobile strategy, enhance our mobile functionality and introduce applications for different mobile devices to allow our customers to access and shop on our website more conveniently and more frequently. We believe that implementing these initiatives will drive increased purchasing activity by both existing and new customers, and foster greater user engagement and customer loyalty.

Strengthen Our Brand Relationships and Expand Our Product Selection

        We intend to work closely with our existing brand partners and potential new brand partners to improve their ability to reach consumers and sell products through our website. We expect to offer more brands and products in the existing verticals by increasing exclusive relationships with brand partners and offering more branded products customized for vipshop.com, and part of the effort will involve establishing of cooperation directly with brand owner instead of brand distributors where business efficiency can be achieved. We also plan to further expand into complementary verticals. For example, we started to offer hotel reservation products on our website in September 2011 and leisure travel packages in August 2012. We believe these adjacent verticals are relevant and desirable to our target base of urban, educated consumers throughout China with growing disposable incomes. We will also seek to provide brands with a high impact channel to market and sell new, in-season merchandise in addition to our current channel through which they can sell surplus inventory. As we demonstrate the power and effectiveness of our website and enhance our value proposition to brands, we believe an increasingly wide range of popular domestic and international brands will seek to partner with us to enter or expand their footprint in China.

Further Promote Our Vipshop.com Brand to Attract More Customers

        We believe that the powerful network effects arising from our growing base of customers and brand partners will continue to enhance our brand awareness and drive the growth of our business. We will continue to encourage the viral and cost-effective marketing we receive from word-of-mouth referrals and social media references. For example, in addition to rewarding customers for their direct new customer referrals, we also plan to extend partnerships with major social media and microblogging websites in China, such as Weibo.com and Renren.com, and reward customers for sharing their positive vipshop.com experiences on those websites. Finally, we intend to enhance our brand awareness by engaging in additional cost-effective brand promotion activities, including sponsoring high profile events.

Expand Our Operational Capabilities and IT Infrastructure

        We will continue to invest in our logistics network and warehousing capacity to support our long-term growth. We are adding more logistics centers in strategic locations in China to improve our nationwide fulfillment capabilities. With the addition of three regional logistics centers and regional subsites within our website targeting specific market in 2011, our ability to access many under-served second- and third-tier cities has been improved, which quickly increased our market share and footprint. The full utilization of these regional logistics centers and regional subsites in 2012 allowed us to cater our product offerings into regional customer demographics and offer additional sales events and SKUs. In the long-term, we plan to add more regional subsites within our website to cater to different local demands following the expansion of our logistics network, and expand into broader geographical areas in China. We also plan to enhance our business intelligence system and integrate it with our management information system, allowing real-time monitoring of inventory levels across our logistics network. In addition, we plan to establish our own in-house delivery capabilities in selected regions.

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        For our customers, we intend to improve our customer relationship management and business intelligence system capabilities to enhance the timeliness and relevancy of our product offerings. We plan to implement a personalized web-interface for our registered members that offers them products and services more closely tailored to their personal preferences and purchasing habits.

        For our brand partners, we plan to expand our IT capabilities to help them optimize their new product development, sales and marketing strategies, and inventory management. We intend to provide our brand partners with enhanced features and tools for making better use of customer behavior and transaction analysis and intelligence.

Pursue Strategic Alliances and Acquisition Opportunities

        In addition to growing our business through internal initiatives, we may pursue selected strategic alliances and potential strategic acquisitions that are complementary to our business and operations, including opportunities that can help us promote our brand to new customers and brands, expand our product offerings and improve our technology infrastructure. We may also pursue strategic initiatives with brands and platforms in international markets.

OUR FLASH SALES MODEL

        Flash sales embody characteristics of value, quality and convenience that are well suited to brand-conscious consumers in China seeking quality goods at substantial discounts. Through our flash sales model, we sell limited quantities of deeply discounted branded products online for limited periods of time. We optimize the brand composition and product mix of our daily sales events based on our strong merchandizing expertise. As of December 31, 2012, we have offered diversified product offerings from over 5,800 popular domestic and international brands, including apparel for women, men and children, fashion goods, cosmetics, home goods and other lifestyle products. We carefully select well-known and popular mid-level to premium brands and products that appeal to a broad base of consumers with different purchasing powers throughout China. To foster customer confidence of purchasing quality products from our website, we provide limited product quality insurance for our products.

        We offer new sales events daily starting at 10 a.m. Beijing time, and our website experiences a surge of visitor traffic in the ensuing two hours as consumers are eager to purchase popular deals of the day before they are sold out. In 2012, during the peak hours of our daily sales, average hourly visitor traffic to our website was over three times higher than the hourly average number of unique visitors to our website per day during the month. To provide our customers with a greater opportunity to purchase featured discounted products, each customer is limited to purchasing two pieces of the same item and each shopping cart can only hold 20 items at one time, except for food products. Unpaid items in the shopping cart will be automatically returned to the available products pool in 20 minutes. Consequently, customers must make quick purchase decisions within a limited period of time, adding to the thrill of the experience.

        Our flash sales model is also characterized by the high frequency and a large volume of inventory turnover. During 2012, we hosted 29,207 flash sales events, each lasting three to five days in general.

OUR WEBSITE

        Through our website vipshop.com, we offer a curated selection of products and services for consumers of different age groups and income levels throughout China to allow them to conveniently purchase branded products online without the hassle of shopping for bargain sales at crowded stores.

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        Our website design offers many user-friendly features that enhance customer experience and convenience:

    Browsing.  All visitors to our website can browse and view our sales events, but a customer must register as a member, which is free, in order to participate in the sales events. Our website features a variety of different brands and products for each daily sales. For each featured brand, consumers can view a short flash animation to receive background information on a particular brand with which they are not already familiar. In addition, we provide customers with curated descriptions and proprietary photographs of each product shown from multiple angles. Our website also provides advance previews of upcoming sales of highly sought-after products. We sort our product offerings into different categories, such as "women," "men," "children," "lifestyle" and "luxury goods" so that our customers can easily find the products they are interested in.

    Daily Sales Events.  New sales events start daily at 10 a.m. Beijing time and typically last for three to five days. Each sale item is available in limited quantities and remains on sale only while supplies last. We thoroughly plan in advance our daily sales to offer a balanced and complementary mix of brands and products.

    Ordering.  To order products on our website, our customers simply click on a button to add an item to their virtual shopping cart. To execute orders, customers click on the "check-out" button and are prompted to supply shipping details and payment details in the case of first-time customers buying from our website. Repeat customers can access their preferred checkout options after logging on to their Vipshop member accounts. Our members can track the status of their purchases and available credits online through their Vipshop member accounts. Customers can always access our customer service representatives online or by phone for assistance while they are shopping online or after the order is placed.

        In October 2009, we launched our mobile internet website, m.vipshop.com, based on wireless application protocol, or WAP, which is designed to optimize the viewing experience and load time on mobile device web browsers. As a new sales event starts at 10 a.m. Beijing time everyday, mobile access enables our customers to access and shop on our website anytime from anywhere they are connected to the internet. We have introduced mobile applications for the iPad™, iPhone™, Android™ and Symbian™ devices in 2011 to increase our customer stickiness and to support customer engagement from anywhere and at any time. We believe that consumers' increasing reliance on mobile internet through smartphones and other mobile devices presents opportunities for us to further enhance customer experience and increase customer stickiness.

        To diversify our offerings of products and brands that cater to individual preferences, we launched new channels on our website, such as a groupbuy channel called Vipshop Groupon ( GRAPHIC ) and a channel designated for promotion of chic and trendy branded products called VIP Fashion ( GRAPHIC ). We believe that the introduction of these new channels provides brands meaningful alternatives to monetize their inventory quickly and to increase consumer awareness throughout China.

OUR BRAND PARTNERS

        Since our inception in August 2008, we have attracted a broad and diverse group of brands enabling our website to become the online shopping destination of choice for urban, fashion-oriented and value conscious consumers. Our brand partners include primarily brand owners, and to a lesser extent, brand distributors and resellers. In 2010, 2011 and 2012, we worked with 411, 1,075 and 2,759 brand partners, respectively. None of the brands accounted for more than 3% of our total revenues in 2010, 2011 and 2012. To date, substantially all of our brand partners have sought to pursue new sales opportunities with us. We believe that our ability to assist brands in effectively selling their

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inventory and in fulfilling their demand for marketing, customer data analysis and inventory management will attract new brands and build stronger ties with our existing brand partners.

BRAND SELECTION AND PROCUREMENT

Brand Selection

        We have implemented a strict and methodical brand selection process. Our merchandizing team, which consisted of 252 members as of December 31, 2012, is responsible for identifying potential qualified brands based on our selection guidelines. We carefully select prospective brand partners, choosing to work only with those that are well-known and offer high quality or premium products that are popular among consumers in China, and that are willing to provide competitive prices and favorable payment credit and product return terms. We generally select brands that have an established network of stores in major department stores or shopping malls in China. We seek input from our customers in the brand selection process. Through our homepage, consumers can send us suggestions regarding the brands they would like to be able to purchase from us. Once a potential brand is identified, we conduct due diligence reviews on its qualifications, including whether it holds the proper business operation licenses and safety, sanitary and quality certifications, and trademark registration certificates and license agreements in relation to the branded products. This review process helps to ensure that we maintain a portfolio of brands with high quality standards and good reputation that can meet our customers' expectations.

        We generally enter into supply agreements with brands based on our standard form. We regularly communicate with our brand partners to discuss the dates and specific product offerings for particular sales events, striving to achieve favorable results for all constituents. Due to the short-term nature of each flash sales event, for some brands, we enter into separate agreements for each flash sales event on our website. For other brands with whom we have established long-term relationships, we often enter into supply agreements with them on an annual basis, with the agreements providing a general framework for an agreed-upon number of flash sales events during the contract year. As we continue to focus on building long-term relationships with our brand partners, we plan to implement framework agreements with our brand partners with supplemental supply orders for each flash sales event.

        In each supply agreement, a brand partner grants us authorization to market and sell products of a particular brand on our website and provides us with the official description and logo of the brand. In addition, we require our brand partners that contract with us to observe our anti-bribery and anti-corruption policy.

Product Selection

        Our key management team members have extensive experience in the retail industry with insightful knowledge and understanding of consumers' needs and preferences. Before each flash sales event, we consider and analyze historical data, fashion trends, seasonality and customer feedback to project how many items of a particular product we s