Vipshop aims to eventually spin off Lefeng.com

US-listed Vipshop Holdings, a leading online discount retailer for brands, said it hopes to spin off lefeng.com, a major online cosmetic platform, in which Vipshop owns a majority stake.

Lefeng.com, a major online cosmetic platform, is expected to operate independently of Vipshop, which acquired a 75 percent equity interest of the former at a price of $113 million in mid February.

Tony Feng, vice president of Marketing&PR at Vipshop, said in the two companies' first joint media event on Tuesday, that lefeng.com will function independently as Vipshop aims to spin it off as a cosmetic arm when the time is ready.

Until that time, Feng said that teaming up with Lefeng.com is a win-win cooperation, rather than a strategy to boost Vipshop's market value as rumored.

"Most of lefeng.com's users are those in first- and second-tier cities while Vipshop's users are mostly those in second-tier to fourth-tier cities. Through uniting with lefeng.com, we can expand our user group and cover more females in China," he said.

According to Feng, the two companies expect to join efforts in procurement and logistics to lower costs and maximize profit.

About one week after buying the control of Lefeng.com, Vipshop acquired a 23 percent equity interest in Ovation Entertainment Ltd, the parent company of Lefeng.com, for a total of $55.8 million.

The deal, which was announced last Friday, signals a deepened partnership between the companies. Apart from lefeng.com, Ovation Entertainment Ltd is also engaged in developing its own cosmetic brands and media products.

"Ovation's expertise in branding and marketing will also help drive up our brand equity, and will support our efforts to expand our user base and increase buying activities on our platform," Eric Shen, chief executive officer of Vipshop, said in an official statement.

"With Ovation as a strategic partner, we are well positioned to expand full-force into the booming cosmetics segment in China and fortify our competitive advantages," Shen said.

Overall transactions in China's online cosmetic market are expected to reach $120 billion yuan ($19.6 billion) by 2015.