Does Vancl face a cash crunch?

Upstart Chinese clothing brand Vancl, a rising Internet star that aims to be Zara and Amazon rolled into one, has been the subject of a series of negative news reports. Of late, according to New Financial Observer (新金融观察报 ), a financial newspaper published in Tianjin, not only does the company owe suppliers great amounts of money, it has been delaying paying photographers and models. Some of the company’s creditors took to Weibo to voice their discontent, including one who threatened to commit suicide at the company’s office building.

Rumors that Vancl has cash flow problems started in August this year, when founding CEO Chen Nian announced that the company would move its office location from close to Beijing’s CBD area to Yizhuang, a satellite district off the fifth ring road. The company has also cut the number of its staff from 11,000 at its peak time to the current 3,000.

Lackluster designs, high inventory levels and high advertisement costs are blamed for Vancl’s cash woes, according to online discussions. It is said that in a recent meeting, Chen Nian was criticized by Lei Jun, a successful entrepreneur who headed Xiaomi and Kingsoft and invested in Vancl, who believed that Vancl’s products lack appeal. Lei previously denied a rumor that he was going to take over Vancl, though rumors persist that Chen Nian is facing great pressure from investors to step down.

The image above is a VANCL advertisement from 2010 featuring heart throb blogger, novelist and car racer Han Han.

Companies and brands affected
Vancl (privately held)

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