Now one of the leading smart look manufacturers in China, Yunding was founded in 2014 and has financed over RMB 1 billion. Currently, Yunding’s main businesses are segregated into a business and consumer side: Yunding (云丁）is for the business side and LOOCK (鹿克) is for the consumer side. With great interest in the smart lock industry, HUANG Yuanpu (黄渊普) and WANG Zekun (王泽坤), founder and analyst of Equal Ocean respectively, went to Yunding’s headquarter to gain valuable insights from CHEN Bin(陈彬), and ZHANG Dongsheng (张东胜), the CEO and President and CTO of Yunding respectively. We want to better understand Yunding’s future plans provide informative insights into the growing smart lock industry.
The Market Background of Smart Lock
According to the statistics, the sales volume of smart locks in China occupies 30% of the global market and will keep increasing. In 2016, the scale of the global smart lock reached 11 million set: 1.5 million for Japan, 1.7 million for South Korea, 2.5 million for European countries and the American market, and 3.5 million for China. In terms of the Chinese market in 2016, the total sales volume of smart locks are 3.5 million sets, but in 2017 it reached 8 million with 6 million for the consumer side and 2 million for the business side. According to i-Research, it is expected that in 2020, the total sales volume of smart locks in China will exceed 32 million sets. I-Research also estimated that the CAGR of the sales volume of smart locks between 2016 to 2021 is expected to be 65.2%. In 2018, the total market size of the smart lock is around CNY 27.9 billion. Compared with the gross lock market, the permeability rate of the smart lock is relatively low. However, with rapid consumer demand, the Chinese smart lock market still has great potential.
Advantages of the Smart Lock
In comparison with traditional locks, smart locks implement many ways to unlock your door such as fingerprints, through APPs or IC cards. Therefore, people no longer need to carry keys. Second, with a strong Internet connection, you can unlock your door remotely. This helps with the apartment management. On the other hand, cleaners and friends could enter the door with permission which is convenient and time-saving. Additionally, you can also check whether families have arrived home or to ensure the elderly in your home is safe. If the smart lock is not closed properly or is broken, the lock would notify the police immediately.
Yunding’s Strategies in the Smart Lock Market
What are Yunding’s strategies in the smart lock market? Yunding chooses the apartment as its entry point. Its smart lock system controls the hardware which helps long-term rental apartments to improve its management efficiency. Currently, there are more than 100 million rental houses in China which include 70 million C2C rental houses and 30 million B2C renting houses. There are about 6 million B2C houses belonging to large and medium brand apartments which Yunding focuses on. However, smaller businesses which include the small brand apartments and public rental apartments from the government occupy the most share of B2C apartments. With the expansion of apartment brands such as Ziru, more and more C2C apartments would be transformed into a B2C model. Therefore, there’s a great business opportunity here which Yunding plans to grasp.
According to the latest data, Yunding’s smart lock occupies over 60% in apartment market share, and more than 1.5 million locks have been installed. According to ZHANG Dongsheng, more than 5,000 apartments have cooperated with Yunding, and Yunding has served over 3 million residents spanning over 100 cities in China. The yearly growth of Yunding is close to 300%. ZHANG Dongsheng says that the smart lock is similar to a nail: once the consumer goes with Yunding, the nail would pin them because they would not change the lock frequently.
With an increasing number of residents, there is an urgent need to improve the management efficiency of long-term rental apartments. Cutting down operational costs and improving management efficiency are reasonable ways to keep rental platform competitive. To solve this problem, Yunding published a series of productions including the smart lock, smart water meter, and smart electricity meter. Based on these productions, Yunding also invented a smart SaaS to help with managing the apartment. The smart lock can solve problems that many residents face such as losing their keys. Smart electricity and water meters can make payment easier. The SaaS can manage the apartments and their hardware at the same time.
Human Resources & Company Culture of Yunding
Human resources are critical to a company. Yunding, as a leading manufacturer of smart locks, is aware and understands its importance. According to ZHANG Dongsheng, Yunding has approximately 500 employees:220 are responsible for research and development. From this viewpoint, Yunding is a technology company dominated by engineers. According to ZHANG Dongsheng, former chief engineer at Baidu, Baidu focuses on its products but lacks company culture. As for Yunding, ZHANG said “We should learn from Alibaba in terms of strategy and culture. For individuals, we ask them to be pure, open, ultimate, and responsible. We advocate taking care of ourselves and others. For our customers, we keep their value customers are the most significant”. ZHANG believes that great companies such as Baidu, Alibaba and Tencent are worth learning from as they are survivors in their industries. He also mentions that Yunding’s culture came about from team discussions. According to ZHANG Dongsheng, he is satisfied with what Yunding has accomplished. However, Yunding has yet to meet his expectations, and there’s still a long way to go. Yunding can get a better result by setting higher goals. In addition, Yunding uses a flattening management method where workers can talk directly with the management team. While talking about senior divisions responsibilities, CEO CHEN Bin and President and CTO ZHANG Dongsheng say the CEO Bin focuses on the long-term layout of the company as well as capital-related issues, while the CTO is in charge of the short-term strategies of the company and operating-related issues.
Yunding’s Expectations of Future
Both CHEN Bin and ZHANG Dongsheng, believe that Yunding’s most important task is product improvement. They believe that the current permeability rate on the consumer side is too low with the reason being that smart locks still lack a solid foundation. ZHANG uses Midea and GREE as examples. He believes that once Yunding has acquired a similar influential impact it may expand into other businesses. ZHANG believes that a home system smart lock will experience an outbreak period, similar to smartphones. Yunding should focus its main businesses and expand gradually.
ZHANG believes that smart locks are expanding rapidly with, no fierce competition between them and the traditional locks. Currently, South Korea has the highest permeability rate in the word. ZHANG speculates the reason behind this is the high-level urbanization of South Korea and the massive apartments due to limited land resources. In addition, the support service of real estate in South Korea is much better than China. Regarding Europe and America, ZHANG says that the mainstream houses in these areas are either houses or villas, which do not require a smart lock. However, China is open to new technologies. Therefore, ZHANG believes that by the end of 2019, the smart lock permeability rate will exceed 10%.
Smart locks’ market acceptance must be lower than Internet productions like smartphones. ZHANG predicts that in the next 5 years, there China will produce 50-70 million smart locks every year. With the increasing acceptance of smart locks, the permeability rate could keep increasing which makes high-end productions such as the LOOCK Touch Pro, would be more widely accepted by the market.
Capital Planning of Yunding
Yunding finished its RMB 600 million D round of financing on Dec 2018. This makes Yunding quite attractive. According to ZHANG, there are four reasons why investors should invest in Yunding. First, the industry is profitable enough to invest. Users are willing to pay for a lock that is efficient and convenient. Second, the smart lock’s market size is large enough to invest. With smart locks, it has an increased permeability rate which indicates that the total market size will continue to grow in the future. The market size is expected to be near CNY 100 billion. Third, Yunding has the potential to become the industry’s top company. With the head effect, Yunding could make more return to its investors. Fourth, the company’s development speed is at least 300%. Regarding IPO, ZHANG says that Yunding has plans to list. Yunding is actively preparing for the arrival of the science and technology innovation board to study what other companies are doing. However, before listing, Yunding should first figure out the companies accepted by the science and technology innovation board.
Future Expectations
As the leading manufacturer of smart locks in China, Yunding has the ability to reach profits over CNY 10 billion. To achieve this goal, Yunding will use perfect production, Internet property, and a higher industry barrier. Yunding founded its safety team and artificial intelligence team in 2015 and 2016 respectively. In the future, AI and IoT will help Yunding with safety-related issues. For example, peepholes can analyze visitor actions and decide whether or not to open the door for him. The applications of IoT are still in its early stages. However, with the increased investment in R&D and technological innovation, we can expect a more fantastic future.