Huangdouxia (黄豆侠), a Chinese retail service provider that focuses on the lower-tier cities and rural communities market, recently secured CNY 70 million in a Series A, led by local-known investor GongqingchengTianyu Investment (共青城天域资本).
Founded in 2018, the Beijing-based company focuses on providing a one-stop solution to small and medium dealers from third- to sixth-tier cities through its online platform and offline services, encompasses trading, logistics, settlement and supply chain finance.
Its business operates under a Supply Chain-to-Business-to-Customer (S2B2C) model, which implies a forceful data-based supply chain platform connected to thousands of businesses– in particular, small and medium-sized brokers who directly serve customers.
The reason Huangdouxia is bullish on China's offline mobile phone market lies in both the demand and the supply sides.
On the one hand, according to Wu Chuming (吴初明), founder of Huangdouxia, 5G communication technology – which is about to be fully utilized and adopted in the near future – will bring new opportunities into the mobile phone market and accelerate sales growth.
From the supply-side, Mr. Wu mentioned that offline sales accounted for 75% of the total sales of mobile phones in China as of 2018. Meanwhile this number, in third- to sixth-tier cities, has reached 80%. Besides, the success of oppo and vivo in such places also suggests the large space of the offline market.
It’s not only e-commerce platforms that find it difficult to break into lower-tier cities with 3C products, but also mainstream chain channels – for example, Dixintong (迪信通, 6188:HK) and Suning.com (苏宁易购, 002024:SH).
The mom-and-pop stores still have the dominant position in the local market, based on the fact that the locals find they are easier to reach. Besides, the smaller the size of the city, the more the locals tend to depend on recommendations in making purchasing decisions.
The fragmented individual dealers have strong sales ability and endorsement of trust among natives; however, they are lacking the Internet capabilities that could improve their operational efficiency. This sheds light on the opportunities from Huangdouxia’s business.
In 2018, its platform realized a Gross Merchandise Volume (GMV) of CNY 1.6 billion, and the figure in 2019 is expected to be in the range of CNY 3.0-3.5 billion.
The company incubated its own social e-commerce platform that only targets small towns – ‘Mijiashenghuo’ (蜜家生活, literally ‘Honey Life’) – which was officially launched in September 2019. It is operating under a community group purchasing model, where users place orders within a WeChat group initiated by the community leaders nearby.
According to the team, the young startup is now witnessing a week-on-week GMV growth of 50%. In the two towns in Hebei Province where ‘Mijiashenghuo’ started its early operations, the number of orders in a single week has already surpassed 10,000, and the average order price per customer is about CNY 25.