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Year-end review: Major investment deals in China’s e-commerce sector

Betting on B2B e-commerce is a new trend.

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2019 is coming to an end. It has been a challenging year for Chinese startups, as the macro economy is slowing and venture capitalists are tightening their purse strings. Yet some companies still managed to secure new financial support. Here is a review of the major investments that took place in China’s e-commerce sector in the past 12 months.

Alibaba acquired Kaola for USD 2 billion

Kaola, which was incubated by Chinese video game giant NetEase in 2015, found a new benefactor—Alibaba, which announced the USD 2 billion acquisition in September. This gives Alibaba a dominant position in the corner of imported goods in China’s e-commerce market.

In 2018, e-commerce transactions in China reached RMB 31.6 trillion (USD 4.5 trillion), think tank Forward • The Economist said, citing data of China’s National Bureau of Statistics.

In the first quarter of 2019, RMB 90.8 billion worth of imported goods were sold via retail e-commerce portals in the country, up 10.6% year-on-year, according to Forward • The Economist, citing data of market research firm Analysys. This indicates that imported goods still represents a very small part of shipments in the country’s e-commerce retail sector.

In the same quarter, Alibaba’s Tmall International platform took the largest market share at 32.3%, while Kaola followed with a 24.8% stake and Haitun Quanqiu secured a 17.4% share, according to Analysys. Hantun Quanqiu was renamed as JD International in November.

When Alibaba announced its acquisition of Kaola, the company said it was confident about the future of China’s e-commerce market for imported goods, which it believed holds great growth potential.

Baibu raised USD 300 million in Series D round

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Guangzhou-based B2B textile trading platform Baibu—not to be confused with the search engine Baidu—closed its Series D round, with investors led by DST Global pouring in USD 300 million. It was the largest ever fundraising round in China’s textiles industry.

In mid-December, year-to-date sales volume for six-year-old Baibu reached nearly RMB 10 billion (USD 1.4 billion), according to data provided by the company.

Benlai bagged USD 200 million in Series D1 round

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Beijing-based fresh produce e-commerce platform Benlai Group completed its Series D1 round, collecting USD 200 million in an investment led by Shenzhen-based Mingde Holding in October.

Benlai.com is the company’s B2C website. It features fresh produce supplied by various retailers located all over China, including fruits and meat. It went live in 2012 and became profitable in 2018.

The company has also developed an online-to-offline business called Benlai Xian (“xian” means fresh), which has been in operation since July 2017. Benlai now runs 400 brick-and-mortar stores that allow customers who live nearby to order products via a WeChat mini-program for delivery. Benlai.com and Benlai Xian are separate entities, each meeting different customers’ needs.

Zhenkunhang scored USD 160 million in Series D round

Shanghai-based Zhenkunhang, which describes itself as a one-stop online shop for industrial products such as production and maintenance equipment, chemicals, and raw materials, closed its Series D financing round, collecting USD 160 million from investors led by Tencent.

Li Chaohui, managing partner of Tencent Investment, said he believed there was a huge market for companies offering procurement services for industrial firms, adding that Tencent was optimistic about the long-term potential of supply chain integration and digital upgrades in the industrial space.

Zhenkunhang booked RMB 2 billion (USD 289 million) in revenue in 2018.

Yijiupi collected USD 180 million

Beijing-based online beverage B2B trading platform Yijiupi said in March that it closed a USD 100 million Series D+ round with financing from Warburg Pincus. The company disclosed in August that it received USD 80 million in additional funding from Tencent in a “strategic investment.”

Founded in 2014, Yijiupi first sold wine and liquor, and then expanded to cover a wider variety of consumer goods, including foods and toiletries, bringing wholesale and delivery services to buyers across more than 140 Chinese cities.

The company predicted its GMV to surpass RMB 20 billion (USD 2.8 billion) this year, a steep increase from 2018’s RMB 13 billion record.

Hipac closed USD 100 million in Series D round

Hangzhou-based B2B e-commerce platform Hipac closed its USD 100 million Series D financing round led by Anchor Equity Partners earlier this month.

Hipac was founded in 2015. Its platform carries goods for mothers and babies to supply brick-and-mortar stores located in China’s smaller cities and rural areas.

Hipac has served more than 200,000 stores that sell maternal and baby products, covering two-thirds of all stores of this type in China. The startup said that in 2018, its GMV reached RMB 8 billion (USD 1.1 billion), and expects that number to hit RMB 15 billion in 2019.

Casstime raised USD 80 million in Series C1 investment round

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Shenzhen-based Casstime, an industrial internet company that serves the automotive aftermarket, closed its Series C1 round in October, bagging USD 80 million from investors led by Sequoia Capital China and Source Code Capital.

Casstime’s business includes a B2B trading platform hosting various auto spare parts, a SaaS management system for workshops, supply chain finance, and a logistics service, according to the company’s website.

Casstime stated it has garnered more than 1,000 auto parts suppliers on its trading platform and has acquired more than 50,000 auto maintenance companies as clients, located in more than 325 cities in China, as of the end of July.

The e-commerce penetration rate in the auto maintenance market in China was only 5% in 2018 and may reach 17% by 2025, Deloitte predicted.

Xiaopangxiong collected USD 18.3 million in Series B financing

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Shanghai-based Xiaopangxiong, a B2B e-commerce platform that sells home decoration materials, raised USD 18.3 million in its Series B round, pulling in RMB 130 million (USD 18.3 million) from investors led by Zhenghan Investment in October. Yunqi Partners also participated in the investment.

Xiaopangxiong was founded in May 2013. It has since gained a total of 68,000 registered users, 45,000 of which have made at least one purchase on the platform. The company has small-and-medium-sized home decorating companies as its main buyers.

The firm has dozens of rivals based in different regions of China, but none of these companies, including Xiaopangxiong, has pulled ahead to become the dominant player in this sector, according to corporate intelligence platform Tianyancha.com.

Yesmro raised USD 10 million in Series A round

Shanghai-based Yesmro, an e-commerce platform for maintenance, repair, and operations (MRO) of industrial equipment, closed its Series A round in September, bagging USD 10 million. The platform, which went online in August 2016, has gained 10,000 users by December 2018, hosting more than 400,000 parts needed for MRO services by small and medium-sized manufacturing companies.

Small companies with an annual output below RMB 20 million (USD 2.8 million) account for 90% of all companies in China’s manufacturing sector, taking 40% of market share, according to Yesmro’s CEO and founder Zhu Hongtao.

BWCMall closed its USD 10 million Series A financing

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Shanghai-based BWCMall, an e-commerce site for MRO products, closed its Series A round and raised USD 10 million in September.

BWCMall was founded in July 2015 by Yang Ning, the 28th employee of Alibaba. Yang, who currently serves as the company’s CEO, said that his site hosts listings for more than 100 million goods from various suppliers.

Flowerplus raised USD 5 million in Series B1 round

Shanghai-based e-commerce platform Flowerplus raised RMB 35 million (USD 5 million) in Series B1 financing.

Flowerplus, which was founded in 2015, started to gain users by allowing them to order online bouquets priced between RMB 99 and RMB 399 under monthly subscription plans, to be delivered each week directly from flower farms.

The startup now runs five brick-and-mortar flower shops and cooperates with more than 100 other florists. It rents 12,000 mu (8,000,000 sq m) of land, where the company grows its own flowers. Thousands of flower farms have signed up as suppliers, including some overseas in countries like South Africa.

Flowerplus founder Wang Ke said that his company made net profits of more than RMB 10 million in the first half of 2019.

Conclusions

China’s e-commerce sector is dominated by large players that are quickly asserting themselves in various corners. Alibaba has a market capitalization of USD 580 billion, JD.com has USD 53 billion, and Pinduoduo has USD 45 billion. But investors still believe there are opportunities in niche areas, and they are placing bets accordingly.

Some of the corners that hold promise are in the consumer-facing e-commerce sector such as in imported goods and fresh produce.

Enterprise-facing e-commerce is booming as conventional industries adopt tech to make their supply chains more efficient, such as in textiles and auto parts. Fresh capital are flowing into these areas, boosting the pace of their digitization.

After these investments settle, it remains to see how various companies will continue to adapt to accelerating challenges.