China’s e-commerce and The industrial ecosystem is as different from the Western world as its culture. It took many decades for the country to be named as the Factory of the World, but now it has a supply chain and production capacity that few countries can match.
The creative use of the country’s networked manufacturing and logistics hubs makes both mass production cheaper and easier. Clothing, electronics, toys, automobiles, musical instruments, furniture – you name it and you will find a manufacturer in China who can turn your abstract concept into a mass productive reality in just days. And they will be able to do it cheaper than anywhere else in the world.
It was only then that a ruthless Chinese entrepreneur with a technical background decided to take Coca-Cola and PepsiCo.
China is also home to the world’s largest e-commerce mercenaries and tech ecosystems. Hundreds of startups dot the landscape, and the amount of money that is raised and spent to innovate around the country’s industrial hiccups is mind-boggling.
It was only then that a ruthless Chinese entrepreneur with a technical background decided to take Coca-Cola and PepsiCo. The technological revolution has not yet affected the bottled beverage industry as much as it has others. With the modern tech startup philosophy of “company moving and breaking things”, a giant could lose a large share of the market share if a company could only do the weaving with China’s manufacturing proficiency and agility.
One such contender is Genki Forest, a Chinese direct-to-consumer (D2C) bottled beverage startup. A philosophy centered around informed iteration by leisure focus on data, quick turnarounds and leisure focus on taking advantage of China’s vast e-commerce ecosystem, has helped the company grow its revenue rapidly since its inception five years ago. It sells sugar-free soda, milk tea and energy drinks in 40 countries and has grossed about 50 450 million in 2020. The company aims to reach 2 1.2 billion this year.
If anything, the valuation of Genki Forest has grown even faster. It has recently completed its fourth VC round which is valued at op billion dollars, which is three times the price it received a year ago and has so far increased by at least half a billion dollars.
It’s amazing how close Genki Forrest’s operations come to be like tech startups. So we thought we should take a closer look and see what the graph of this company could tell us about the new wave of Chinese D2C entrepreneurship looking to take over the world.
Finding a big wave to ride
The bottled beverage industry that Binsen Tang, the founder of Genki Forest, initially set out to tackle was not. Its first launch was a successful casual, mostly mobile gaming outfit known as the ELEX Technological as G. It was nowhere near breaking the record, though – nearly 50 million users in more than 40 countries around the world logged in to some popular games, including one of the first versions of Zinga’s Farmville predecessor Happy Farm. But Tang was not satisfied and finally sold ELEX Technol sold G to a publicly listed company in 2014 for about 400 million.
Tang walked away with a few important lessons. He will learn from now on that Chinese products were already globally competitive, whether people realized it or not, and that and the geographical arbitrage was real, Happy Farm is a perfect example of that. Finally, he now knew that it was more important to choose the right “racetrack” (Chinese investors and entrepreneurs prefer to put it) than a great product.
Choosing the right membership was the most important way to win. It is also an idea that sets Chinese entrepreneurs apart from their Western counterparts – regardless of one’s previous skills, the most appropriate effort at hand to identify the largest and most profitable market. It was he who led Zinging Yiming to make a byte and Xiaomi got Lei Jun.
The same philosophy led Tang to create the Genki Forest. After selling ELEX Technol selling G, Tang did not return to his business, which led him to make his first gold medal. As much as he benefited from the rise of the mobile internet, he thought that the lessons learned from customer brand building and programming had a much greater opportunity in building tangible products.
He soon launched his own investment fund, Challengers Capital Set, confirming that the next big opportunity in China is in the application of tech for everyday consumer products. He soon began investing in everything from ramen and hotpots to bottled drinks.
China’s rapidly expanding e-commerce ecosystem and the abundance of D2C industries developed on Alibaba and JD.com will also affect its decision to sell directly to its target audience instead of the traditional route. But to truly understand its motivations, we need to take a look at the very unique D2C environment in China and how many years it has changed.
What is different about Chinese D2C?
“China doesn’t need a better platform, but it doesn’t need good products,” Tang told his team in an internal email in 2015. Tang was talking about how the age of building infrastructure for e-commerce in China has largely ended; Now it was time to create brands that could take advantage of the defined advanced distribution network.
Other investors also noted. The principal of China Growth Capital, Albus Yu, told me that his fund had temporarily stopped investing in independent customer-facing platforms or markets. He said that it was economically possible to start a business in 2014 due to the rising cost of customer acquisition and the strength of the entrants.
Indeed, 2015 was the year when CAC began to outperform or at least outperform ARPU, the least rival for Alibaba and JD.com.
In China, it was present in the distribution network digital and physical world. , Online, there was absolute market power in the hands of only two players: Alibaba and JD.com, which used and still retained 80% or more of the market share.
In fact, Alibaba’s dominance, in particular, was so overwhelming that over the years, VCA invested not in D2C, but in “Taobao Brands”, as it was the only channel to win to create it.
Consumer acquisition was so straightforward – especially during its annual flagship shopping festival, Singles Day, throwing everything into advertising. Even today, topping one of the leaderboards in the category is a surefire way to build brand awareness, investor interest, as well as sales records.
Physically, the Chinese market is also very different from most of the developed West. Years of heavy investment in logistics by the private sector through government support and infrastructure buildouts, i.e. delivery costs have come down significantly over many years, this year’s package also goes below 40 0.40 per wholesale. Innovations such as return insurance have also accelerated customer adoption.
As of 2016, China is carrying 30 billion packages a year, which already accounts for 44% of global shipments. That number is doubling every three years and is expected to reach more than 100 billion this year. And the low cost of delivery is one of the biggest reasons for China’s outsourced e-commerce market – the largest globally and is projected to reach 2. 8 2.8 trillion in 2021, three times the number. 2, U.S.
Current China also presents another edge: the proximity of advanced, flexible product networks and supply chains to most consumer products, and the ability to outsource them to almost everything.
Original appliance manufacturers of previous years have evolved over a very long time into original design manufacturers. The expected result of being a “factory of the world” for many years, creating goods for some of the best brands in the world, is that some knowledge was bound to transfer.
It may be difficult for outsiders to understand how strong China’s networking manufacturing hub is these days. Now the weeks that used to take are longer, the main time of which is greatly shortened by software, robots and other advances. For example, Chinese cross-border ultra-fast-fashion company Shen has narrowed the design-to-ship timeline to seven days.
And it’s definitely not just for making crop tops. The trend may come as a surprise even when producing completely unknown goods, as electric vehicle maker BYD turned its factory into the world’s largest face mask plant in just two weeks when the COVID-19 epidemic struck last year.
Companies offer the advantage of flexibility and agility over just this product. Chinese Cosmetics Upstart Perfect Diary uses it to launch SKU twice as much as foreign competitors. In addition, rapid change allows agile brands to take advantage of the most short-term benefits of that IP, Memes.
This is not to say that the Chinese supply chain is inaccessible to foreign entrepreneurs. The best-selling mattress manufacturer Xenus, for example, is founded by South Korean, but its products are manufactured in China and mostly sold to US customers on Amazon.
It’s just that Chinese non-Chinese companies have figured out how to tap into a supply chain like this new crop of Chinese D2C brands, which may require years of work, but physically in factories, trust building To do and know- how. Sheen, for example, stays close to the factories and carefully watches what other brands make.
Before global sentiments such as ticket ok weakened the mantra, “copy on China” was an influential feature of Chinese startups. In December 2015, when Tang filed for the Genki Forest trademark, it was still a very relevant strategy.