A mobile app enables Chinese consumers to buy from overseas retail websites
December 2, 2015 06:00 AM
Nearly 600 million Chinese consumers connect to the Internet via mobile devices, and many of them are part of China’s emerging middle class that craves foreign goods. A startup has sold more than $100 million in six months by letting those consumers shop for imported products via a mobile app.
The app, called Red, was launched in January 2014, but at that time did not sell any products, only allowing consumers to review foreign products. Since then, some 15 million consumers have written reviews of products from overseas brands, says Charlwin Mao, who created Xingyin Information Technology Co., Ltd., the operator of Red, in Shanghai two years ago.
Mao, 31, who received his MBA from Stanford University, named the app Red after Stanford’s school colors.
As Chinese consumers came to learn about foreign products, they wanted to buy them, Mao says. That led him in December 2014 to add e-commerce capabilities to the app, enabling consumers to buy some of the items that others review. In the following six months Chinese consumers bought 700 million yuan ($110 million) worth of goods through the app. Mao says many items sell out in two hours because he offers only items that are hard to find in China.
“China has a huge demand for imported brands, but many consumers lack information about overseas brands. For example, many oversea products’ descriptions are written in foreign languages and are hard for Chinese people to understand,” Mao says. “My solution was to develop an app that enables China's younger-generation shoppers to discover the best global products from peer reviews, not from salespeople.”
Today, he says, about 15 million users write about 1 million posts every month and they lead others to respond, such as by “liking” 20 million posts per month. 82% users are under 30 years old and 90% are female, according to Mao.
Most of those posting content to Red are Chinese consumers traveling abroad or Chinese living overseas. China’s Minister of Commerce, Gao Hucheng, said in a recent press meeting that more than 100 million Chinese visited other countries in 2014 and they bought more than 1 trillion yuan ($157 billion) worth of products during their trips.
Red offers about 10,000 products. It owns about 80% of the merchandise it sells, with the rest being sold by outside merchants through the Red app. Popular categories on Red include cosmetics and fashion. There are products on Red from U.S. supplements retailer GNC Holdings Inc., No. 164 in the Internet Retailer 2015Top 500 and fashion boutique Otte as well as from Japanese brands Panasonic, Casio and Kose.
Red operates a warehouse inside of a cross-border e-commerce free trade zone in the city of Zhengzhou, where imported products can be stored, then pass through an expedited inspection by Chinese customs after an online shopper places an order. Red’s customers typically receive their orders in two to three days.
Companies that sell products through online communities like the one Red created are appealing to investors, Zhu Xiaohu, managing director of GSR Ventures, said at a recent cross-border conference in Guangzhou. GSR has invested in Red as well as in LightInTheBox Holding Co. Ltd., a Beijing-based company that sells Chinese products online to consumers outside of China. “E-retailers, like LightInTheBox, need to invest a lot of money on ads to get new users,” Zhu said. “Now many investors like companies selling through an online communities because these companies can generate traffic without pouring money into marketing.”
Mao says his company has raised tens of millions in funding and is now seeking a Series B infusion of capital.
LightInTheBox is No. 26 of Internet Retailer China 500.