Fortune backs Huimin’s B2C-B2B switch
Huimin started out in 2012 as an online B2C platform, enabling Chinese consumers to order daily household items from small-scale supermarkets in their neighborhood. The supermarkets took care of the delivery and Huimin got a commission on each transaction. However, after two years the company was still burning cash and generating zero profit.
"They spent a lot on promotion," says Shixiang He, an investment manager at Shenzhen-based Fortune Capital. "Also, when customers ordered products online, Huimin didn't know whether the supermarkets had sufficient stocks. Even if supermarkets did have the right items, they weren't necessarily willing to deliver when customers ordered just two bottles of water."
The chairman, Yichun Zhang, responded by shifting to a B2B model, serving as a commercial logistics provider that connects supermarkets and manufacturers. Last week, Huimin raised $100 million in a Series A round led by Fortune Capital, which accounted for one third of the total capital committed. Other participants included GP Capital, CITIC Private Equity, Zhejiang Zheshang Investment Management, and Xitai Sheng, co-founder of Hongtai Fund.
By helping small supermarkets to source goods from wholesalers, the company reduces the workload for shopkeepers, many of who are husband-and-wife teams. "They can't bargain much with wholesalers as they're only stocking small quantities, so the cost price is high. There are also risks in terms of buying counterfeit products from different agents," He says.
Huimin buys in bulk so gets better prices. It also offers greater supply chain transparency, minimizing concerns about product safety. From the manufacturers and wholesalers' perspective, it is easier to manage one customer relationship than hundreds. In addition, prices are more stable.
There are over 2 million community-level supermarkets and convenience stores in China, and Huimin now works with nearly 100,000 of them across more than 30 provinces and municipalities. It adds approximately 1,000 outlets to its network every day and wants to reach 250,000 by the end of the year, with a focus in top-tier cities.
According to He, Huimin's warehousing, distribution and service quality are superior to those of e-commerce giants like JD.com and Alibaba Group's Taobao Marketplace and Tmall.
While JD.com builds out self-run logistics systems and warehouses, Huimin is able to rely on the supermarkets in its network to provide warehousing services. He notes that JD.com is still making a loss because it spent so much on logistics.
Huimin contrasts with Alibaba in that it does not rely on outsourced delivery services. "Using third-party delivery firms can result in safety issues," He says. "Customers using Huimin enjoy cheap delivery services provided by the supermarkets because they are so close by. This operating model is much more convenient."
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