Deal focus: Hua Juan leverages celebrity selling power

Unlike traditional celebrity brand ambassadors, “wang hong” fashion bloggers have become a new marketing tool for retail brands. These social media influencers, who are regarded as experts in their various fields, connect with their followers through short-form videos or written posts on platforms such as Sina Weibo, Youku-Tudou and WeChat. They offer brands relatively easy access to thousands or even millions of potential consumers.

Beijing-based Hua Juan is a mobile e-commerce platform – predominately focused on skincare and cosmetics products – that features short videos produced by the “wang hong,” also known as key opinion leaders (KOLs). In each video, typically 1-3 minutes long, a KOL promotes a product available on the platform. Consumers can touch the “purchase” button immediately after watching the video.

“Hua Juan’s business model is similar to TV shopping in the old days. The latter is less popular now because young consumers don’t like watching TV; they spend all their time on mobile phones,” says Xu Ying, a partner at Vertex Ventures China. “Millennials also have little brand loyalty. When there are new products, they are willing to try them. That’s why short video promotions work so well.”

Hua Juan was launched in June 2016 with seed funding from Ventech China. Vertex provided the Series A round, while US-based Dell EMC subsequently led an extended Series A. Last week, the start-up secured a $40 million Series B round led by Sinovation Ventures. Most existing investors re-upped.

Hua Juan works with more than 100 KOLs, most of whom are under exclusive partnerships. In addition to collecting a 15% commission on each transaction, a KOL – who generally has fewer than one million followers – can use the Hua Juan platform to build their audience and expand their influence. The company also provides online marketing training to KOLs.

Unlike e-commerce marketplaces like Vipshop and Jumei – which focus on mainstream brands sold at discounted prices – Hua Juan sells emerging brands from China, Japan and South Korea. It has about 1,700 stock keeping units on its platform and over 100,000 daily active users. It mainly targets female consumers living in lower tier cities, who are less informed about fashion trends. As such, they are more reliant on KOLs in making purchasing decisions.

According to Eric Huet, a managing partner at Ventech China, on average 70% of viewers will end up buying featured products. The company has generated nearly RMB1 billion in revenue since inception. Now Hua Juan will expand its product range – to include health supplements, wine and baby products – and build relationships with more KOLs and consumers. 

“We believe Hua Juan will gradually address more sophisticated customers in major cities, depending on the types of products they sell and KOLs they have on the platform. The business is evolving every day,” says Huet.

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• Topics
• Greater China
• Early-stage
• Consumer
• Technology
• Media
• China
• Vertex Management (II)
• Sinovation Ventures
• TMT