Usually, consumers bid for what they want to buy on the web. But on Shajia, an e-Commerce site, incubated by Innovation Works, it is the suppliers bidding for orders of mobile phones, laptops, digital cameras, and other consumer electronics.
The idea came from the company’s founder, Peng Lin. He had worked for Tsinghua Tongfang, a leading PC manufacturer in China for 10 years before starting his own company. Before he left Tsinghua Tongfang, he was the general manager of its consumer product department, overseeing the company’s business of PC and notebooks for the whole country.
Opportunity in the Distribution Network
“At Tsinghua Tongfang, we distribute our own products. Our network has to cover every place in China, not only the major cities, but every small town and county,” said Peng. That is how he understood the distributor network in China for consumer electronics.
“China is unique in its distributor networks,” said Peng. “In the West, manufacturers, such as HP, have strong power in pricing their products. The distributors and retailers, basically, follow the pricing strategy of the manufacturers,” said Peng.
In China, manufacturers have little control on the prices of their products once they are sold to the distributors, said Peng. In fact, distributors at different places will price the same product differently, depending on how eager they want to close the deal. “If buyers order a lot and if they can pay cash, usually the distributors can offer a better price,” said Peng. They even compete with each other for orders. And that is the opportunity for Shajia.
Lowest bidder gets the prize
Users on Shajia can place order for what they want. As these orders aggregate, e.g. there are 100 people want to buy an iPhone 4S, suppliers can start bidding for the order. Price gets lower and lower. And the supplier who can offer the lowest price will get the complete order. Afterwards, users can pay for the items and the winning supplier will fulfill the shipments.
“The impulse buyers might regret and cancel their orders. But on average, 80% of people who make orders on Shajia will eventually pay for the items. This is acceptable to the suppliers,” said Peng.
The site was officially launched last October. Currently, total transaction volume is on average Rmb 200,000 each day. “This is quite good given we have not done any promotion yet,” he said. At the moment, Shajia’s service is free for both buyers and suppliers. But Peng believes it can charge a transaction fee once the service is mature.
Jump-Start or Acceleration
Shajia was incubated by Innovation Works’ Jump-Start program, which usually are for entrepreneurs with little experience. Innovation Works’ more well-known incubatees, such as UMeng, Wandoujia, etc., come from the more advanced program, Acceleration.
I wondered why Peng, who has 10 years of solid experience and a senior executive position at Tsinghua Tongfang, would apply for the more junior program. “In fact, the people at Innovation Works’ have asked me the same question. But, I thought my chance at getting accepted at the Jump-Start program would be much more certain,” said Peng.
Overall, the Innovation Works’ experience was helpful to Peng. He got an angle investment of several million yuan from Lei Jun, a celebrated angle investor, after he finished the program. And he and his team of about 6 people has moved out of Innovation Works and set up their own office.
Next step: Rmb 100 million a year
To further expand Shajia, Peng is looking for a partner with solid experience in marketing and promotion. “Shajia will start promoting its services soon,” said Peng, “I need someone with solid experience.” In the next 6 months, he hopes to increase Shajia’s transaction volume to Rmb 350,000 per day and that is roughly Rmb 100 million a year.
“And after that, I hope to get a series A investment of about US$3 million,” said Peng. These goals seem quite achievable for Peng and his team. Good Luck to them.