Beijing startup Meicai has been raising capital at a valuation of US$2.8 billion as it seeks to expand in the China's fresh-food market.
Meaning 'beautiful vegetable' in Mandarin Chinese, Meicai was founded in 2014 with a goal of sourcing vegetables for 10 million restaurants throughout China. By using the Meicai app, restaurant owners can order specialty vegetables like bok choy and eggplant direct from the farmer. Similar ro AirBnB and Uber, the company is yet another emerging player aiming to disrupt traditional retail operations by cutting out middlemen.
Why is an app selling vegetables popular with investors?
China has over 200 million farmers but can utilise just a handful of e-commerce companies to sell their produce domestically. While China’s e-commerce industry is quite mature, most of the big e-commerce platforms such as Alibaba and JD, simply apply the existing B2C model to fresh-goods business, linking relatively small numbers of producers and retailers together.
Meicai operates in another way having developed an innovative B2B model that works as a professional purchaser for tens of thousands of restaurants. This business model maximizes scale on both the purchasing and selling ends, and also resolves common supply chain problems seen in the traditional fresh-food market.
Many restaurants choose to purchase fresh food through the Meicai app with a key reason being a lower cost but for the same quality of goods.
The time taken for product delivery is also exceptional with customers able to receive their orders twice a day, ably satisfying any restaurant's need to meet their dinners’ expectation of fresh produce. However, China's current standardisation of fresh products does pose a great challenge to Meicai as it costs a significant amount to establish and apply these standards across the whole supply chain process from purchasing to storage and finally delivery.
Also contributing to the popularity of the app, Meicai has a convenient return and exchange procedure where unsatisfactory goods can be returned or exchanged through the app.
One challenge remaining for the company is the limited capability of Chinese farmers to access the internet. As an online only mobile platform, Meicai is banking on continued technology development in China's rural areas.
Source: Bloomberg, Ebrun