Like many overseas Chinese, Derek Weng receives shopping requests from his family and friends every time he returns to China. Some of the most sought after imported products are maternity items, cosmetics, and vitamin supplements. Many in China still hold the belief that "imported products are better".
The request gave Weng a business idea. In 2018 he founded LemonBox sell American health supplements to Chinese millennials like him through online channels. The company soon attracted seed funding from Y Combinator and just this week announced the completion of a $ 2.5 million pre-A round led by Panda Capital and followed by Y Combinator. .
LemonBox tries to differentiate itself from other importing activities on two levels: convenience and customization. Weng, who previously worked at Walmart where he was involved in the retail giant's Chinese import business, told ProWellTech that he knows many American supplement manufacturers and is therefore able to cut middleman costs.
"In China, most supplements are sold at a large profit margin through drugstores or multilevel marketing companies like Amway," said Weng. "But vitamins are not that expensive to produce. Amway and the like spend a lot on marketing and sales. "
LemonBox has designed a WeChat-based lite app, where users receive product recommendations after answering a questionnaire about their health condition. Instead of selling by the bottle, the company tailors users' needs by offering daily packs of various supplements.
"If you are a vegetarian and travel a lot and the other person smokes a lot, [your demands] they will be very different. I wanted to personalize users' prescriptions using big data, "explained Weng, who studied artificial intelligence at business school.
A monthly basket of 30 B-complex tablets, for example, costs 35 yuan ($ 5) on LemonBox. Amway's counterpart product, a 120-tablet bottle, charges 229 yuan at JD.com. That's about 57 yuan ($ 9) for 30 tablets.
Selling cheaper vitamins is just a means for LemonBox to attract consumers and gather health insights into Chinese millennials, with whom the company hopes to expand its product range. Weng declined to disclose the company's customer size, but said the user conversion rate is "higher than most e-commerce sites."
With the new proceeds, LemonBox is opening a second logistics center in the Shenzhen Free Trade Zone after the one based in Silicon Valley. This is to provide more stability to its supply chain as the COVID-19 pandemic disrupts international flights and cross-border trade. Additionally, the startup will spend the money to get health certificates and add Japan to its sourcing regions.
Returnees adapt
In the decade or so that Weng was living in the United States, the Chinese internet has seen drastic changes and has given rise to an industry largely in the grip of Alibaba and Tencent. Weng realized he couldn't simply replicate the American playbook directed to the customer in China.
"In the US, you could create a website and perhaps an app. You will embed your service into Google, Facebook or Instagram to market your products. Each continent is connected to each other," Weng said.
"In China, it is quite significantly different. First of all, not many people use web browsers, but they all use cell phones. Baidu isn't as popular as Google, but everyone uses WeChat and WeChat is isolated from other major traffic platforms. "
As such, LemonBox is looking to diversify beyond its WeChat store by launching a web version and store through Alibaba's Tmall marketplace.
"There is a lot to learn. It's a very humbling experience, "Weng said.
