PhoneWin: Winning in Rural Markets

Driving by several internal and external challenges, Jiangsu Huabo Industrial Group Co., Ltd. (“Huabo Group”), a leading provincial distributor of mobile phones incorporated in 2001, have been exploring how to transform its offline distributing business into an online platform from 2013. In April 2014, Huabo Group incubated a new startup, Jiangsu PhoneWin Logistics Management Co., Ltd. (“PhoneWin”), by bringing together offline logistics services (PhoneWin Logistics) and an online platform (51dh.com.cn). Different with large established e-commerce platforms such as Taobao.com and JD.com focusing on individual customers in first- and second-tier cities at that time, PhoneWin was created to exploit opportunities to serve small stores in smaller towns and villages. The basic operation model is: When the small mobile phone stores in rural markets placed their orders on 51dh.com.cn, PhoneWin Logistics would deliver the phones before 4:00 p.m. the next day. By November 11, 2015, PhoneWin has expanded into 13 provinces across China, built partnerships with over 300 suppliers of mobile phones, and had over 80,000 small stores registered on its platform. In October 2015, it completed Series A funding of ￥120 million. However, two Chinese e-business giants, Taobao.com and JD.com, have started to expand their penetration in rural markets, which is becoming an inevitable threat to companies like PhoneWin. As an early entrant in this market, how can PhoneWin compete against such powerful giants? Will it be able to sustain its revenue and profit growth in the coming years?