Tubatu January 24 2017 - Deborah Weinswig · 1/24/2017  · All details about pricing, design and...

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

The Disruptor:

Tubatu— An O2O Disruptor

in the Home Décor Market

KeyHighlights

1) TubatuisaB2Ce-commerceplatformwhichaimstoprovideinteriordesignandhomedécorservicesbylinkingcustomerstolocalprofessionals.ThecompanyisestimatedtobeworthUS$2billion.

2) GMVoftheO2OhomedécormarketinChinawas¥151billionin2015,up40%yearoveryear,andcomprises10%ofthetotalhomedécormarket,accordingtoChinaConstructionDecorationAssociation.

3) Tubatuactsasadisruptorinthehomedécormarket,asitincreasesthetransparencyoftheconstructionprocessandbringstogetherover950,000interiordesignersand70,000décorcompaniesinanintegratedplatformfromwhichconsumerscanchoosefrom.

Deborah Weinswig

Managing Director,

Fung Global Retail & Technology

deborahweinswig@fung1937.com

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

MarketTrendTheinteriordesignandhomedécormarketinChinawasworth¥3.4trillionin2015,up8%overthepreviousyear.Themarketisgraduallyexpandingalongwiththeincreaseinhousingdemandandincomegrowth.

Beforethehomedécorserviceslistedonline,itwasnoteasyforhomeownerstofindthebestsolutiontosuittheirneeds,withthousandsofcompaniestochoosefrom,nottomentionopaquepricingandinsufficientcreditinformation.Atthesametime,homedécorcompaniesfounditdifficulttopindownactualcustomers,asmosthomeownerswerelookingforafreesampledesignsotheycouldcomparecompaniesandtheirofferings.

Figure1.SizeoftheInteriorDesignandHomeDécorMarketinChina(¥trillion)

Source:ChinaBuildingDecorationAssociation

Figure2.YoYGrowthRateoftheInteriorDesignandHomeDécorMarketinChina

Source:ChinaBuildingDecorationAssociation

0.70.9 1.0

1.21.5

1.71.9

2.12.4

2.62.9

3.23.4

0%

5%

10%

15%

20%

25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2003200420052006200720082009201020112012201320142015

IndustrySize(trillionYuan) yoy(RHS)

0%

20%

40%

60%

80%

100%

120%

2010 2011 2012 2013 2014 2015

Homedecorabon

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Figure3.O2OPenetration(¥billion)

Source:ChinaBuildingDecorationAssociation

CompanyBackgroundTherearemorethan100,000companiestryingtocapitalizeonthisgrowingmarket.Yet,thefeedbackfortheoverallindustryisnegative,duetoalackoftransparency,informationasymmetryandlackofprotectionforconsumers.Againstthisbackdrop,RobinWangGuoBinsawthisasanopportunitytosetupanonlineplatformtoconnectconsumersandcompanies.

WangGuoBinisthefounderandCEOofTubatuwhowasselectedasoneofChina’stendécormarketleadersin2015andratedasoneofthetop35youngentrepreneursunder35byiheima.comin2016.

Figure4.HistoryofTubatu

Source:Company

2010:launchedO2Opalform,biddingfor

decorservices

2011:MatrixPartners

joinedseriesAfundinground

2012:Launcheddecoraboninsurance

2014:Sequoia

capitaljoinedseriesBfunding

2015:58.com,Sequoia

capitalandMarbxPartners

joinedseriesCfunding,valuabontoppedUS$200million

1,359,90%

151,10%

TrandibonalhomedecorabonO2Ohomedecorabon

WangGuoBin

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Itiscalled“Tubatu,”whichisametaphorinChinesetomeananagileteamthatworkstogethertoovercomechallenges,launchedasanO2Oplatformforinteriordesignandhomedécorin2008.

Thewebsiteservesasanagentofferingavarietyofhomefurnishingsolutions:homedécorcompaniesareencouragedtotaketheinitiativetoprovidefreeservicessuchasdesigndraftingandpricingsoconsumerscaneasilygatheralltheinformationtheyneedtochoosethesolutionthatbestsuitstheirneeds.Homedécorcompaniesuploadtheirfinisheddesigns,renovationcostestimatesandotherservicesonTubatu,andthenhomeownerscanbrowseandselecttheirfavoritesfromamongthem.

Forcustomersthatdonothavethetimetosearch,theycanchoosetouploadtheirowndecorationexpectationsanddesignideasandletthebestbidderwinthecontract.Tubatuwillalsoanalyzethedatafrombothsidesandsuggestthemostsuitablesolutionthatmatcheswiththehomeowner’sdemands.

Alldetailsaboutpricing,designandconstructiontimearetransparenttothecustomer.Byachievinginformationsymmetrybetweenbuyersandserviceproviders,Tubatufoundthekeytotransformingthetraditionalhomedécormarket.

Figure5.TubatuKeyStatistics

Source:Company

AnUnconventionalSupervisorAsthevolumeofclientsgrew,theinconsistentqualityoffinishedprojectspostedapotentialdownsiderisktoTubatu’sreputation.Tocombatthis,thecompanylaunchedthe“decorationinsurance”servicein2012.

Uponsigningthe“decorationinsurance”,Tubatuactsasatrustandshoulders100%oftheconstructionfeeandprovidesafeeschedulethatregulatestherelationshipbetweenthehomeownerandthehomedécorserviceprovider.Thefirst5%isusedtopayformaterialcosts.Afterthat,theconstructioncostisbrokendownintothreemainparts:thewatersystem,wall&plasteringandpainting.Thehomeownerpaysaltogether75%oftheconstructionfeeseparatelyuponeachstageofcompletion.Theremaining20%ispaidaftertheprojectisfinished.Duringeachstageofcompletion,thehomeownerhastherighttoaskforaprogresscheckandcanwithholdpaymentuntilthehomeownerissatisfiedwiththeproject.

Ifthehomeownerdoesnotwanttogetinvolvedinmonitoringtheproject,Tubatuhasasupervisionteamthatcanoverseeeverystepoftheconstructionprocess.

250cibes

70,000decoraboncompanies

900,000interiordesigers

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Figure6.Tubatu‘sdecorationinsurance

Area Tubatu'sdecorationinsurance Traditionalinstallment

Beforetheprojectstarts -

Tubatuactsasatrustandshoulders100%oftheconstructionfee

40%todécorcompany

Afteracceptancecheckof…

Materials 5%todécorcompany -

Watersystems 30%todécorcompany 40%todécorcompany

Wall&Plastering 25%todécorcompany 15%todécorcompany

Painting 20%todécorcompany -

Wholeproejct 20%todécorcompany 5%todécorcompanySource:Company

PenetratingintoE-commerceLeveragingitsgrowingreputationamongconsumers,Tubatuaimstodevelopaverticallyintegratedbusinessmodel.In2015,thecompanyreachedouttoupstreamsuppliersofconstructionmaterials,furnitureandhouseholditems.Aftersixmonthsofpreparation,Tubatuaddedanewfeaturetoitswebsite–B2Ce-commerceforhomedécor.Bysettingupanintermediatetransitionwarehouse,Tubatucanstreamlinethefactory-to-customerlogisticsprocess.

Tubatugathersalltherequiredmaterialsandproductsfromdifferentsuppliersandstoresthematitstransitionwarehouse,thenarrangestodelivertheitemsaltogethertothecustomer.

Tubatuhaswarehousesinoversevencities,includingBeijing,ShanghaiandShenzhen.Tofurtherleverageitssupply-chainnetwork,Tubaturequiresallconstructionprojectstousesuppliersthatitisalreadypartneredwithonitse-commerceplatform.

Figure7.Tubatu‘se-commercewebsite

Source:Company

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

OurThoughtsWethinkTubatucanbeadisruptiveforcetothetraditionalinteriordesignandhomedécormarketduetothreefactors:

• Transparentindustryinformationsharing:Formostcompanies,keepingcertaininformation,suchasthequalityofthematerialsandconstructiontechniquesused,hiddenfromcustomersisapracticalwaytomakeadecentprofit.Yet,thisinformationimbalancemaynotholdforlong,giventhevolumeofinformationthatiswidelyavailableontheinternet.Facilitatinginformationsharing,Tubatuimmediatelygeneratestrustamongitstargetaudience.

• Factory-to-consumer:ThankstoTubatu’se-commerceplatform,consumersareabletoplacecustomizableordersdirectlytothefactoryandsavecoststheywouldincuriftheywentthroughanintermediary.Cuttingoutintermediariescaneffectivelylowerthecostoffurnishings,whichgivesTubatuanedgeovertraditionalhomedécorcompanies.

• Turnkeysolutions:Fromthecustomer’sperspective,Tubatuhassimplifiedtheentirehomedecorationprocesstoonlythreesteps:choosethebestoption,checkthefinishedprojectandpayfortheservice.Mostconsumerslackknowledgeofconstructionandinteriordesign,e.g.,thequalityandcostofthematerialsused,soTubatu’ssolutionhelpseliminatethispain.

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January24,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comSimicChanSeniorResearchAssociate

HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com