Like many overseas Chinese, Derek Weng receives shopping inquiries from family and friends every time he returns to China. Some of the most wanted imported products are maternity items, cosmetics, and vitamin supplements. Many in China still believe that "imported products are better".
The demand gave Weng a business idea. In 2018 he founded LemonBox selling American dietary supplements to Chinese millennials like him through online channels. The company soon received seed capital from Y Combinator and just this week announced the completion of a pre-A round of $ 2.5 million led by Panda Capital, followed by Y Combinator .
LemonBox tries to differentiate itself from other importing companies on two levels – affordability and personalization. Weng, who previously worked at Walmart, where he worked in the retail giant's China import business, told . that he knows many American dietary supplement manufacturers and can thus cut costs for middlemen.
"In China, most dietary supplements are sold at high prices through pharmacies or multi-level marketing companies like Amway," said Weng. "But vitamins aren't that expensive to make. Amway and the like spend a lot on marketing and sales."
LemonBox has developed a WeChat-based lite app in which users receive product recommendations after completing a questionnaire about their health. Instead of selling by the bottle, the company tailors users' needs by offering daily packs of various nutritional supplements.
“If you are a vegetarian and travel a lot and the other person smokes a lot, (your requirements) will be very different. I wanted to use big data to customize user recipes, ”said Weng, who was studying artificial intelligence at the business school.
For example, a monthly basket of 30 B-Complex tablets costs 35 yuan ($ 5) at LemonBox. Amway's counterpart, a bottle of 120 tablets, charges 229 yuan from JD.com. That's about 57 yuan ($ 9) for 30 tablets.
Selling cheaper vitamins is just a means for LemonBox to attract consumers and gain health insights into Chinese millennials with whom the company wants to expand its product range. Weng declined to disclose the company's customer size, but claimed the user conversion rate was "higher than most e-commerce sites."
With the new proceeds, LemonBox is opening a second fulfillment center in the free trade zone of Shenzhen after the one in Silicon Valley. This is set to add stability to the supply chain as the COVID-19 pandemic disrupts international flights and cross-border trade. In addition, the startup will spend the money securing health certificates and adding Japan to its sourcing regions.
In the decade or so that Weng lived in the United States, the Chinese Internet saw drastic changes, creating an industry that was largely captured by Alibaba and Tencent. Weng realized that he couldn't simply recreate America's playbook for customers in China.
“In the US, you can build a website and possibly an app. They will embed your service in Google, Facebook or Instagram to market your products. Every continent is interconnected, ”said Weng.
"It's quite a lot different in China. First of all, not many people use web browsers, but everyone is on cell phones. Baidu is not as popular as Google, but everyone uses WeChat, and WeChat is isolated from other major traffic platforms."
Therefore, LemonBox is keen to diversify beyond its WeChat store by launching a web version as well as a store through Alibaba's Tmall marketplace.
"There's a lot to learn. It's a very humbling experience," said Weng.