Old electronics mean new opportunities for company

Aihuishou.com, one of China's online electronics recycling platforms, is ramping up its efforts to expand into smaller cities, pinning its hopes on the potentially huge market, company executives say.

Late last month, the Shanghai-based startup raised 400 million yuan ($57.56 million; 55.3 million euros; 47 million) in Series-D fundraising, attracting support from heavyweight investors such as Cathay Capital, Fortune Capital, Tiantu Capital and JD.com Inc.

Announcing the funding details, CEO Chen Xuefeng says his company will use a large proportion of the investment to further support two new business lines. One focuses on growth in smaller cities, by partnering with local recycling stores. The other is to encourage consumers to rent new smartphones from the platform instead of buying them.

The company's president, Zheng Pujiang, outlined the geographical rollout.

"To date, Aihuishou has secured the market in first-tier and second-tier cities," he says. "Third-tier and smaller cities will be our next strategic priority."

Since August, the group has established links with assorted partners in these markets.

Aihuishou, established in 2011, recycles old electronics such as cellphones, laptops, cameras and assorted hardware. The platform then resells most of the used goods after cleaning and testing, and channels the low-value ones to professional recycling centers.

To date, the platform has set up five operations centers and more than 200 recycling stores nationwide.

In 2016, the average monthly revenue of Aihuishou exceeded 200 million yuan. It started turning a profit in September, the company said. It collected nearly 5 million cellphones last year, compared with fewer than 3 million in 2015,

Industry data indicate future market potential. In the first 11 months last year, shipments of Chinese cellphones increased to 497 million, up 7.6 percent from the same period the previous year, according to figures from the Ministry of Industry and Information Technology.

The fast-growing business fueled Aihuishou's plans for a public listing.

"The countdown to our initial public offering will begin in 2017," says CEO Chen Xuefeng. "The preparation stage is likely to last three years."

He says the company prefers to go public in the domestic market than to list abroad.

"Aihuishou's online-to-offline business model has become mature and has raised the service standards of the recycling industry," says Cai Mingpo, president of Cathay Capital Private Equity.

"We see a bright outlook as the company has created strong barriers to competition and maintained a fast pace of growth."

Yang Tinghui, investment director at Fortune Venture Capital Co, says compared with listing on the Nasdaq in the United States, Aihuishou's business model and characteristics are more in line with the requirements of the domestic capital market in China.

(China Daily Africa Weekly 01/06/2017 page29)