Appconomy Aims for Share of China’s Mobile Shopping Market
We’ve all been there, standing in a superstore, shopping list in hand. We stare at the dozens and dozens of rows of consumer products before us and don’t have a clue where to find anything.
But if you’re in China, Appconomy has something that might help. The company, which is based in both Austin, TX, and Shanghai, unveiled its “Smart Shopping App” in a soft launch in Shanghai earlier this month. Shoppers can now check in through the app on their phones and upload shopping lists that the app would match to maps of the store in order to plot out the most efficient route, among other services.
So far, the app has been rolled out in 26 stores of one of the world’s largest hypermarkets. (Appconomy isn’t making the name public since the official unveiling is still to come in China.)
At stake is a piece of China’s $2.3 trillion retail market, which is already nearly half of the American retail market and is expected to surpass the U.S. by 2020.
How did an Austin startup come to serve shoppers in the most populated city in the world’s largest marketplace?
Appconomy’s founders were each longtime members of Austin’s entrepreneurial community, having previous experience at startups such as Moxie Software, iMark.com, and Powershift Ventures. But executive chairman and co-CEO Steve Papermaster got to know China when he was appointed by former President George W. Bush as a member of what is now known as the China-U.S. Strategic Economic Dialogue, among other organizations dedicated to growing Sino-American trade ties. During his time there, he got to know Jiren Liu, the chairman, founder, and CEO of Neusoft.
The publicly traded Chinese software giant was looking to expand into the mobile market and saw an opportunity in a partnership with Appconomy. The American executives had intended to start its operations in the U.S. when it was founded two years ago, but realized that if they were to join up with Neusoft, the Chinese market would dominate the company’s business.
“We did a total pivot to shift all focus to China,” says Joe Canterbury, Appconomy’s COO and senior vice president of marketing and business development. “It wouldn’t be feasible to build markets in parallel.”
Since then, three of Appconomy’s senior executives moved with their families to China, and six months ago the company launched its first mobile app aimed at retail, called Jinjin Marketplace (see screenshot). The app enables customers to manage mobile-based loyalty programs and receive store coupons and special officers. Customers can also participate in digital gifting programs through SMS. Retailers get a direct, real-time channel to their customers and can harvest data about how people shop and what they buy.
“Merchants are getting to leapfrog from paper punch cards to a much more dynamic loyalty program that allows them to capture so much more data about members,” says Canterbury, who joined Appconomy last year after more than a decade involved with Starbucks’ international operations.
The Jinjin app targets food and beverage outlets and smaller-box retail such as health and beauty stores. Since its launch in December, about 50,000 consumers in Beijing and Shanghai have used Jinjin.
Canterbury says the linchpin for Appconomy’s efforts in China is its relationship with Neusoft.
“Anything that’s Internet-related in China is very regulated,” he says. “To operate any kind of business that is tied to Internet, you have to have a special license, an ICP [Internet Content Provider], and can be hard to get for foreign companies.”
Appconomy was able to piggyback on top of Neusoft’s existing licenses. Without the partnership, Chinese companies like Neusoft would find it difficult to expand globally, Canterbury says.
Neusoft became Appconomy’s largest investor in 2011 and last November, Shanghai-based Qiming Ventures led a $10 million Series A round of equity and debt funding. Appconomy’s other investors include Western Technology Investment and True Ventures. Qiming Ventures Managing Director Gary Rieschel also joined Appconomy’s board of directors.
A majority of Appconomy’s 100 employees are currently based in China, including Neusoft engineers who are dedicated to the startup. The company has plans to expand into tier-one metro markets in China by year’s end and is looking at other Asian countries as well.
“We are extremely focused on being successful [in China], first, because the opportunity is extraordinary to reinvent the physical-digital retail experience,” Canterbury says. “Our most likely path will be hand-in-hand with some of the global brands and partners with whom we are currently doing business or in discussions with in China, first.”