Building a responsible E-commerce business in China – Steve Liang, Fields China
FIELDS China (甫田网) is a Shanghai based online grocery store. FIELDS was established in 2009 by Chinese American former IT professional Steve Liang and TZG Partners in response to food safety concerns in China. FIELDS’ customer base includes both expatriates and Chinese who are increasingly concerned about healthful eating. FIELDS recently closed a $5 million Series Around of funding. The Series A funding was led by ClearVue Partners, a private equity fund targeting consumer companies in the Greater China region. YourStory caught up with Steve to learn more about FIELDS and the e-commerce landscape in China. On how the e-commerce startup came about
Steve Liang: I started FIELDS when I was 39 and at a serious crossroad in my life. All I knew then was that I wanted to focus on ethical, fair trade and proper business practices that tolerate no corruption.
This is our current mission statement for FIELDS. Our first version:
“FIELDS is a premium online food retailer that delivers high quality, safe and consistent products to retail customers in Shanghai, Zhejiang and Jiangsu. It provides friendly, reliable, and professional service through a user-friendly and attractive website. FIELDS delivers the above through a sustainable cost structure.”
I want to emphasize the first sentence. At FIELDS, we want to create a world-class company of ethical, good business practices, zero corruption policy that supports & promotes social responsibility. This is our branding and the ethos that we all live by at FIELDS. This, I believe, resonates clearly with everyone and we go back to this every time we make large, difficult decisions in our management meetings.
Instrumental to the survival of FIELDS for more than four years, has been our first investor, TZG Partners. To start a business in China or in any country, it takes hard work, fortitude, patience, resilience and luck. Luck will only happen if you practice those first four values.
My first meeting with TZG Partners was very random. TZG’s co-founder, Josh, was the husband of a customer at my previous workplace and they orchestrated a meeting between us. At that time, I was so down and out I didn’t really want to meet him at Element Fresh in the Shanghai Centre Portman. Running on my last one thousand RMB, I was afraid that I would be obliged to pay for a breakfast bill for which I really didn’t have the money. I already had a ticket to fly back to Kansas, USA, and I was resigned to being an engineer once again. Fortunately, Josh paid for breakfast and even gave me a ride back to my apartment, allowing me to save 2RMB on the bus fare. After a week of negotiations, I started FIELDS on the Monday. We met March 9, 2009 and by March 13, FIELDS was born. And Monday, March 16th, I made my first sale and officially began my wild and uncertain ride with FIELDS.
The growth so far
Yes, FIELDS is developing quite rapidly as concern and demand for safe food in China rises. As I mentioned, we started the company in 2009. From 2010 to 2012 our customer base increased over 180% every year, and revenue has increased by 220%.
In 2009, we only delivered in Shanghai but now we deliver in 7 other cities in Jiangsu and Zhejiang province (Hangzhou, Suzhou, Taicang, Ningbo, Nanjing, Wuxi& Changzhou)
Experience starting up in China
Like I said previously, to start a business in China or in any country, it takes hard work, fortitude, patience, resilience and luck. Luck will only happen if you practice those first four values.
We are growing quickly, we have a significant amount of competition and we are transitioning from a bootstrap startup to a small company, but we still don’t want to lose our startup values. And even after recent funding, we need to be even more careful with our cash. Being frugal and doing the “right things” with our money is really important.
It’s rewarding to work at FIELDS, but it’s also very hard. When I started this company, TZG gave me 40,000RMB to build the business. From day one, we had a bootstrap mentality where saving, being savvy and delivering results was paramount. To do this, we have accomplished two goals: we practice our business ethically; and second, we must show results immediately. No sales and no results mean not being able to pay our bills. We have to get sales quickly and be efficient with what we do. When I see all of the obstacles in operations, I am frustrated. Often I need perspective to see how much we have grown and improved in the past. It comes down to finding top talent and getting them to work together as a team.
However, having the right incubator/VC/PE/angel investor is often important for the survival and growth of a business. A good investor usually frustrates you to no end 99% of the time. But that 1% of the time when they are truly right, they save you from catastrophic events. And that 1% makes it worthwhile having professional investors. FIELDS has been incredibly lucky with the partnership of TZG.
We also expect our partnerships with the new investors to be equally fruitful.
But when I look back now, TZG taught me to focus and to truly strategize. They coached me and made me incredibly tough, strong and resilient in running a business. They have helped and supported me in becoming a tougher, better leader. And I believe my relationship with TZG (Ben, Josh, and Tony) is for the better and stronger on account of all of the difficult and trying times we have gone through.
E-commerce in China - potential, learning, challenges?
TZG has also helped tremendously with strategy. It took us about nine months to properly develop our business plan and strategy to get us where we are today. Multiple times we have thought and explored the opportunity of opening stores in various locations within Shanghai. We used to debate endlessly about online vs. opening a store. And I am glad that every single time Josh politely told me “NO”! He emphasized the importance of focusing on a single business and how important it was for us to prove to TZG, customers and future investors about the viability of being only online. That strategy paid off with our Series A funding (see press release attached).
The second strategy that paid off was our investment in operations. Most of our capex has been invested in equipping the warehouse and vans. For FIELDS to make our business sustainable, we had to take a different path. We chose the path of higher margins and quality. As expats, we didn’t have the ability to communicate effectively to Chinese customers, I didn’t have the ability to do “guanxi” marketing with the huge gift channel business and I wasn’t talented enough to run a fast growing, scalable business like Yihaodian (the founders of which are, by the way, amazingly smart and savvy). Those guys have done incredible things. By comparison, FIELDS after four years still does a fraction of what they have accomplished in the same time.
With higher margins, we had to do vertical integration and that meant packing, butchering and delivering our own products. Packing and butchering is a very basic idea as most of the grocery stores in the US do some of their own butchering. However, bringing our logistics in-house and managing them internally was initially counter-intuitive.
During 2009, the consensus was that doing our own delivery was maybe not the smartest strategic decision, that we should instead be focused on marketing and selling our products and outsource delivery to a 3rd party. That was what other online companies were doing and we wondered if we should be doing that too. We were laughed at since having an internally managed delivery system is expensive, causes a lot of operation headaches and meant we were not focusing our energy and resources in the right areas.
Hiring: One of the biggest challenges
One of my biggest problems right now is recruiting and scaling this business. Because we are doing something so different to most Chinese business, our biggest problem is recruiting top talent. It’s hard to get people to understand and consistently buy into the philosophy of what we are doing, which is:
Focusing on finding and offering high quality, safe, and consistent products from around the world for our customers. We prefer local and organic foods where possible, selective where not possible.
Offering high quality, safe and consistent is tough to do every day. And to be consistent is even harder, especially since we are open 365 days a year, no matter what holiday and no matter how the weather is. We deliver every day and we expect to deliver high quality products. Getting people to understand and live this philosophy is what I have been doing for the past five years. Which leads to recruiting and retaining top talent. This is what we want to do:
We Support And Reward An Excellent, Motivated Team
We hire and reward individuals who want to excel in their jobs. We train and care for our employees, fostering an environment focused on results, happiness, and creativity. We create a work place that values and benefits from our employees’ diverse skills and experience.
Plans going ahead
Recently, we have completed and closed our first round of funding or Series A in venture capital speak. In our fund raising efforts over the past year, two funds have decided to join FIELDS. The first investor is Federal Capital, a Taiwanese angel investor (Andy Wang) and the second is Clearvue Partners (CVP), a professional VC fund backed with a talented team (Will Chen, Harry Hui, Irene Cai) with strong funding and more importantly, impressive knowledge in retail.
It is an exciting time to be at FIELDS. We plan to use this investment to improve our operations, website, warehouse and recruit more top talent, but most importantly connect with you, the customer, by strengthening our service, quality, and community. Over the next year, you will see more convenience in our delivery service, more unique products, more interesting fresh fruits and vegetables, more seafood and meats and more transparency. A happy life starts with fresh, nutritious, and healthy foods.