With 15,000 Contracted Merchants and Over 900 Mln yuan in Monthly GMV, Sichuan-born Peng Lei Exploits the Trillion-Yuan Catering SaaS Market
[Keruyun, a SaaS software provider for the catering industry, has always been the benchmark in the industry since it was established in 2012. What lie behind its development are the painstaking efforts of a team of more than 1400 members led by Peng Lei, who comes from Sichuan. To learn about a business, we need to learn about its people first. In this episode of “Dialogue with Innovator”, let’s talk about Peng Lei first to explore this catering SaaS enterprise with thick “Peng Lei taste”. (The data in this article is based on Keruyun’s annual report in 2016.)
Peng Lei arrived later than the scheduled time due to the reception of investors. His wearing – Polo shirt, jeans, sport shoes, and frameless glasses – reflects a unique internet style. “Let’s talk in my office,” he said.
Peng Lei’s office is separated from the staff area only by a glass wall. Once I entered the office, the several generations of integrated SaaS terminals from OnPOS to OnPOS mini came into view. The sound box and the toy figurine “Baymax” are placed on the cupboard on the wall. If I hadn’t seen it personally, I could hardly believe that an office with such simple and casual decoration belongs to the Founder and CEO of an internet company with more than 1,400 employees.
“The first rule of Keruyun’s corporate culture is called ‘life is great’. Our employees are similar because they all have positive and optimistic mentality and we are not that kind of entrepreneur who often feels sorrowful and hatred.” This internet entrepreneur, who was born in 1980 and had set up several companies in succession, said with almost no dashing spirits but more affinity in his tone.
Keruyun, founded in 2012, is the fourth company founded by Peng Lei. It has now become the largest domestic SaaS system company with its leading position internationally. It mainly provides a new generation of hardware and software integrated intelligent management system for catering, retailing and other service industries to make the operation intelligent, efficient and simple.
Keruyun was listed on the NEEQ (835268.OC) on December 30, 2015 and entered the innovation tier in May 2017. In the year 2016, Keruyun’s operating income soared 640% year-on-year to 73.05 million yuan and its gross profit skyrocketed 38.78 folds on a yearly basis to 28.3855 million yuan. Its monthly GMV (Gross Merchandise Volume) jumped more than 8 folds from less than 100 million yuan in early 2016 to over 900 million yuan in December 2016.
Sichuan-born Peng Lei
In the eyes of most people, Chengdu people always leave an impression that they live a life of ease and leisure. They enjoy their comfortable life, claiming that “it is none of the business of others”. However, at the critical moment, Chengdu people can always put away their lazy character and become brave and skilled in the fight. The term “brave and skilled” is exactly proper to describe Peng Lei.
“When I applied for college, my family could not understand why I decided to go to college outside Sichuan, for they believed that Sichuan is quite a good place,” said Peng Lei. “As the famous saying goes, don’t enter Sichuan in your youth (the young people may enjoy the leisure life in Sichuan and forget to work or study hard). I had stayed in Chengdu for 18 years and thus it was time for me to leave.” In 1998, Peng Lei was admitted to the University of Science and Technology of China after graduating from the high school, leaving Sichun as he had wished.
Peng Lei can be regarded to be a distinct one in the University of Science and Technology of China. At that time, 20%-30% of his classmates went to the United States, around 40% of them entered various institutes of Chinese Academy of Sciences, and the remaining ones became civil servants by passing the provincial and national exams.
“I was the only one in my class who chose to start a business, as I was discontented with my lot. I did not intend to stay steady even from the day of leaving Chengdu.”
Peng Lei ushered in the first “critical moment” in his life in 2001.
He was in the third year of college. As an undergraduate, out of personal interest, he founded Bowei Network, the largest content service provider in the field of education network at that time. The website provided rich content including BBS, Blog and online entertainment. The music community of the website, named Pengpeng Music Bar, can also be founded today in a post that collects various music websites.
“I ran the website for two years and sold it to a company in Beijing for a few hundred thousand yuan,” Peng Lei recalled, adding that “I did not think too much when selling it because I was young then and did not know what the premium is.”
Carrying the several hundred thousand yuan, Peng Lei and his several partners went to Beijing and started his 11 years of drifting life there.
When asked why he did not buy a house at that time, Peng Lei said with a smile: “A house in Xizhimen was sold for 7,500 yuan per square meter. I thought the price bubble was serious since the traffic there was so inconvenient, and therefore I decided not to buy it. Later, I kept wondering what I was really thinking at that time.”
After arriving in Beijing, Peng Lei started his seemingly crazy continuous entrepreneurship period. In 2006, he founded a business card website that became the largest business card data exchange platform in China. In 2007, he set up FirstDM, a marketing company based on big data.
The Business Opportunity in Group Purchase Website; To Be the Apple in To B Companies
Any experience is a kind of accumulation. This is not only chicken soup for the soul but also a fact
For Peng Lei, it was the experience of founding a grouping purchase website that made him aware of the business opportunity in the combination of catering and the internet. “The first judgement we made at that time is that there is a huge market between the catering merchants and the consumers, whether it is in the catering industry or in the service industry.”
Furthermore, Pang Lei also found that smartphones had gradually popularized among consumers. However, given that both the catering industry and the service industry had not changed for 20-30 years, the connection between the catering merchants and the consumers cannot be achieved, let alone the communication.
Peng Lei found that the things could not go this way and there must be a company standing out to help the service providers of the business market. Such a company provides the service providers with intelligent hardware like iPhone and intelligent software like iOS, achieves real-time two-way data connection online, completes various transactions and interactions, and actualizes the two-way interconnection between consumers and the service industry.“
Under such a circumstance, we decided to be the company that was needed,” Peng Lei said. “Focusing on SaaS service in the To B market, we aimed to change the business market, just like that Apple has changed the consumer market. Therefore, we are labelled as the Apple Company in the To B market
Keruyun with “Peng Lei Taste”
This To B Company is of “Peng Lei Taste”.
Keruyun leaves a similar impression as Peng Lei does, pursuing positivity and staying away from sorrow and hatred. “Life is great”, the first rule of the corporate culture, asks the employees to have a passion for life, while “Teamwork wins”, the second rule of the corporate culture, emphasizes the importance of teamwork. As what the Sichuan people pursue in life, the two rules reflect Peng Lei’s hope for employees to enjoy work and enjoy life.
The last two rules of the corporate culture, namely “Fast learning fast moving” and “Best or nothing”, describe Peng Lei’s characteristics of being brave and skilled while basically summarizing the work style of the Keruyun team.
2012, the year of incorporation of Keruyun, also witnessed the rise of the SaaS industry. Once it emerged, the SaaS system was given the symbol and mission to “eliminate traditional catering management software”. But an indisputable fact is that most traditional catering suppliers did not even know what SaaS was, not to mention using the software system.
A small number of SaaS companies such as Keruyun could only engage in research and development of software in the initial stage and the hardware was dependent on iPad or other PAD terminals.
Keruyun successfully developed its own system in 2014 and started to promote it to catering service providers in 2015. However, they encountered unprecedented difficulty in promoting the system in a budding market. Peng Lei recalled: “As we marketed our system, the catering service providers were in bewilderment and they did not understand what the software can help and why they need to buy a SaaS system, insisting that it’s pointless to be intelligent.”
The first generation of OnPOS, being white in main body and affectionately called “Baymax”, can provide the catering industry with booking, queuing, delivery, ordering, cash register, membership, marketing, supply chain management and many other services.
The fast research and development of hardware inevitability produces trouble. The most typical problem facing Keruyun at that time was that, after OnPOS was released in October, it merely produced 200 terminals by December 2015 for it was lack of factory management capabilities and did not know how to address supply chain problems.
“Many catering merchants asked if we were doing hunger marketing and we answered that we were really ‘starving’,” said Peng Lei. “We had no choice since we could not produce enough terminals, but later we gradually sorted out the production process,” he continued.
The birth of the integrated terminal changed the development track of Keruyun or have pushed it onto the highway of development. The year 2016 saw the enhanced internet awareness of catering merchants. As Wechat payment could be used for even buying food or an egg pancake in the morning, the catering merchants’ demand for SaaS surged. The OnPOS of Keruyun, which could be easily operated and be used immediately after power on, stood out among the many SaaS products, broadening the market prospects of Keruyun since then.
A year later in August 2016, Keruyun launched OnPOS mini, its new generation of product. It will also unveil its new product OnPOS 2 this September.
Relying on its strong ground force, the “brave and skilled” Keruyun kept expanding its footprints nationwide in last year. As of the end of 2016, Keruyun has established directly-operated branches in 28 cities, providing services for customers in more than 150 cities, hiring more than 1400 employees, and serving over 15,000 catering merchants.
In 2016, according to its annual report, Keruyun recorded an operating income of 73.05 million yuan, with a jump of 639.65% year-on-year, and a gross profit of 28.3855 million yuan, with an increase of 38.78% year-on-year. Its gross margin, reaching 7.42% in 2015, skyrocketed 432% to 39.47% in 2016. The GMV (Gross Merchandise Volume) for December 2016 soared more than 8 folds to more than 900 million yuan. In addition, it has also recorded an annual growth of 8-10 times in other performance indicators such as the number of orders and the amount of mobile payment.
Meet the Turning Point of the Industry with “Openness”
American scholar Everett M.Rogers put forward the Diffusion of Innovations theory in 1960s, arguing that the diffusion of new things will go through the knowledge-persuasion-decision-implementation-confirmation process that follows an “S” curve.
From Peng Lei’s point of view, SaaS for the catering industry, as a new technology, will also follow an “S” curve. The whole industry, emerging in 2012, underwent a gestation period between 2012 and 2016, and then grew gradually. Once a critical value (10% acceptance rate) is reached, the market will enter a period of rapid growth, and the turning point will arise at this moment.
The turning point will be the year 2017.
The number of SaaS service provider in the catering industry is increasing, the catering merchants’ system access awareness is getting stronger, several BAT-level companies like Keruyun have emerged in the industry, and the growing enterprises have frequently become the hot spots of investment. Some media believe that the entire industry will enter a red ocean in the year 2017 where service providers compete fiercely.
How to deal with the cut-throat competition? The answer given by Peng Lei is to be “open”.
On March 7, 2017, Keruyun held the “Catering SaaS Open Platform—KONNECT 2017” conference. At the conference, Peng Lei announced that Keruyun was to set up the “KONNECT Catering SaaS Open Platform to open four capabilities, namely cloud capacity, terminal capacity, sales capacity, and operational capacity, to partners in the upstream and downstream of the catering industry, forge the intelligent ecological circle of the catering industry based on the open platform, and jointly solve the problems related to employees, capital, inventory and customer for catering merchants.
“The traditional offline service industry has always been in a state of “isolated island” where the information of traditional system is isolated and lack of external connection.” During the development of the internet, the information isolation and the lack of external connection, as Peng Lei said, are now still “fast knots” for the offline service industry which has a value of tens of millions yuan.
Wabei.cn learned that, to address employee-related issues, the KONNECT open platform will provide a sound talent management tools for the catering practitioners through cooperation with companies of recruitment, training and personnel management. At present, Keruyun has currently established cooperation with zhaopin.com and shaoziketang.com, an affiliate of zggonglue.com. To address capital-related issues, the KONNECT open platform has provided “capital loans” and other services for small and medium catering enterprises through establishing connections with QianBao.com and China Minsheng Banking Corp. In the future, it may also cooperate with yonyou, Kingdee and other traditional financial systems to facilitate the financial management of catering enterprises.
To address inventory-related issues, the KONNECT open platform is been able to accurately calculate the real-time consumption of ingredients through the backend big data, ensuring scientific proportioning through intelligent inventory management. In the future, it will also cooperate with Jd.com, Shuhai Supply Chain Solutions, meicai.cn, and other raw material suppliers to provide catering enterprises with convenience in cross-platform price comparison and favorable account period. To address customer-related issues, the KONNECT open platform has linked to major platforms of the consumer market, such as meituan.com, ele.me, dianping.com, koubei.com, and nuomi.com, hoping to attract customer flow by showcasing the booking, ordering, delivery, payment and other services of the catering enterprises on the these major platforms and solve the trouble of multiple Apps and multiple bills.
On the other hand, by launching the open platform, Peng Lei is paving the way for Keruyun to become a data company in the future. “There will be more and more catering merchants entering our open platform in the future, and in addition to the catering industry, we will also get into the new retail area this year,” Peng Lei said. “The huge data of these offline service industries is a gold mine where we can dig out astonishing value.”
Looking back the four-year gestation period of the catering SaaS industry from 2012 to 2016, numerous small companies were closed down while Keruyun is one of the few companies that have survived.
Peng Lei still have mixed feelings about the foundation time of Keruyun. He analyzed that, if Keruyun hadn’t been set up in 2012 but in 2010, a time before the rise of catering SaaS, the company might have collapsed before the turning point; if the company was founded in 2014, it would hardly become successful either, for the products would have not reached maturity when the turning point had already come.
For Keruyun, it is difficult to judge whether it is the catering Saas market that has hatched the company or it is the company that has cultivated the catering SaaS market.
Perhaps we can say that catering SaaS market is Keruyun itself.