Following Alibaba, its online merchants now eye listings

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A customer service representative of Three Squirrels, a leading brand and e-shop selling nuts and snacks, deals with online transactions. [China Daily] 



Rome was not built in a day. Nor was any other great city, town, village or company. But in China's rapidly growing internet industry, a potential market-leader, it seems, can be built from scratch within five years.

Three Squirrels is a shining example. It launched on Tmall, Alibaba Group Holding Ltd's online marketplace, in mid-2012. Today, it is China's largest snacks brand in e-commerce.

It started by selling nuts like cashew and pecan. Its 2015 sales reached 2.5 billion yuan ($385 million).

Three Squirrels is an "asset-light company"-no bricks-and-mortar outlets, no investment in growing nuts itself.

Zhou Ting, chief financial officer of the Anhui-based company, attributed the company's success to "a group of right people doing the right thing at the right time".

The next right move, he said, "is going public".

Three Squirrels is among the emerging group of hundreds of online merchants and internet brands that are looking for funds for expansion.

The companies are eyeing listing on the stock market. They were all born and raised in China's booming e-commerce industry, which pulled in nearly 4 trillion yuan in sales last year from more than 400 million shoppers.

Like Three Squirrels, most of them do not own any factories nor employ production line workers. Some of them do not even sell physical products but peddle services, expertise and technologies.

Their strength is their deep understanding of Chinese online shopping behavior and e-commerce, which helps them to outperform many of the bricks-and-mortar leaders in an incredibly short period of time.

To be sure, there are 44 public companies in China that are involved in businesses related to e-commerce. None of them got listed purely because of their online business.

According to China's e-commerce giant Alibaba, nearly 100 merchants on its online marketplaces have plans to go public.

They are from various industries like clothing, home furnishing, food and electronics. Sector leaders boast a combined valuation of hundreds of billions of yuan.

They plan to use the proceeds of their initial public offerings for business expansion.

Guo Jia, chief executive officer of Mayn, a firm in Hubei province that assembles personal computers as per its customers' specifications, said after four years of growth in China, annual sales are projected to reach 3.5 billion yuan this year.

Mayn is popular among video game fanatics who make enormous performance demands on their PCs.

"We assemble superb gaming equipment by sourcing top-end hardware from top suppliers such as Dell Inc," said Guo.

Mayn is ready to expand into the Western markets. "But we have no money to support our overseas expansion."

Mayn, he said, has already received two rounds of funding from venture capitals. It is, therefore, very difficult to find fresh rounds of financing from investors. Banks are not an option for firms such as Mayn that have very little, in terms of physical assets like factories, to offer as collateral for loans.

So, Mayn plans to list first on the New Third Board-the National Equities Exchange and Quotations-that has fewer regulatory hurdles than mainstream bourses.

Later, Mayn will turn to ChiNext, China's Nasdaq-style board for tech companies and startups.

Mayn is not alone in adopting this approach. Nelson Li-led Guangzhou Taotall Technology Co Ltd, which offers turnkey solutions for firms seeking to set up online shops, has already listed on the New Third Board.

"But the ultimate goal is to have an IPO in 2018," Li said. "Improving the company's valuation is one reason (for the IPO). The visibility and the money that an IPO generates could help us secure high-quality talent, which is very critical for the company's growth in the long run.

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