Just as investors suddenly realized that Meituan's moat may not be as deep as they imagined, another O2O company has knocked on the door of the Hong Kong Stock Exchange.
On January 29th, WoodPecker International INC (referred to as &#34;WoodPecker Repair&#34;) submitted an application to the Hong Kong Stock Exchange for a main board IPO, with CICC and CMB International as its joint sponsors.
According to Zhaoshi Consulting, the total transaction volume of China's home repair market in 2022 is about RMB 669.5 billion. As the Chinese housing market becomes saturated, the demand for repairing old houses and appliances is growing.
Currently, WoodPecker Repair is the largest home repair platform in China, with a total transaction volume of approximately RMB 1.46 billion in 2022, a year-on-year growth of 47.5%. As of the first three quarters of 2023, WoodPecker Repair is still the largest home repair platform in China, with a total transaction volume of RMB 1.79 billion, a year-on-year growth of 65.7%.
From 2021 to the first three quarters of 2023, WoodPecker Repair achieved revenues of RMB 401 million, RMB 595 million, and RMB 735 million, and net profits of RMB 33.43 million, RMB 6.2 million, and RMB 102 million, respectively. In the first three quarters of 2023, WoodPecker Repair's net profit margin reached 13.86%, compared to Meituan's 5.62% during the same period.
Similar to Meituan and Didi, WoodPecker Repair also operates a two-sided business, but it is even more difficult to accumulate scale advantages.
On the one hand, compared to high repurchase rates in the food delivery industry, on-site repair is more of a one-time transaction with a higher average order value but lower repurchase rate. In the first three quarters of 2023, WoodPecker Repair's average order value exceeded RMB 250.
On the other hand, the work of on-site repair technicians is not something that any young person who takes off their long shirt or an optimized employee of a large company can do. Each engineer can only cover a limited area, naturally limiting the number of orders they can handle.
As of the first three quarters of 2023, WoodPecker Repair has trained a total of 57,000 engineers, accounting for only 2.4% of the long-term workforce of 2.04 million engineers.
In this attempt to IPO on the Hong Kong Stock Exchange, WoodPecker Repair plans to use the funds raised for diversified services, expanding its service scope, engineer recruitment, upgrading its digital platform, increasing brand exposure, establishing strategic partnerships, investing or acquiring suitable targets, and supplementing working capital.
<h2>Multiple Bets from Lei Jun and Yao Jinbo</h2>
WoodPecker Repair has experienced both the era of brutal growth of O2O companies and the winter of closures that began in 2015.
After difficult development, WoodPecker Repair has received significant investments, with notable support from Shunwei Capital and 58.com, which also have significant related transactions with the company.
In 2017, Xiaomi Group's subsidiary Tianjin Jinmi Investment Partnership Enterprise (Limited Partnership) (&#34;Tianjin Jinmi&#34;) and Lei Jun's Shunwei Technology Venture Investment Partnership Enterprise (Limited Partnership) (&#34;Suzhou Shunwei&#34;) participated in WoodPecker Repair's Series A financing at a price of RMB 4.77 per registered capital.
In 2020, 58.com's subsidiary, Hunan Wubaqianmo Equity Investment Fund Partnership (Limited Partnership) and Wubai Limited participated in Series B financing at a price of 22.46 yuan per registered capital.
In 2021, Wubai Limited participated in Series B+ financing at a price of 25.38 yuan per registered capital.
On January 4, 2024, Astrend, a subsidiary of Lei Jun's Shunwei Capital, participated in Series C financing at a price of 17.27 yuan per registered capital.
As of now, Yao Jinbo's 58.com holds a combined stake of 16.42% through Dream Landing Holdings Limited and Tianjin Wubaqianmo. Astrend, Suzhou Shunwei, and Tianjin Jinmi, under Lei Jun's Shunwei Capital, hold a combined stake of 9.84%.
It is not surprising that 58.com actively participates in the financing of Zhumu Bird Repair, as they have been a supplier to the latter since 2017. In 2022, 58.com ranked as the fourth largest supplier to Zhumu Bird Repair.
In 2021 and 2022, Zhumu Bird Repair made purchases of 26.43 million yuan and 24.50 million yuan respectively from 58.com and its affiliated company, Tianjin Haodaojia Information Technology Co., Ltd., accounting for approximately 22% and 16% of the annual traffic purchase amount.
Among other external institutional investors of Zhumu Bird Repair, Xiao Qingping, a director of Zhumu Bird Repair, holds a 7.62% stake in the New Third Board-listed company, ZST (430093.NQ). The presence of Chongqing State-owned Assets and Hunan State-owned Assets is also evident.
Currently, Zhumu Bird Repair's founder, Wang Guowei, his sister Wang Yuhua, and the trust entities and company equity incentive platform controlled by them have formed a concerted action group, collectively controlling 55.32% of Zhumu Bird Repair's equity as the controlling shareholder.
<h2>How to integrate the &#34;non-standard&#34; market</h2>
From the financing prices of Zhumu Bird Repair between 2021 and 2024, its valuation has decreased by 30%.
This is influenced by both the cooling trend in the primary market and cautious estimation of Zhumu Bird Repair's growth prospects.
After all, the current landscape is different from the past, where there is no longer a large amount of US dollars pouring in to fuel the &#34;ride-hailing war&#34; or the &#34;war of a hundred groups&#34; for scale expansion.
Compared to Meituan and Didi, Zhumu Bird Repair faces greater challenges in operating a bilateral market.
An undeniable reality is that the foundation of the repair market still lies offline. Until 2022, the online penetration rate of household repairs in China was only 12%, but it has grown significantly compared to 3.2% in 2018.
Because repair services are not as frequent as food delivery and ride-hailing, burning money may not necessarily lead to economies of scale. Compared to food delivery and ride-hailing, repair services are more like &#34;one-time transactions&#34;.
According to a third-party survey in 2021, more than half of Zhumu Bird Repair users only place orders 1-2 times a year, and the repurchase rate is not high.
During the fulfillment process, there are many challenges such as non-standard processes and opaque pricing for both parties involved in the transaction. The standard for measuring food delivery is convenience and efficiency, while the standard for online ride-hailing is the timely response brought by a sufficient number of operating vehicles. However, due to the variety and mix of home repair types and brands, the repair service faces the challenge of being non-standard and difficult to quantify.
Similar to common O2O models, the business model of Zhumu Niao Repair is to match &#34;consumers with repair needs&#34; with &#34;engineers registered on the platform&#34; through an online platform, with Zhumu Niao Repair taking a commission of about 40% as revenue.
The key to Zhumu Niao Repair's rapid growth lies in scaling up on both the user and engineer sides, standardizing processes in the non-standard repair service market, and achieving economies of scale.
On the user side, on the one hand, Zhumu Niao Repair promotes user activation and acquisition by increasing marketing efforts to increase scale. From 2021 to the first three quarters of 2023, its sales and marketing expenses were 178 million yuan, 290 million yuan, and 318 million yuan, accounting for over 40% of revenue. Nearly 40% of these expenses were used to purchase traffic and advertise.
On the other hand, information asymmetry and opaque pricing are industry &#34;chronic diseases&#34;. In the 2019 CCTV 3.15 Evening Gala, it was reported that some after-sales service providers used various means to sell high-priced accessories and auxiliary materials during the free installation of home appliances, earning high commissions.
In 2020, Zhumu Niao Repair launched a &#34;repair pricing calculator&#34; that provides quotes based on the product category, brand, and fault of the repair, making the pricing more transparent compared to the &#34;price gouging&#34; behavior that exists in repairs.
On the engineer side, in order to achieve service standardization, Zhumu Niao Repair has established 400 engineer stations nationwide to provide professional training for cooperating engineers, and sells parts used in the service process to engineers.
However, the volume of the parts sales business is relatively small. In the first three quarters of 2023, Zhumu Niao Repair's product sales revenue from the parts sales business was approximately 66.92 million yuan, accounting for less than 10% of total revenue.
As of now, Zhumu Niao Repair has served 15.5 million users and trained 57,000 engineers. However, the number of engineers accounts for only 2.4% of the long-term employment of 2.04 million engineers.
In terms of pricing, Zhumu Niao Repair has always been relatively expensive. From 2021 to the first three quarters of 2023, the average order value of Zhumu Niao Repair has increased year by year, from 231.8 yuan to 254.4 yuan.
For engineers, compared to delivering food or driving for ride-hailing services, the threshold for Zhumu Niao Repair is higher and the treatment is not better. Engineers who sign contracts with Zhumu Niao Repair can only earn 60% of the total order amount, with the remaining 40% being taken as a commission by the platform.
Based on an estimated average of 18,423 active engineers per month on the platform, a GMV of 1.46 billion yuan in 2022, and 60% of the amount received, excluding taxes, social security, and other factors, the average annual income per Zhumu Niao engineer is approximately 47,600 yuan.
According to the &#34;2023 Research Report on Employment of Blue-collar Workers in China&#34; released by the China New Employment Forms Research Center, the average monthly income of delivery drivers is about 6,803 yuan, with an annual income of about 81,600 yuan, which is higher than that of Woodpecker engineers by about 70%.
However, in the external publicity of Woodpecker Maintenance, some maintenance personnel seem to have higher incomes. They have claimed that the average monthly income of maintenance personnel in first- and second-tier cities is around 10,000 yuan, and the highest-earning individual can even earn nearly 30,000 yuan per month.
According to the prospectus, in order to ensure service quality, Woodpecker Maintenance engineers are required to pay a service quality guarantee deposit to the platform. As of the first three quarters of 2023, Woodpecker Maintenance has received a balance of 105 million yuan in warranty deposits from engineers. Based on the average monthly active engineers of Woodpecker Maintenance in the current period, which is about 18,400, the average amount paid per person is about 5,700 yuan.
Furthermore, Woodpecker Maintenance has been found to have unpaid employee social security and housing provident fund contributions. From 2021 to the first three quarters of 2023, Woodpecker Maintenance has made retroactive payments of 5.6 million yuan, 6.6 million yuan, and 5 million yuan respectively.
In an official video on Woodpecker Maintenance's video platform, there is a content that states that whether one has failed the civil service exam, the postgraduate entrance exam, or is middle-aged and unemployed, they can all successfully join Woodpecker Maintenance.
However, before joining, prospective engineers may need to ask whether there is enough demand in their local area to support them in decent &#34;manual labor&#34; jobs. After all, in most cities, the majority of repair needs are taken care of by local hardware stores, without the platform taking a significant 40% commission.

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