Author: Pencil Road | Xinxin

Recently, Shanghai Minhang has witnessed a super IPO: Jushuitan has resubmitted its listing application to the Hong Kong Stock Exchange, marking its third attempt at an IPO.

Its core product is an e-commerce SaaS ERP, designed to help merchants achieve cross-platform operations (orders, inventory, etc.) across platforms such as Taobao, JD.com, Pinduoduo, Amazon, etc.

According to Frost & Sullivan, as of 2023, Jushuitan has connected over 400 e-commerce platforms, making it one of the broadest-reaching e-commerce SaaS providers in China with a market share of 23.2%, ranking first domestically. Additionally, Jushuitan's valuation has soared to 6 billion yuan, a 72-fold increase from the 83 million yuan during its angel round in 2015.

So, will Jushuitan successfully achieve its IPO this time?

- 01 -

Jushuitan was founded in 2014. As early as 2009, Luo Haidong, then 31, left his own company, Shanghai Shengxun Technology, to join an e-commerce company, Jiaxing Maibao.

There, he met his future business partners, He Xingjian and Li Cansheng. After four years of experience, Luo Haidong decided to start another venture in 2013, co-founding Jushuitan with He Xingjian, Li Cansheng, and Wang Yu (formerly an Alibaba key account manager).

From its inception, Jushuitan focused on e-commerce SaaS ERP with the goal of empowering e-commerce businesses to automate their operational processes. Eleven years later, Jushuitan has grown into the largest e-commerce SaaS ERP in China.

Jushuitan's main product is JuSaaS ERP, which integrates multiple modules such as Order Management System (OMS), Warehouse Management System (WMS), Procurement Management System (PMS), and Distribution Management System (DMS), covering functions related to orders, inventory, procurement, and distribution.

According to Frost & Sullivan, Jushuitan has served 66,100 SaaS customers of various types, and its products can connect to over 400 e-commerce platforms in China and globally.

- 02 -

Jushuitan operates in the e-commerce SaaS market, an industry that has emerged during the booming era of e-commerce.

Although it is a "traditional industry," its overall growth rate remains high. According to Frost & Sullivan, the Chinese e-commerce SaaS market reached 2.95 billion yuan in 2023 and is expected to grow at a rate of over 20% annually in the coming years.

Jushuitan's primary customer base consists of small and medium-sized enterprises (SMEs) across various sectors such as apparel, footwear, and bags, home products, food and beverages, with the apparel industry accounting for over 40% of its clients.

In addition, Jushuitan's clientele includes numerous e-commerce platform merchants, such as brands and sellers on Alibaba, JD.com, Pinduoduo, and other platforms.

As of the date of the prospectus, the company's total number of SaaS customers has grown from 33,100 in 2021 to 66,100 by June 2024.

- 03 -

Previously, Pencil Road conducted research on SaaS business models, revealing a drawback: when targeting SMEs, it is difficult to scale revenue and achieve profitability. Does Jushuitan face this challenge?

Firstly, it is clear that Jushuitan's primary customer base is SMEs, resulting in a naturally low average revenue per user (ARPU).

If calculated based on the monthly fee per customer, Jushuitan's ARPU is approximately 1,000 yuan and remains stable, with figures of 1,000 yuan in 2021, 900 yuan in 2022, and 1,000 yuan in the first half of 2024.

In the B2B business, an ARPU of 12,000 yuan per year is considered very low. This is true for SaaS companies globally: targeting SMEs poses challenges and profitability is difficult. Acquiring large and small customers takes similar amounts of time, but the ARPU differs significantly.

Furthermore, according to Pencil Road's statistics, the average lifespan of domestic SMEs is only 3-4 years, compared to over 10 years for large enterprises, reflecting a vast difference in marginal benefits.

Jushuitan's income statement also reveals this issue. In 2021, revenue was 433 million yuan with a net loss of 254 million yuan; in 2022, revenue was 523 million yuan with a net loss of 507 million yuan. In the first half of 2024, there was some improvement with revenue of 421 million yuan and a net loss of 60 million yuan.

- 04 -

Amidst the losses, this sector also faces fierce competition, both domestically and internationally.

For example, Guangyun Technology also provides services such as e-commerce ERP, customer service robots, and intelligent marketing, widely used by SMEs. Its "Kuaimai ERP" product directly competes with Jushuitan.

Weimob offers a series of digital business solutions, including SaaS products, precision marketing, and social e-commerce, with a notable advantage in the WeChat ecosystem.

Huice (Wangdiantong) specializes in providing e-commerce ERP solutions for medium to large e-commerce enterprises, offering functions such as order management, warehouse management, and financial settlement—a distinct positioning from Jushuitan.

Over the past three years, Jushuitan's revenue and net profit have fluctuated. Revenue grew from 433 million yuan in 2021 to 691 million yuan in 2023. However, losses were also considerable, totaling approximately 254 million yuan, 507 million yuan, and 490 million yuan, respectively, amounting to a cumulative loss of 1.251 billion yuan over three years.

The primary cause of these losses lies in the significant increase in sales and marketing expenses: from 235 million yuan in 2021 to 344 million yuan in 2023, exceeding half of the revenue for the corresponding periods.

Despite Jushuitan's financial challenges, considering that global SaaS companies typically take about 15 years from investment to profitability, and Jushuitan has been established for less than 10 years, there is still considerable potential for turning losses into profits.

This article does not constitute investment advice.