Carlyle Group invests US$85 million in vending machine operator Ubox to tap China’s evolving e-commerce boom
Carlyle Group, one of the world’s largest buyout funds, said on Thursday it will invest US$85 million in Ubox to help expand the Chinese vending machine operator's network and give consumers a better-quality service.
The deal tesitifies to the enduring power of the world’s second-largest economy in attracting interest from wealthy foreign funds to its booming e-commerce industry.
Carlyle's investment will “further expand [Ubox’s] vending machine network and consumer coverage in China, improve its digital marketing and advertising business, and explore other value-added services for its customers,” a representative of the group told the South China Morning Post by email.
For several years, Ubox’s customers have been able to shop online via its mobile app and collect their drinks or snacks from its network of interactive vending machines, which now number over 30,000 and are spread across 58 Chinese cities.
Ubox said it will use the money to accelerate its online to offline operations (O2O), which involves guiding internet users to convenient physical stores and services nearby.
The American global asset management firm made the investment via its RMB fund, with the support of the Beijing city government.
The deal comes despite the group’s broader move to downsize its investments, which shrank to US$1.6 billion in the second quarter of 2015 from more than double that figure in the year-earlier period.
Ubox is a key player in China’s vending machine industry and is known for its pioneering 020 efforts.
Its interactive machines allow customers to win bonus points, which translate into prizes, by playing games on touchscreens embedded into the physical machines, the company said.
“Over the last four years, Ubox has made a number of innovations to improve the production efficiency and business model of China’s vending machine industry through its internet and online payment tools, thus driving the fast development of the market.” said Ubox Chairman Wang Bin.
As Chinese Premier Li Keqiang put forward his “internet plus” strategy in March, China’s O2O market has rapidly gained momentum.
It is expected to grow 32 per cent this year to 309 billion yuan (US$49.76 billion), according to internet consultancy iResearch.
In a recent industry report, Barclays included this growing market as one of its top five ‘China internet’ trends to watch this year.
China’s new captains of industry have been quick to jump on the O2O bandwagon, especially e-commerce giant Alibaba.
Alibaba operates the massively popular Taobao and Tmall online shopping platforms, and has been on a shopping spree itself this year in a range of industries.
It invested nearly US$1 billion in June on two of its subsidiaries: food order and delivery platform Taodiandian; and Koubei, a crowd-sourcing site that focuses on restaurant reviews and connecting people for apartment rentals.
Tencent, Asia's second-largest internet company after Alibaba, extended its O2O retail service capabilities in China last year after it invested US$100 million in 58.com, dubbed “China’s Craigslist”, and US$300 million in China South City Holdings. The holding company used the investment to launch an O2O platform last August that lets retailers track and analyse customers' preferences in real time.
Wanda Group, China’s largest shopping mall and cinema chain operator, has also established an O2O open platform. It is now being operated on a trial basis in Beijing and Wuhan, the capital of Hubei province. The platform allows customers to shop online, book parking lots and reserve tables in restaurants before heading out to a mall. The group plans to apply the system to its 100 malls nationwide.
Internet and mobile internet usage continues to boom in China, which had 668 million registered internet users as of the end of June. The internet penetration rate on the Chinese mainland has now reached 48.8 per cent, according to the China Internet Network Information Centre.
Nearly nine out of 10 Chinese internet users, or 88.9 per cent, now get online using their smartphones, up from 85.8 per cent last year.