DCM
China

Disney Inks Deal with Greenbox, Chinese eCommerce Is Taking Off

Next Story

Mobile Ad Network Millennial Media Saw Nearly $50 Million In Revenue In 2010

A lot of Americans desperately want to believe that China is full of poor people who can’t innovate, and the only goods they make are cheap, toxic rip-offs our Western brands. They want to believe the only reason the Chinese economy is surging is because the West wants cheap goods and China knows how to make them that way.

These people will hate this post because it’s about a company called Greenbox that flies in the face of those preconceived notions.

Greenbox makes high-end, super-styled kids clothes in and for the Chinese market. It caught the eye of Disney, which reached out to the company to ask if it wanted to manufacture some of their lines. “No thanks,” the company replied. “We’re not interested in just being an OEM.”

Wait, isn’t this China we’re talking about? It’s a country of OEMs.

The mouse house came back with a sweeter offer that’s being announced at a ceremony in China tonight: It has licensed the rights for the princess collection, Mickey Mouse and Minnie Mouse and Winnie the Pooh to Greenbox. The company will design a high-end online collection to be sold online in China, as part of a broad plan to help build hype for the upcoming themepark in Shanghai.

Greenbox was founded more than ten years ago by a designer named Fangfang Wu who started to make clothes for her kids because she was so unhappy with the cheap, boring ones being sold in the country at the time. She obsessed over fabrics, fashion and design and a hobby quickly turned into a business, as she opened a chain of stores, and later closed those stores to sell on Taobao for better margins.

She was one of the top grossing sellers on Taobao as her designs struck a chord as with other young, working women in China who wanted to flaunt their increasingly hip and unique tastes. (I mean, look at that outfit above. It’s like a little Chinese Natalie Wood playing Red Riding Hood. How is that not adorable?) In 2010, DCM’s China office sought her out, investing just over $10 million to help scale the business.

Today Greenbox is bringing in about $50 million in annual revenues on decent margins. She charges between $30-$40 for items— not absurd, but certainly on the higher end for kids’ clothes. “It’s a classic case for venture capital: High gross margins, but takes money to build it to scale,” says Hurst Lin of DCM.

Note I didn’t describe Greenbox as the fill-in-the-blank of China. In fact, I’m hard-pressed to come up with an ecommerce model she’s ripping off from the US. Kids clothes hasn’t been a natural vertical for etailers here, save being an offshoot of a site like Amazon.

The reason Greenbox has worked so well for China is cultural. Because there are so many only children, there are at least six people wanting to lavish them with cute things: The parents, and two sets of grandparents. This was the same insight Tencent tapped into to monetize its virtual goods early on.

So, Greenbox: Not a copy cat, and not the invisible cheap assembly partner for the West either. Welcome to the next stage of Chinese entrepreneurship.

Greenbox is part of a crop of booming ecommerce companies in China. For years, the market has been held back due to the typical challenges of shipping, infrastructure and payment platforms. Jack Ma, of Alibaba, has long said ecommerce would be bigger in China than here, and that’s not just because there are more people. In the US, he calls ecommerce “dessert,” but in China there are so many people underserved by brick-and-mortar retail that ecommerce will be the “main course.”

DCM and other firms have been aggressive backing many new ecommerce players, and they aren’t as simple as just being the Amazon of China. (Although, to be fair, DCM backed one of those too.) Many of these companies, like Greenbox, show a sophistication in appealing to what the Chinese market wants, not simply what’s worked elsewhere.

A surprising vertical Lin seized upon that has never proved lucrative in the US is wine. As incomes soar, many Chinese are developing a taste for Western wine, but have trouble finding interesting vintages and even navigating the language barriers, he says. His bet, YesMyWine, isn’t just an ecommerce play, it’s a content and media play.

He was delighted the PR contact on the call brought up another hot DCM ecommerce company: La Miu, which makes sexy lingerie. I could hear him squirming as he tried to explain– delicately– why Victoria’s Secret failed miserably in China, while more recently La Miu has succeeded.

Victoria’s Secret tried to market to women in their 30s who wanted to be comfortable not sexy. It was a bit too early in China’s consumer revolution and husbands weren’t demanding sexier underwear so ever-practical Chinese women just didn’t see the appeal.

Victoria’s Secret made another mistake that Lin tries to explain as tactfully as possible: Asian women have… different bodies….than Western women.

But La Miu has taken a totally different tact: Marketing underwear designed for the Asian body type to teens. “Born in the late 1990s they are much more a global consumer, they are open-minded and more rebellious,” Lin says. “It’s been a huge success.”

As I’ve written before, China’s ability to be the assembly line to the world wasn’t where its role in the global economy ended; it was where it began. An ability to make products cheaper than anywhere else gave way to an ability to make high end products more nimbly than anywhere else. And increasingly, entrepreneurs like Wu are adding design and brand on top of that to create products the broader world will want.

The first generation of Chinese entrepreneurs was about picking the low-hanging fruit in a massive country just opening up to capitalism. Now the real fun is starting.

(Shameless plug: Join TechCrunch at Disrupt Beijing in October to learn more.)