On April 25th, the largest vending machine company in China Ubox published its 2017 finance report. The report says that its annual gain reached 2.1 billion RMB which increased 33.4% compared to last year; Net profit was 118 million RMB which increased 52.1%.
Ubox’s great business performance comes from the income increase in its retailing, display advertising and the new “Mini KTV” service. Among these income increases, retailing takes 61% of the gross income and reached an 11.9% percent growth compared to the year before. Display advertising and other related services increased 65% from last year. The biggest increase happened in the new mini KTV department reaching an income of 195 million RMB which is 196 times of what it was in 2016.
In fact, Ubox’s online business has always been outstanding. Ubox Online had incomes of 818 million, 1.22 billion and 1.58 billion RMB in each of the years between 2014 and 2016. 2015 was its turning point to start getting profit with a net profit of 118 million RMB while it was -123 million RMB the year before.
Ubox Online was founded in 2011 with vending machines as its main business. It covers snacks, bento boxes, and other groceries. It also has other related business including selling equipment, display advertising, equipment rental and mini KTV, etc. As the idea of all-tech self-service retail getting more popular in China, Ubox gained more profit by increasing the number of vending machines and covered area, which also brought in more display advertising opportunities. By last April, Ubox Online has had more than 57,000 vending machines, covering 30 provinces in China, and has become the absolute king of the all-tech self-service retail market.
In February 2016, Ubox Online was listed in NEEQ as the first vending machine company. Shortly after that, Ubox bought out the stock of Xiamen Frontier Company and eventually took control of all holdings. The core business of Xiamen Frontier was Youchang M-Bar KTV which contributed the most to Ubox’s gross profit last year.
Youchang M-Bar is one of the many popular mini KTV booth operating companies in China. These mini KTV booths make the traditional karaoke experience more accessible. You can find these KTV booths in a shopping mall for a short time kill while waiting in line for a restaurant or before the movie starts. These mini KTV booths can also sync your consumption data to your mobile devices for recording, gaming or social media function.
The first mini KTV appeared in China in 2013 which soon became popular among young generations as a product of the need to maximize spare time and the accessibility of mobile payment. Investors are also optimistic in this market. In February 2017, Youchang received a 60 million RMB finance from Ubox Online, while Starcandy MiniKTV also finished all angel, A and A+ rounds of finance within the first 3 months of busineses with a total amount of 150 million US dollars.
As there’s more capital involved in the market, the entire industry of mini KTV is blooming fast. More than 10 mini KTV brands were added into the field last year, including Mida, YY, VR Mini KTV, WOW KTV, Starcandy, Lingda MiniK, etc. According to iiMedia Research’s “2017 China Offline MiniKTV Research Report”, the market scale of the offline miniKTV in China reached 3.18 billion RMB last year which increased by 92.7% compared to the year before. The report also predicted that the market will keep growing and reach 7 billion RMB. Among all the brands in the miniKTV market, Mida was leading with a market share of 38.8%, followed by Youchang and WOW with 33.2% and 12.1%.
Ubox’s self-service terminal has played a crucial role to help Youchang rank second place in the mini KTV market share. Ubox values the potential of the miniKTV market and how well its business model fits Youchang. Mini KTV is another form of self-service terminal providing a karaoke service rather than a physical product. Based on its self-service retail experience, resources and network with other companies, Ubox will help Youchang find more suitable locations for the mini KTV booths and bring it more promotion and cooperation.
On the other hand, Youchang values the online operation by collaborating with Quanmin KTV, an app that runs under Tencent, to take an advantage of Tencent’s huge online database and great social media resources. The two will share their data to connect the social media function with mini KTV. For instance, Youchang KTV users can share a song on Quanmin KTV App easily, and users from Quanmin KTV can reserve a Youchang KTV booth simply by pressing a button in the Quanmin KTV app.
Although Youchang is in a leading position in the market with going from offline to online, it’s also facing a lot of challenges. Right now the mini KTV market in China is very competitive. All brands and companies are trying to take a bigger share of the market by putting in more mini KTV booths. All major cities in China are pretty maxed out on supplies which eventually led to a detour for these companies to dig into third or fourth-tier cities. All these mini KTV booths are also very similar, both on appearance and functions, despite all the different brands and companies. Many brands started to try new things to make their own booths unique. Like VR MiniKTV brought in the VR technology to attract customers; Moyunjian’s miniKTV booths appear on location search so customers can find the booths nearbyMoyunjian also allows customers to make music videos along with their KTV experience.
However, all these miniKTV’s special features are only the icing on a cake, the fundamental functions are still similar. Therefore, right now all the companies are just competing with their ability to control the cost, and how well they can wisely use the resources to operate and promote their products.
Translated by Paris Wu
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