KK Group, a Chinese online-to-offline new retail business rebranded from “KK Guan,” has raised 1 billion yuan ($142 million) in a Series E round of financing, about eight months after the company entered the unicorn club at a valuation of over $1 billion.
The investment comes as China’s economy gradually recovers and consumer demand revives after the easing of coronavirus-related lockdown measures in one of the world’s largest consumer markets, although it could still take months for the activity to return to pre-crisis levels.
The pandemic has “further polarized” the Chinese fundraising market as top consumer brands are roping in more consumers and capital, while average players are struggling to survive, Michael Zhang, partner of BA Capital, told DealStreetAsia. Shanghai-based BA Capital, an investor in the Series E round, exclusively invests in consumer brands.
The Series E round, which was first covered by Chinese-language information platform 36Kr, was reportedly led by CMC Capital Group, a Chinese equity investment fund specialized in media, technology and consumer field.
Other investors in the round include Beijing-based asset management company Hongtai Aplus (an existing investor), and INCE Capital Partners, a fund led by JP Gan, a former managing partner at Chinese venture capital major Qiming Venture Partners.
Although BA Capital confirmed its investment into the billion-yuan deal, CMC Capital Group declined to comment and KK Group did not immediately respond to DealStreetAsia’s inquires.
KK Group, founded in 2014 and operated by Guangdong Kuaike Electronic Commerce, provides imported products through its online and offline platforms. The company mainly generates revenue from offline stores while using online channels, such as a branded mobile app and WeChat mini-programme, to display and promote products, creating an online community for customers to share reviews and boost sales.
The company manages three brands, including “KK Guan,” which mainly delivers imported snacks and skincare products, and two new brands introduced in May 2019, namely a lifestyle chain “KKV” and cosmetics business “The Colorist.” As of October 2019, the company has set up hundreds of brick-and-mortar stores in over 70 cities in China, such as Beijing, Shanghai, Guangzhou, Shenzhen and Wuhan.
The offline retail model usually has “a higher entry barrier” than the online retail model, like KK Group’s anchor stores, which are all “carefully chosen” and located in shopping malls, said Zhang. “The operation of such kind of large chain stores creates an even higher barrier in the shopping mall ecosystem, representing more value in the future.”
Zhang said that in the next two years, KK Group will focus on stepping up its efforts to expand the number of branded chain stores in prime shopping malls nationwide. He said that the company is now “very close” to reach positive cash flows.
After the Series E round, Guangdong-based KK Group has collected nearly $300 million in the recent two years. It reached the unicorn valuation in October 2019 after it closed $100 million in a Series D round led by the Electronic World Trade Platform (eWTP), an initiative proposed by Alibaba co-founder Jack Ma in 2016.
Its returning investors, Beijing-based venture capital company N5Capital, Matrix Partners China, and Shanghai-based equity investment firm Black Algae Capital poured money into the new round.
In March 2019, the company raised 400 million yuan ($57 million) in a Series C round. It also closed 70 million yuan ($10 million) in a Series B round in April 2018 and 100 million yuan ($14 million) in a Series A round in July 2017.