Date
20 September 2017
Property management firms can leverage captive communities to sell various products and services. Photo: Reuters
Property management firms can leverage captive communities to sell various products and services. Photo: Reuters

Harvesting e-commerce from property management

It is certainly a good life for those living in properties managed by Fantasia Holdings (01777.HK), the developer based in Shenzhen.

When a Fantasia homeowner wakes up in the morning, he can open a smartphone application called Colourlife {彩之雲}, browse a list of nearby restaurants and food outlets, pick his menu and make the payment with the app. Within 20 minutes his breakfast is delivered to his home.

The app was launched by Colour Life Services {彩生活}, a wholly-owned property management subsidiary of Fantasia and tipped as the firm’s future pillar of profitability. Indeed, Fantasia chairman and chief executive Pan Jun {潘軍} even asked journalists to describe the firm as a community services provider, rather than a developer. This dovetails with his view that the realty sector is becoming a value trap with soaring land auction prices and product homogenization.

One may reckon that Colour Life may be charging very high rates for its services. But the fact is that, since its foundation in June 2002, the unit has been offering its all-around services to homeowners and tenants free of charge.

So, how can it make money?

The answer: Harnessing the collective purchasing power of homeowners within the communities.

One example is the group-buying of fruits. Pan told NetEase Estate that Colour Life joins hands with e-commerce facilitators and launch such activities on a monthly basis with wholesale prices that are just a fraction of normal market levels. Interested customers can place their orders through the smartphone app. The feedback has been good.

Fruits are directly sourced from the farms and delivered through Fantasia’s own property development and management network to the homeowners’ doorsteps. Without any intermediaries the logistics costs can be trimmed by more than a half and Colour Life can “easily rake in millions of yuan as net profit”, according to Pan.

Colour Life’s overall revenue increased to 185 million yuan (US$29.77 million) last year with an impressive gross margin of 40 percent. Net profit was close to 100 million yuan.

It is said that product categories will be further diversified with more imported foods and daily necessities. Except the group-buying ones, most of the items can be delivered within 30 minutes as they are supplied by shops and supermarkets located within or near the community with Colour Life’s “try first, pay later” offer.

Pan revealed that Colour Life now serves 650 estates in 45 cities across the country with a total area of over 100 million square meters. The firm hasn’t given the exact figure of the total population living in these communities but some analysts put the number at no less than 600,000.

The use of smartphone app and other information technologies also helps Colour Life get smarter in cost control as labor cost now accounts for 60-70 percent of the property management expenses.

Homeowners can now lodge their inquiries and complaints or make reservations for repair work though the app and all the information can be simultaneously shared by all Colour Life employees within the same city. Instead of having repair staff stationed at all of its estates, Colour Life now only needs one maintenance team in one city to stand by and send it to the place where something needs to be repaired, the 21 Century Business Herald reports. Gardening and cleaning are also outsourced to third party companies.

Already, numerous similar free-to-download community services apps have come onto the market, with some of them designed for use at estates managed by different firms. Colour life, therefore, needs to actively defend its turf.

Many Colour Life employees are now asked to pay doorstep visits to all homeowners to promote the app, demonstrate various functions and convince clients to make it the their favorite e-portal. National Business Daily notes that the number of active app users is now over 100,000.

No one can resist the free offer especially when it is a common phenomenon in China that many homeowners do not like to pay for property management services. Colour Life’s zero-charge pledge is thus a killer offering that allows it to swallow rivals and expand its market share — over 30 smaller property management firms have been acquired in the recent past. As of now, almost 90 percent of Colour Life’s managed estates have not been developed by Fantasia.

Colour Life is finalizing the work for a separate listing in Hong Kong. The funds raised will be used to deepen the IT applications and for more takeovers. Fantasia already has two financial arms — Guilin Hehenian {桂林市合和年} Microcredit Co. and Shenzhen Qianhai Fantasia Financial Services Co. It’s likely that micro loans will be an important business and income source.

Praise and progress notwithstanding, Colour Life is still too small in size compared to Fantasia’s realty development business. Colour Life’s lofty goal of getting 40 million homeowner clients in 100 cities with an annual community spending of 800 billion yuan by 2020 is somewhat distant, right now.

– Contact the writer at [email protected]

RC

EJ Insight writer

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