It has recently emerged that Chen Tao (陈涛), founder of Chinese ecommerce SaaS ERP company Centaur, (圣特尔)has a new identity – Buddhist monk Bodhi. Centaur, founded in 2004, developed China’s first SaaS-based ecommerce ERP system EDianbao (E店宝) in 2006. EDianbao handles functions including order processing, product & inventory management, warehouse management, CRM, call centre for sellers as well as larger ecommerce enterprises. 

The timing of Centaur’s founding was opportune – Taobao was launched by Alibaba a year earlier in 2003, leading a surge of ecommerce growth in China and corresponding growth in the number of sellers. 

For a moment, Centaur and EDianbao seemed to be doing very well. EDianbao started an official partnership with Taobao in 2008, and Centaur became the first venture-funded ecommerce ERP developer in 2009. 

In 2010, EDianbao completed integration with JD, Amazon, Dangdang and other leading ecommerce platforms. In 2011, top VC firm Sequoia China (now called Hongshan after the firm’s split) made an investment into Centaur. 

As ecommerce continued to boom in China in the 2010s, Edianbao’s fortune took a turn for the worse. In 2020, it emerged that Centaur had run out of cash and abruptly shut down, leaving thousands of sellers rushing for their data and cash deposits. 

Centaur charged each seller between CNY5,000 to CNY 20,000 (US$700-2,800) deposit, and an annual service fee of CNY10,000 (US$1400) and above, depending on the features and needs. 

As the ecommerce sector continued to be disrupted since the pandemic, EDianbao was quickly forgotten, as sellers, manufacturers and service providers rushed to leverage new platforms (e.g. Douyin, Pinduoduo) as well as cross border. 

SaaS is a perfect illustration of “involution” in China 

While there were probably many leadership and management issues leading to Centaur’s shut down, the macro landscape did not help either. 

It is well known that SaaS (or business software) startups are particularly difficult to monetise in China – clients often ask SaaS companies to have very comprehensive feature sets, but are unwilling to pay the corresponding fees. This is particularly true in the ecommerce sector, where things evolve very fast, always demanding new features, capabilities and plug-ins. 

And if you find it hard to monetise on SaaS and decide to go enterprise, counting State-owned-enterprises (SOEs), all the best. SOEs can often afford to give very large contracts (a friend of ours once got a software customisation contract of US$12.4 million) – however these contracts come with a lot of strings attached: on premise development, very strict data security requirements, delayed payment, and sometimes poaching your employees during the project. 

A lot of analyses have been done on why building SaaS is so difficult in China, often citing the above-mentioned ‘client unwilling to pay’ as the key reason. 

The deeper reason, however, is a simple supply demand equation. For sectors such as ecommerce ERP, there are thousands of developers competing for the large yet limited client pool (of sellers). 

As many suppliers are not able to differentiate themselves meaningfully from others in product, they resort into price competition, slashing the fees while offering more features, worsening the margins of the whole sector. 

According to an EY analysis of the financials of 22 China-based SaaS companies in 2022, while most of these companies had improved gross margins to above 50%, the high sales & marketing (i.e. customer acquisition) cost and high R&D costs (i.e. more features and customisation) meant overall profitability remained dismal. 

Both high costs are a result of the competition mentioned above. 

This is exactly what is happening in many sectors in China, where growth of suppliers outpace growth of demand. The notorious term of “Involution” (“内卷”) which you hear from almost every working professional in China, describes exactly that – a lot of extra effort for very little marginal return. 

There is hope?

Not everyone is losing hope, though. Publicly listed Glodon Co, a developer of software tools for the basic construction industry, now has a market cap of CNY16.85 billion (US$2.33 billion) and a P/E ratio of 144. The company has developed real product expertise in the particular sector that no other competitor can match. 

In the ecommerce sector, while general ERP companies are mostly struggling, cross-border focused big players such as Dianxiaomi(店小秘)are still advancing. Dianxiaomi has also launched a number of software tools for different regions, such as BigSeller for Southeast Asia. There is also Superbrower, a lightweight tool that provides a secure and easy-to-manage web interface for cross border sellers which, according to people familiar with its finances, is a “very profitable cash cow”. 

The key is differentiation and sometimes focusing on a niche. We know a number of ecommerce ERP players that are doing well by serving customisation needs of 20-30 medium sized clients. Such software teams are small, nimble and cost-efficient (they do not have to develop and maintain large feature sets). 

There is also another take. BaiYa (白鸦), the famously outspoken founder of listed ecommerce SaaS company Youzhan (有赞), shared on his social media that Edianbao was the first ecommerce ERP that was willing to connect with Youzhan. 

He added: “SaaS founders please be daring to march ahead. Who said SaaS in China has no exit route? There are many exit routes (such as becoming a monk).” 

As for Chen Hao n.k.a. Bodhi, he now tours around, giving blessings and lectures. Two SaaS founders we spoke to last weekend said “I am truly envious of him, being able to find inner peace.” 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].


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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.