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Cereal success: How an online startup conquered a niche market

Taiwan’s e-commerce sector recorded a brief downturn in the first six months of 2017 before a dramatic rebound in the second half of the year

(Photo courtesy of shixugang/PIXABAY)
E-commerce company Morning Shop achieved annual revenues of more than NT$200 million (US$6.89 million) by using data analysis to boost repeat purchase...

(Photo courtesy of shixugang/PIXABAY)

E-commerce company Morning Shop achieved annual revenues of more than NT$200 million (US$6.89 million) by using data analysis to boost repeat purchase...

Taiwan’s e-commerce sector recorded a brief downturn in the first six months of 2017 before experiencing a dramatic rebound in the second half of the year. Many e-commerce companies logged impressive yearly revenue results, with a number of them registering their highest-ever annual returns.

This competitive industry is marked by an intense rivalry between two large firms: Taiwan-based PChome Online Inc. and Singapore-headquartered Shopee. The rapidly evolving sector also provides plenty of opportunity for audacious enterprises, however. Amid last year’s chaotic e-commerce landscape, a new team quietly emerged to capture annual revenues in excess of NT$200 million. That team was Morning Shop.

The company was co-founded in 2015 by current CEO Jeffrey Wu, marketing honcho Chris Chen and operations manager Jake Tseng with the goal of bringing the healthiest and highest quality cereal and granola products from around the world to local consumers.

Wu, 33, who graduated from the Department of Electrical Engineering at Taipei City-based National Taiwan University, had long dreamed of establishing an influential company. During college, he participated in business development competitions and worked as an intern at a U.S. startup. After he finished his military service, his enthusiasm for starting his own company had not waned. In time, his entrepreneurial team received sponsorship from local startup accelerator AppWorks.

Learning from Failure
Success did not come quickly or easily for Wu, whose team experienced four failures during their time under AppWorks while attempting to develop mobile applications focusing on restaurant reviews, food delivery and food photography. A turning point came when he launched health care platform iHealth. This was also the time when Chen joined the team.

Initially conceived as a health promotion aid, the iHealth app morphed into a group buying site at the request of users. As the business took off, Wu and Chen found themselves frequently apologizing to other startups at the incubator for filling the hallways with boxes of products awaiting shipment. Despite the limited resources and space, they managed to fulfill all the early orders they received through the app.

Although iHealth ultimately failed, the team learned invaluable lessons from the experience. They discovered that the concept of health products was too general, leading to a divergent customer base and repeat purchase rates of less than 10 percent. Of all their products, cereal and granola attracted the most return customers. In view of this, the team decided to launch a new business centered on these goods.

In 2016, the company’s highest turnover in a single month was NT$20 million. By the following year, this number had risen by 35 percent to NT$27 million. According to the management team, their ultimate goal is to hit NT$400 million. “But there is still a lot of work to be done before we reach that target,” Wu said.

Own-Brand Products
According to Morning Shop estimates, Taiwan’s cereal market is worth NT$10 billion, with U.S.-based Quaker Oats Co. occupying a 50 percent share. Online purchases comprise just 10 percent of Quaker’s turnover in Taiwan, underscoring the largely unexplored nature of the internet market for cereal, granola and instant oatmeal goods, the Taiwan company said. Grasping this opportunity, Morning Shop managed to capture 20 percent of the online cereal market in 2016.

Recognizing the intense competition in the sector, Wu set about creating exclusive products to ensure Morning Shop would continue to stand out from the crowd. The company currently owns two brands of cereal and granola goods. One of these is a collaborative effort with Taiwan farmers to capture local seasonal flavors, such as lychee and black tea.

In order to gauge preferences, the team asked repeat customers for feedback on the flavor profiles of their new own-brand products. The options preferred or adjusted through this process typically ended up among the website’s top 20 best-selling items. “One difference between us and other startups was our appreciation from the very beginning for data analysis,” Wu said, explaining that the team researches the repeat purchase rate of each product.

Morning Shop staff member Gaga Liu, who helped oversee fundraising during the preliminary phase of Morning Shop, said most early investors expressed concern about the potential size of the online cereal market. “However, we’ve consistently sought to extend our product base by analyzing the purchasing habits of our repeat customers.” A top-selling product added to the website through this process was protein powder. This item was included based on an evaluation of the lifestyles of customers, a high proportion of whom like to work out.

Chen said the customers buying either granola or protein powder are mostly between 25 and 30. “When you identify your core target customers, you should expand your business based on the lifestyle habits of this cluster,” Wu said.

Eyeing the International Market
Amid stable business development in the domestic market, the team launched operations in Malaysia during September last year. According to Chen, it took the company just two months to locate business partners and recruit staff in the Southeast Asian nation. “We tend to act quite swiftly once we’ve reached a decision,” he added.

According to Wu, while the path to success has been filled with stumbles, he has managed to build his business by adopting a practical and committed approach. Past failures are the nutrition of future success, he said. “Everything happens for a reason.” (E)

(By Hsiao Yu-pin/tr. by Chiang Pei-ying)
(This article first Nov. 1, 2017, in Taipei City-based monthly magazine Global Views.)

Updated : 2021-09-19 11:12 GMT+08:00