Zhangshang Fucai Raises RMB 20 Million Angel Round from Source Code Capital and Buhuo Ventures

源码资本·October 19, 2017·0·0

B2B building-materials marketplace Zhangshang Fucai recently raised a RMB 20 million angel round from Source Code Capital and Buhuo Ventures. The funding will go toward acquiring seed users, validating its business model, and boosting sales.

Zhangshang Fucai, a B2B e-commerce platform for construction finishing materials, recently raised a RMB 20 million angel round led by Source Code Capital and Buhuo Ventures. The funding will primarily go toward acquiring seed users, validating its business model, and boosting sales.

Zhangshang Fucai founder and CEO Chengkun Xue told 36Kr that, in simple terms, Zhangshang Fucai aims to be the JD.com of the construction finishing materials space.

Building materials fall into two main categories: primary materials and finishing materials. When homeowners renovate, they typically make direct decisions about primary materials they can see and touch — things like tiles, doors and windows, toilets. But for the invisible finishing materials — electrical wiring inside walls, plumbing pipes, paint, tile adhesive — decisions usually fall to the construction foreman. Because finishing material quality directly affects the homeowner's living experience and whether rework will be needed, foremen tend to be cautious when selecting these products.

Currently, China's finishing materials market is largely served by traditional home improvement building materials markets. But these traditional markets create real pain points for foremen:

Quality hard to guarantee: Foremen care deeply about finishing material quality, because if subpar materials lead to rework after completion, the construction team loses money. Yet building materials markets are chaotic, with wildly uneven product quality. This makes it costly for foreman teams to screen and verify products.

Inefficient logistics: Building materials markets tend to be in remote locations. Logistics drivers typically wait for business at the market entrance, leading to long idle periods. Plus, return trips are usually empty, making transportation inefficient. Beyond that, once materials reach the construction site, there's often the problem of hauling heavy loads upstairs — requiring foremen to find extra help, wasting time and affecting construction schedules.

Zhangshang Fucai's core customers are these foremen. The platform operates on a B2B self-run model: it purchases over 1,000 common construction finishing materials directly from manufacturers or first-tier suppliers into its own warehouses. After users place orders through the platform's WeChat public account, app, website, or 400 hotline, Zhangshang Fucai dispatches a professional team to confirm product details, pricing, and specifications. The platform then ships from its own warehouse, handles logistics, and delivers materials directly to the specified construction site before processing payment. Xue said that by connecting directly with factories, all products come with original manufacturer quality test reports, ensuring quality. The shorter supply chain also makes quality control easier. Meanwhile, the platform model enables order consolidation and optimized logistics routing, significantly improving delivery efficiency. Payments flow through the platform, which typically settles with factories on payment cycles of two weeks or more.

Xue told 36Kr that Zhangshang Fucai officially launched on September 15 this year. The platform has already processed several hundred orders, with an average order value around RMB 2,000 and a current repurchase rate of 46%.

The platform currently works with nearly 100 upstream factories and several dozen first-tier suppliers. Logistics is handled by third-party logistics partners and long-term contracted drivers. The platform operates one warehouse in Beijing of roughly 1,000 square meters for inventory, with approximately 1,000 SKUs. Xue explained that the reason they don't use a purchase-on-order model is that a typical order contains 15 or more SKUs, and direct factory purchasing with logistics lead times would be too long. The warehouse inventory model allows the platform to complete delivery within 3-4 hours of a foreman's order.

Data shows China's home decoration market was approximately RMB 1.78 trillion in 2016, with the commercial renovation market around RMB 1.88 trillion. Finishing materials typically account for about 10% of total renovation costs. If Zhangshang Fucai's product range covers the long tail of both home and commercial finishing materials, the total addressable market would be roughly RMB 300 billion.

Currently, Zhangshang Fucai mainly profits from the spread on finishing materials. Xue told 36Kr that because upstream construction finishing material channels are fragmented and overcapacity is common, suppliers have limited bargaining power. Going forward, Zhangshang Fucai is considering working with upstream factories on OEM production to build its own finishing materials brand.

B2B platform models differ from B2C platforms. Because product attributes are difficult to explain through web pages and customer service alone, enterprise customers generally need professional consultation before purchasing — especially for specialized, non-standard products in construction and renovation. For example, converting a wall to a soundproof wall: how many bags of soundproofing cotton are needed? What type works for different wall surfaces? These require platform staff to work directly with B2B clients. B2B customers also value service quality when choosing platforms. And foremen are a relationship-oriented group, typically gathering and sharing information through hometown networks. So customer referrals generated through platform service outperform advertising. This means that if major e-commerce players like JD.com or Tmall want to enter this industry, they'd need to build vertical service systems from scratch. But if giants do take a serious interest in construction finishing materials, rather than building their own self-run platforms, they'd be more likely to acquire existing players in the market. So there should still be considerable startup opportunity in vertical sectors like home improvement and finishing materials.

Xue also told 36Kr that what Zhangshang Fucai is doing essentially replaces traditional finishing materials purchasing channels. The market itself is massive and fragmented, with room for many similar companies. No single enterprise can capture too much market share, so the rise of more B2B platforms like this is actually a positive for market education and industry transformation.

Xue believes that at its core, the Zhangshang Fucai platform is a heavy-operations business, so its core competitive advantage ultimately lies in the team. Xue himself is a serial entrepreneur, having co-founded PPzuche and served as CTO, with experience spanning technology, product, user operations, marketing, corporate strategy, and new business incubation. He previously worked as a R&D engineer at Baidu and as Director of Product and Technology at Mozat (Singapore). The other two co-founders were both VPs at PPzuche, with backgrounds in product, data, and user operations at major companies including Tencent and Baidu. The team has strong accumulated experience and resources in entrepreneurship.

Lyu Yuemei, Vice President of Investment at Source Code Capital, an investor in this round, said: "The finishing materials industry is at a stage ripe for transformation. New models can create significant operational value, gross margins are sufficiently large, and no strong brands have yet emerged. We're very optimistic about Mr. Xue's team capabilities and experience being applied in this industry."

Li Zhujie, Partner at Buhuo Ventures, commented: "The multi-layer trading structure in finishing materials stems from information asymmetry and the difficulty of managing warehousing and logistics. The industry overall has large market space and high gross margins. Mr. Xue has rich entrepreneurial experience, and the entire team has strong capabilities in both entrepreneurship and execution. We believe Zhangshang Fucai can succeed in this space."

Zhangshang Fucai currently has a team of 35 people, responsible for procurement, sales, logistics (warehousing + delivery), and product (app, WeChat public account, and the backend ERP system).

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