Three SOM Alumni Prepare to Launch Chinese Home Shopping Network

LuckyPai, a TV home-shopping company focused on delivering value and quality products in an entertaining format to Chinese consumers, is the entrepreneurial brainchild of three SOM classmates — co-founders Raymond Chang ’96 and Wayne Zhang ’96, CEO and CFO respectively, and Chang Su ’96, COO. Founded in May 2006, the company currently has around 180 employees, with its key operation hub located in Jinan City, the capital of Shandong Province, in northeastern China.

After seeing the success of TV home shopping in many parts of Asia — Korea, Taiwan, and Japan — Raymond Chang, who is also the co-founder and former CEO of GigaMedia (one of the leading internet and media companies in Taiwan) was convinced that China would be the next big home-shopping market. After nearly two years of research and preparatory work, he decided to embark on this new venture. During the initial fundraising stage, Raymond met with Wayne Zhang, who was at the time a partner at CBC, a China-based private equity firm (and who also happened to be Chang's roommate while at SOM). After only a few meetings, Chang and Zhang decided to team up, and together managed to complete their Series A fundraising in approximately six months, raising $15 million from Intel Capital, Lightspeed Venture Partners, and DT Capital. Recognizing the need for someone with a strong retail operations background, they successfully recruited fellow classmate, Chang Su, the general manager of Mont Blanc (China) who, with his extensive retail experience, provided the perfect complement of skills.

LuckyPai’s Ju Jia Home Shopping Channel is the only government-licensed home shopping channel in Shandong, and one of only six nationwide. The Home Shopping Channel will begin broadcasting in May in Shandong — the second richest province in China, with approximately 100 million in population — and will have access to all 10 million cable households in the province. The channel will initially broadcast 16 to 17 hours per day, with six hours of live programming. On offer will be digital goods (including mobile phones, digital cameras, and MP3 and MP4 players), small home appliances, beauty and high-fashion items, household goods, as well as children’s educational items.

The name "LuckyPai" has two meanings in Chinese — to clap and to auction — and, according to Raymond Chang, they would like to make the new network's TV shows more entertaining than the typical U.S.-based home shopping programs: “We chose 'Pai' because we really want our customers to enjoy our programs (clap their hands) and because we also intend to introduce various game-type programs with a key focus on auctions.”

In addition to regulatory challenges and a complicated operational model, one of the key hurdles for Lucky Pai has been a lack of good and convenient payment and delivery mechanisms. Payments in China are still mostly CODs. However, LuckyPai has managed to break through the payment hurdle by offering mobile POS (points of sale), which will allow for payment by credit cards and bank cards upon delivery. Additionally, on the delivery side, they are investing in their own fleet of trucks, with the goal of delivering to all parts of Shandong Province within 48 hours, as the management team believes that this is one of the key requirements needed to achieve high customer satisfaction.

As for future plans, LuckyPai intends to expand to other northeastern regions of China, with the goal of reaching 25 to 30 million cable households within the next 12 to 24 months, and eventually reaching 40 to 50 million households in the next three to five years. Ultimately, LuckyPai hopes to become the largest multi-channel virtual retailer — encompassing TV, online, and mail catalogues — in China.