CRO’s business model may be the best interpretation of JadeValue’s investment philosophy: a great business stems from earning a large number of small amounts of money from the mass market.
In China, there are over 200 million electric scooters on the roads, with 30 million new ones sold each year. With such a demand for electric vehicles in every-day transportation, the number of thefts has also been on the rise. It is common to see people using two locks to protect their scooters, but for a skilled thief, this is not a hard challenge to overcome. In reaction, many people have started to buy cheaper scooters (e.g. under 2000 RMB) or re-placing their stolen scooters with a second-hand one. The frequency of theft is not only a problem for scooter owners, but also for manufacturers and dealers, which are experiencing dropping sales profits.
For two years, Wei Wang had been thinking about how to utilize insurance to minimize the inconvenience caused by theft. He has personally been unfortunate, being a victim to theft of losing two electric scooters and a motorcycle, all of not successfully retrieved by the police. These experiences have given Wang insights into the irritation and troublesomeness brought to people by scooter thieves. He is convinced the most adequate insurance should beneficially serve all stakeholders by providing affordable pricing to customers, timely claim settlement, accurate information to the police and a stepping stone for new market growth for dealers.
However, none of the existing providers comprehensively fulfil these criteria. Current theft insurances available costs between 300 to 500 RMB, but requires a lengthy claim settlement, and is generally unpopular. Scooter owners can also buy a locator (‘tracker GPS’) for approximately 200 RMB, but it simply serves as a hardware device for locating the scooter instead of a comprehensive theft solution.
Prior to founding CRO, Wang was working with a smart-home company where he was responsible for operations of the ‘tracking device, gaining rich knowledge and seeing the large potential demand for electric scooter insurance. After failing to persuade the company management to open a new department for development of scooter insurance, Wang decided to leave and pursue this project by himself.
Wang visited Chengguo Ding, a dealer who had sold an electric scooter to him, who also joined him as a co-founder. Through Ding’s help and introductions, Wang managed to conduct market research by collecting insights from other dealers. Ding runs six stores in Nanhui district in Shanghai, with over 10 years’ experience of selling electric scooters. He was very interested in Wang’s idea, as from his point of view, a tracking device does not give sufficient theft protection. Ding also mentioned that in order to provide and install these tracking devices, dealers would need to pre-pay manufactures, put them in inventory, which is not only capital intensive, but also equals to low gross margins. In addition, customer awareness of the risk for theft, has led them to purchase cheaper electric scooters, reducing dealers profits, as the premium market diminishes. Consequently, there is a need for reasonable priced theft insurance that would enable customers to also consider buying premium scooters.
Most dealers share Ding’s opinions of demand and consumer interest. The electric scooter market has matured with more transparent pricing and severe competition. In order to gain trust and support from the front line sales, Wang has to learn about dealers demands and day-to-day challenges. In China’s dynamic market, dealers have full autonomy in controlling the sales of scooters, from sales of locks, trackers and other accessories, to eventually determining the promotion and timing of the theft insurance. I.e. to launch a theft insurance for electric scooters, Wang need to gain trust and support from both consumers and dealers.
In early stage, Wang invited his friend Xu Zheng to join him, who has many years’ experience as a manufacturing representative of several electric scooter brands. He has a wide dealer network, making him the perfect partner to expand their sales network. Through another friend’s help, Wang managed to obtain instrumental support when an insurance company finally agreed to design the theft insurance product for him. Consequently, the company CRO (“Chief Riding Officer”) was built by the Founder and CEO Wei Wang, and the two co-founders Chengguo Ding and Xu Zheng.
After a year of persistent work, on November 18, 2016, a beta version of the CRO product was released. This innovative ‘new gadget’ theft solution is a combined hardware location device (tracker), and theft insurance product, described below:
1. Dealers receive commission when selling CRO’s products to their customers, but do not need to pre-pay for stocking CRO’s locators;
2. Users access CRO’s Wechat account to quickly activate their CRO hardware to be protected;
3. Users monitor their electric scooters live through CRO’s locator and software, which is included in CRO’s product package;
4. If the user claimed a theft at a police station and was unable to find the scooter within 5 days, PingAn Property Insurance will settle the claim and allocate the claim payment directly to the user’s CRO account;
5. The user can then purchase a new electric scooter immediately, by using his CRO account funds at designated stores.
By integrating dealers, consumers and the insurance company into one eco-system, CRO enables their users to replace their stolen electric scooter with a brand-new one without cost, through affordable insurance. Long term, CRO aims to provide their users with a sense of freedom and security, encouraging them to also purchase premium vehicles without too much worry.
For the product launch, Wang chose three stores in Shanghai to test CRO’s product. Up to this point, more than a 100 people have bought CRO’s product, whereas four have claimed for theft. However, with the help of the trackers and the local policemen, three of the scooters were retrieved. Consequently, only one user entered into the settlement process and successfully obtained a new electric scooter within 5 days after the theft. Through CRO’s service loop, CRO managed to help the users to quickly return to their normal life, and retain them as customers.
At the beginning of 2017, CRO raised angel investment from JadeValue. The company’s next step is to expand in Shanghai as a regional market leader, and become more mature in their operations and management. In JadeValue’s view, CRO market is huge and with massive potential. With a price of 299 RMB, many people could buy it without much hesitation, giving CRO the ability to not only provide an innovative insurance solution, but also the potential to grow as a ‘social service’.
