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IPO is the next step, Pinkoi, Sequoia backed “NEXT BIG” startup, sells original design products to 93 countries
Pinkoi, a Taiwanese e-commerce platform for original design products from independent designers, is certainly the first-choice online marketplace for picking gifts. Every brand that wants to list products on Pinkoi has to make an application and go through a strict screening process, and merely 10% of brands pass it. This process maintains the prime product quality on Pinkoi and creates positive word of mouth.
Last year, Taiwan National Development Council selected Pinkoi as one of the “NEXT BIG” representative startups that are taking Taiwan’s startup scene to the next level.
Peter Yen, Pinkoi co-founder and CEO, describes Pinkoi’s winning formula as follows:
“Originality and innovation are Pinkoi’s keys to success. We have been recruiting original design brands around the world to diversify the products on Pinkoi and updating the AI systems to create new business models.”
Evolution of Pinkoi
Since its inception in August 2011, Pinkoi has sold over 12,000,000 original design products and has expanded into 93 countries with 32,000 brands available and more than 5,000,000 active members across the world. Besides, Pinkoi’s volume of orders and of members have sustained double-digit growth since 2011.
In 2015, Pinkoi secured a US$9 million capital investment from Sequoia Capital and then started its expansion into international markets such as Hong Kong, Thailand, and Japan by recruiting original design brands in the global market and setting up offices overseas to deliver localized marketing plans. According to Pinkoi’s sales performance, over 65% of brands have ever taken cross-border orders.
Furthermore, Pinkoi launched IP collaboration plans with several international IPs such as miffy and SNOOPY.
Implementation of Unique AI-based Recommendation System
In 2020, Pinkoi launched a new paid function “Pinkoi Ads”, which is an AI-based recommendation service available to all sellers on Pinkoi. This function automatically generates and provides performance reports to sellers, allowing them to analyze how much benefit they can get from each campaign. In merely 2 years, this new SaaS (Software as a Service) business model has contributed more than 20% of Pinkoi’s revenue. Pinkoi expects that the figure will rise to 40% in the next 5 years.
Since 2016, Pinkoi has already invested tens of millions of capital in researching new AI technologies to develop a “non-linear recommendation model”. This unique model divides the information of products and of users into hundreds of factors, including styles, colors, etc, to identify users’ preferences. After implementing the model, the click-through rate of recommendations on Pinkoi has boosted by 50%, increasing not only reach but also the conversion rate.
Even though the AI-based recommendation model had become a necessary and common function for e-commerce platforms, Pinkoi drained its energy while developing its model. “Pinkoi’s customer profile is specific,” explained Yen. For instance, the average page views per user on Pinkoi is more than 10 pages, which is 4-5 times more than the number on other e-commerce platforms. The phenomenon shows that the users on Pinkoi spend much more time online shopping to explore creative and new products beyond their expectations.
As a result, the AI-based recommendation model for Pinkoi has to be “non-linear” so that it can recommend cross-category products that users may be interested in and bring surprises to users during online shopping on Pinkoi. However, developing this non-linear model for Pinkoi is not easy. Yen admitted that the preliminary results were frustrating: low click-through rate and low algorithmic efficiency. Specifically, only 3 people out of 100 received the recommendations.
Pinkoi’s Special Non-Linear Recommendation Model
After continuous optimization, this unique “non-linear recommendation model” finally went live on Pinkoi 4 years later. With this new system, Pinkoi can precisely analyze user preferences and then recommend users cross-category products, helping users reach diverse products. For instance, camping gear might show up in your recommendations on Pinkoi after you bought a mug cup.
However, will this new business model lower the exposure of small brands, which often have low marketing budgets, while the bigger ones get more exposure by investing more in this new service on Pinkoi? The answer is a big NO. “The budget invested by each brand is not the only factor in Pinkoi’s AI recommendation model,” said Yen. As mentioned, the system contains hundreds of factors such as colors and styles, ensuring that each product will have the same chances to be recommended as long as it is of high quality and original.
Pinkoi’s International Strategies
In addition to the new business model development, international expansion is also crucial for Pinkoi. As of now, cross-border orders account for 40% of orders on Pinkoi. Among the 5 major markets in the world, Taiwan, Hong Kong and Macau, and Japan are the most important ones for Pinkoi, taking more investment in both recruitment of local original brands and marketing in the local consumer markets. On the other hand, Pinkoi decided to not spend any other marketing budgets in the local consumer markets in Thailand and China from 2019, concentrating the existing capital, human resources, and time on markets with higher demands for original design products.
The differences among consumers in different countries are also one of the reasons why Pinkoi changed its international strategies. For instance, the consumers in Thailand and China don’t welcome high-priced original design products, but the designers in these two countries both contribute endless creative and fresh products to Pinkoi. Pinkoi therefore ceased budgeting for localized marketing but focuses more on recruitment of local original design brands; As for Japanese consumers, they are the pickiest. “Japanese consumers have higher standards for product quality and design,” shared Yen, “and we have to meet their expectations in each detail, such as fonts and colors used in every corner.”
Any plans in other countries? “South Korea and several cities in China are under consideration,” said Yen, “but it depends on a variety of circumstances.” Interestingly, Europe and America are not in Pinkoi’s plans. “The design industry has developed for over a hundred years in Europe and America, while in Asia it is still in the early stages, which contain more potential.”
However, to gain a stable footing in international markets, what are Pinkoi’s features that make consumers choose it over other platforms such as Etsy, an American e-commerce company also focused on handmade or vintage items? First, Pinkoi has its screening process for brands, ensuring the top product quality and originality. Moreover, Pinkoi equips with its own AI recommendation model, enabling users to reach diverse products in various categories.
Pinkoi’s Next Steps
In the second half of 2022, Pinkoi is planning to launch “Feed”, a function similar to news feed on Facebook, through which users can scroll up or down the page and view product reviews and favorites of others. However, the version released this year will be a beta version. The following goal of this function is to create a Pinkoi ecosystem where brands can share posts and maintain KOL relationships. In the long term, Pinkoi expects to develop a new SaaS business model outside its ecosystem to help other brand official websites implement AI algorithms or to offer Martech services directly. This plan will kick off, at the earliest, in 3 years.
After the online platform and oversea markets are both on track, IPO will be the next step. Yen shared that Pinkoi would be officially listed in 3-4 years and that Hong Kong, the U.S., and Taiwan are all under consideration. However, IPO is not Pinkoi’s destination but a checkpoint. “We hope to continue expanding into different services and global markets and become a sustainable development company 10 years after IPO,” said Yen.
The aritcle is supported by National Development Council
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