From Rongchang to eDaixi, "Transformation Veteran" Zhang Rongyao's more than 10 years have been full of tears

"Back in 2000, I was already thinking about transformation. I always thought it would be done in a year or two, but it ended up taking more than ten years."

Zhang Rongyao has two identities: one is the chairman of the traditional laundry industry Rongchang Group, and the other is the founder of the emerging O2O platform "eDaiXi". At the beginning of 2015, recalling his experience, he said that the more than ten years of transformation were sometimes spent in tears.

"Of course, without the previous years, there would be no later eDaiXi."

The biggest return from more than ten years of transformation was that Zhang Rongyao obtained the O2O ticket in advance—in 2013, after 23 years of running the "Rongchang" brand, he founded the O2O laundry platform "eDaiXi." Through an app, residents in communities with laundry needs can place orders anytime, and residents with free time in the same community directly pick up the items and hand them over to the community laundry shops for cleaning.

This is a typical sharing economy model—sharing the "idle" labor and "idle" laundry capacity in residential areas, operating services and product delivery through crowdsourcing and outsourcing models.

This is obviously a highly growth-oriented model. Coupled with more than 20 years of experience in the laundry field and 10 years of community laundry business operation practice, eDaiXi quickly gained the favor of capital.

These financings also mean that eDaiXi has endorsements from multiple investment institutions, including two giants among BAT.

1990-2013: The Long Road of Reform

The story of Rongchang Laundry began in 1990. At that time, Zhang Rongyao, who graduated from Beijing Light Industry Institute (now Beijing Technology and Business University) and stayed to work at the school-run enterprise, was unwilling to accept the unchanging life "within the system" and started a leather cleaning business with his brothers.

In the early 1990s, the widespread "leather jacket craze" made Zhang Rongyao's business grow bigger and bigger. While gaining good cash flow, Zhang, who was unwilling to live a comfortable life, kept looking for new opportunities, such as doing business in professional laundry equipment.

Rongchang Laundry first tasted success from equipment agency sales. In 1996, Rongchang introduced the Italian brand Ilsa and promoted dry-cleaning equipment integrating more than a dozen types of washing and dyeing nationwide. The stores that bought the equipment that year found that with the brand effect of Rongchang and Ilsa, they could achieve greater profits.

Inspired by this, Zhang Rongyao and his brother began to try the franchise chain operation model and acquired the exclusive brand usage rights of Ilsa. Thus, the two brothers embarked on a dual-brand route of Rongchang and Ilsa. From 1999 to 2003, the number of chain stores expanded from 15 to more than 300, becoming the largest laundry chain enterprise in China during the first rapid expansion period.

But the good times did not last long. With intensified expansion, the drawbacks of the laundry chain model gradually emerged.

On one hand, the laundry chain is a heavy-asset expansion model driven by equipment sales. As Rongchang chain stores rapidly spread, the market's equipment stock and its processing capacity surpassed people's laundry demand at an accelerating rate;

On the other hand, from the perspective of Rongchang Laundry headquarters control, most franchise stores, once they buy equipment and learn the technology, sooner or later will part ways with the Rongchang headquarters. The human resources cultivated over several years would be wasted, and any problem in a franchise store would affect the entire Rongchang Laundry brand.

In Zhang Rongyao's view, this American-style chain business model was no longer suitable for the domestic market. Therefore, in 2004, Rongchang launched the "one plus four" network card model, with four stores radiating the community responsible for receiving goods, and one store equipped with dry-cleaning equipment to complete washing; and invested heavily in informatization, using nationwide network cards for unified service to overcome regional limitations.

After several years of network card implementation, functions such as points, reviews, complaints, and reservations gradually formed a system. Especially the unified payment function allowed cash flow to concentrate more quickly to the headquarters. As a result, the chain laundry model changed, user numbers surged, users could buy cards online and consume offline, and Rongchang thus took the first step into O2O.

2013-2014: Bold Decision to Sever Ties

In 2013, many internet O2O companies approached Rongchang Laundry, trying to persuade Zhang Rongyao to integrate Rongchang's traditional life services into their platforms. However, Zhang, who owned thousands of terminals, was not convinced.

"Wherever I go, I am arrogant. Others have one or two stores acquired, why should I, with one or two thousand terminals, play with you?" Zhang Rongyao once told the media.

It was also in this year that 45-year-old Zhang Rongyao made a decision considered a bold severance—fully transforming to O2O.

Zhang Rongyao believed that whoever could integrate real offline resources would become the focus of this positioning battle. He firmly believed that traditional enterprises were the true leaders of this wave, and his 23-year-old Rongchang might become the most dazzling company at the forefront—provided the old company could introduce fresh blood and complete a thorough transformation of internet thinking.

"Many people say traditional enterprises lack internet thinking. For me, it is just about formulating strategies, business models, and the structure of the board and shareholders. As for how to fight this battle, it must rely on the O2O team," Zhang Rongyao said in an interview in September 2013.

At the end of the same year, "eDaiXi" was launched on the WeChat platform. To optimize the product, he focused on Lu Wenyong, who worked in Baidu's O2O department and was 26 years old at the time. The two talked for seven hours during their first meeting. Subsequently, Lu Wenyong became the CEO of "eDaiXi."

In Zhang Rongyao's view, the introduction of this O2O team had an impact on Rongchang comparable to the property rights system reform years ago. The focus of change back then was management; now the innovation is in business models and development methods. Regarding this highly anticipated new team, Zhang Rongyao said, "The O2O part basically needs to be decentralized."

eBagWash proposed the business idea of "pay per bag" at its inception: users receive a canvas bag, and no matter how many clothes are inside, it costs 99 yuan to wash one bag. Users can also choose to wash by item. All services include door-to-door pickup and delivery, free shipping, pickup within 48 minutes, and return within 72 hours.

"I waited 14 years at the tipping point." Zhang Rongyao said in a 2014 interview that in 2000, Rongchang Laundry began exploring the shift from B2B to B2C, but it was not until the arrival of the mobile internet "tipping point" that he felt "the time had come."

In July 2014, "eBagWash" received a 20 million yuan angel investment from Tencent. In August 2015, eBagWash announced it had secured a $100 million investment led by Baidu. Baidu's stake meant the project was endorsed by two giants among BAT.

eBagWash CEO Lu Wenyong stated that Baidu had long been focused on "information flow" transmission, but now it hopes to connect people and services—to create a "service flow." eBagWash's current coverage of service scenarios in the vertical O2O field is exactly what Baidu needs and aligns with Baidu's development direction for the next five years. Meanwhile, Baidu's precise traffic and LBS-based accurate positioning (used in logistics and delivery) will undoubtedly greatly assist eBagWash's business development.

2015: Embracing the Sharing Economy

As of July 2015, eBagWash had 4 million users and services covering 16 cities. Lu Wenyong said that by the end of 2015, eBagWash's services would cover 50 cities.

Compared to many life service O2O platforms that acquire traffic for free, eBagWash generates cash flow income through a revenue-sharing model with laundries. It is reported that eBagWash and laundries operate on an approximately 50-50 split, with laundries handling laundry services and eBagWash bearing logistics and other costs.

"eBagWash's biggest future competitors may be internet companies like JD.com, 58.com, and Tencent. Because I have little to do with laundry now; I am just a mobile service entry point for home services O2O. I just use laundry as a single product entry point, and the logic is the same for laundry and cleaning, just like JD.com uses digital products as an entry point," Zhang Rongyao told the media.

This idea was validated in August 2015.

In August, when Lu Wenyong announced Baidu's investment, he also declared: "eBagWash's goal by the end of this year is to become China's largest cleaning platform, so that when people have needs for laundry, shoe cleaning, home textile cleaning, luxury goods care, etc., they think of eBagWash. After achieving this goal, we will have established a connection with household users and will then consider whether we can do some services for household users related to the sharing economy."

In this statement, Lu Wenyong said: "Actually, people have a very strong demand to provide services to each other, provided these are reasonably connected and standardized." eBagWash's future positioning is the "personal micro-service market." Besides laundry, the platform intends to extend its business to shared kitchens, home appliance repair, and other fields. They have also internally incubated a project called "Accompany Parents," focusing on community home-based elderly care services.

Undoubtedly, eBagWash chose a development path similar to Xiaomi phones: using a single product to drive the system. After Xiaomi created the hit product Xiaomi phone, it began launching many products such as TVs, routers, and air purifiers. eBagWash hopes to launch more home service categories after making laundry a hit product.

"Our future vision is to truly connect the entire system through our future single products and ultimately create a home service platform," Lu Wenyong revealed in a sharing session at Zhenghe Island. eBagWash will focus on operating 2-3 key categories in home services, while other service categories will be developed through investment incubation and external cooperation, ultimately aiming to provide 80% of services in home life scenarios.