Fung Capital has added online prowess to its portfolio by taking a minority position in Onestop Internet Inc., an e-commerce service provider to apparel brands and retailers, with an investment of $9.15 million.
The size of Fung Capital’s minority stake in Rancho Dominguez, Calif.-based Onestop was not disclosed, but the investment aligns with the firm’s strategy of putting mostly $1 million to $10 million toward fast-growing e-commerce and supply chain companies. The private investment arm of sourcing titan Li & Fung Group’s controlling shareholders, William and Victor Fung, has already delved into e-commerce with investments in New York-based online analytics firm Proclivity Systems in 2008 and Chinese women’s fashion e-commerce company Moonbasa earlier this year.
“Customers are asking for various ways to get into e-commerce, and we would like to learn about that as well. It is a mutually beneficially relationship,” said John Seung, a partner in Fung Capital who will sit on Onestop’s board. He continued, “With us having the Asian network, we can really help the company in that regard. The big growth, aside from the international expansion, is helping companies to drive traffic to their sites. That is where the value add is, and that’s hard to replicate.”
Onestop, which competes with the much larger Amazon.com Inc. and eBay Inc.-owned GSI Commerce to develop and operate online stores, has built a customer roster strong in denim and contemporary apparel companies with online sales of $5 million to $25 million annually. In total, its 35 clients, including Seven For All Mankind, J Brand, Rag & Bone, Splendid, Ella Moss, True Religion, John Varvatos, Nicole Miller and William Rast, have generated around $150 million in annual sales via their Web sites, and Onestop takes a commission on their online sales.
Chief executive officer John Tomich, who founded Onestop in 2004 with Brett Morrison and Steve Tandberg, said the company has been profitable since the beginning and has registered yearly growth “closer to the triple digits than the double digits,” although he declined to be more specific. In 2008, Onestop raised $13.4 million in a Series A round of funding from Bessemer Venture Partners, which was used to support Onestop’s interactive marketing and technology platforms.
Of the latest Series B investment from Fung Capital, Tomich said, “We didn’t necessarily need the operating capital, but we thought that Victor and William Fung, and Li & Fung would be a very strategic relationship for us.” Although Onestop has the capacity to handle international transactions on the Web sites it runs, it only has in-country distribution capabilities in Canada and the U.S. By the fourth quarter of next year, the company plans to start distribution within China and Europe. Onestop currently has 250 employees.
Tomich said, “In China, we are talking not only to brands that we have that want to sell directly to Chinese consumers and want to have an inventory position in China. The other group is brands that we service currently that just want us to operate their Chinese e-commerce. They might already have something going in the U.S., but they don’t have anything in China.”
In the short term, Seung said, “We certainly want to concentrate on the domestic market.” He anticipated Onestop’s growth would also be propelled by its ability to provide customers with insight into online shoppers. “The company has a very unique advantage because they focus on a specific segment. They are gathering a lot of data about this very targeted customer base of younger, more affluent people who buy premium denim,” he said. “The next stage is really leveraging the data to add real differentiated value for our customer base.”