Yihaodian's annual sales can't compare with those of large B2C enterprises such as 360buy.com and VANCL, but when compared to physical supermarkets selling daily goods sales are on a par with those of any regional, chain model. It's noteworthy that the growth rate of Yihaodian is much higher than for traditional supermarkets.
Last year, Yihaodian devoted tremendous efforts to building its logistics and delivery systems, with its warehousing increased from 33,000 sqm at the beginning of the year to 220,000 sqm by the end. The supermarket's delivery network also expanded from 28 locations in five cities at the start of the year to 140 locations in 34 cities by year's end.
Yihaodian's Chairman, Yu Gang, set a target this year to add 500,000 new product lines to its stock to satisfy customer demand for "one-stop shopping without going out".
Media reports claim that US giant Wal-Mart intends to further increase its investment in Yihaodian by acquiring stock currently held by the Mainland's Ping An Insurance Group. Assuming the move is completed, Wal-Mart would hold a controlling stake in Yihaodian, catapulting it into the leading ranks of online supermarkets on the Mainland.
Although Yu is an academic, his main aim is to be the leader of an enterprise and hopes his entrepreneurial qualities will make an impact on Mainland lifestyles. Yu says the fundamental problem with e-commerce lies in supply chain management. The fast-moving consumer goods offered by supermarkets are generally rather bulky while some products are fragile and liable to leakage (especially those with a short expiry date), so delivery is an issue. This makes supply chain management crucial. After spending more than 20 years studying supply chain strategies, Yu chose the business model of an online supermarket to make an entry into the market.
As leading players in vertical e-commerce such as Dangdang.com, 360buy.com and 51buy.com have reached bottlenecks in development, they have begun to turn to horizontal development, he believes. Yu is well-versed in e-commerce trends; the firm is moving towards integration and "platformisation". He picked a business model to avoid the pain of undergoing transformation later. Currently, he focuses his efforts on expanding the scale of Yihaodian, aiming to cut costs through economies of scale.
When Yihaodian first went online, it offered only 3,000 lines of products. The number has now risen to almost 200,000 and big goals for the future. The increased product categories have benefited from enhanced procurement and by introducing more quality suppliers under the "shop-within-a-shop" concept.
Yihaodian also makes use of multiple business models to amplify its product range. Among the products on offer, only some are sourced on a buy-out basis. Others are sourced on consignment, under which settlement is made after the products have been sold. Still other products are put up for sale in the form of refer orders. After an order has been received, it will be referred to the right supplier for execution and provision of after-sales services.