Tuesday, 22 May 2012

Yihaodian Online Supermarket Growing in China

Yihaodian Online Supermarket
An online supermarket in China is experiencing rapid growth.  Yihaodian.com is eager to catch up to larger supermarkets wand gain a larger share of the food market. Last year the online supermarket achieved a three-fold increase over 2010, with total sales hit Rmb2.7 billion. This year, Yihaodian plans to add 500,000 types of new products to its stocks, upping the total to 670,000.

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.

Yihaodian Online Supermarket
Yu Gang was Vice President for Worldwide Procurement at IT hardware and software leader Dell Inc and responsible for procurements worth US$18 billion in the Asia Pacific. Prior to that, he also served as Vice President of Worldwide Supply Chain Operations at the world's top online bookseller, Amazon.com. However, he says he gave up these positions to start his own business.

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.

Yihaodian Online Supermarket
Yihaodian believes it can offer customers products at the lowest costs and services of the highest efficiency. In August 2010 when Yu Gang paid a visit to Procter & Gamble's (P&G) China headquarters to discuss strategic co-operation and business objectives, he said P&G could get a 10-fold increase in sales a year through Yihaodian.com. Subsequently, P&G received a 16-fold increase in sales within a year, using the Yihaodian route.

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