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China’s retail market saw its digital revolution.
New players emerge and take a significant share of B2C . Yihaodian is part of this new generation of online sales site .
Strategy worth considering.
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Here is a company created in July 2008 and five and a half years after its creation, became the third on-line distributor in China. It comes as a challenger to Jing Dong – created five years earlier and T Mall, the armed wing of the Chinese B2C giant Alibaba. All these companies have helped to establish B2C in China – traditionally a C2C market (B2C accounted for only 2% of total e-commerce in 2008, it rose to 15% in 2013) .
300,000 to 400,000 orders per day are met
The Strategy Yihaodian was to expand rapidly the range of classes offered; initially focused on food , beverage and household products, the range is extended from 2009 to cosmetics and electronics. The clothes are the last category that Yihaodian bet on today. The progress is amazing. In 2009 , the creators are proud to reach thousand orders per day . Since the beginning of 2014, it is an average of 300,000 to 400,000 orders per day.
Yihaodian now has its customer base in the tens of millions (more than 60 million in early 2014). The company employs 10,000 people ; most of the workforce is allocated to the deliveries .
The strategy was first a strong technology component.
The founder, Gang Yu, a Chinese entrepreneur is returned from the United States. He did his PhD there. He started as a teacher in Austin, working for Dell, start a software company then sold it to Accenture. The now CEO of Yihaodian is first and foremost a specialist in information technology. Ten percent of the workforce are also Yihaodian engineers information technology. All IT developments are conducted in-house (with the exception of software finance and accounting). The company controls all computer systems: liaison with suppliers, management, warehouses, management, delivery points , customer , etc.
Complete autonomy from suppliers
There is no dependence on suppliers. But, there is however a greatly increased reactivity; in this emerging sector, speed is of the essence. The control room: they are sixteen screens that allow real-time tracking of orders, traffic, activity by region, activity according to product categories, etc. For example, a screen displays a word cloud in other words, the results of an analysis of continuous content of client requests.The company captures trends instantly. These tools allow targeting consumers vastly more accurate than what can be done in stores, and most importantly, they help to set up business operations and immediately see the effect just as fast promotions. Yihaodian is also in a position to give a huge amount of information to its suppliers. If the first steps have been made towards PCs, the growing number of smartphones and tablets in China has become an engine of development for the company.
While m-commerce meant nothing in China in 2009 , it rose to 10% of e-commerce in 2013 and should reach 20 % in 2016. As an increasing number of Chinese firms , Yihaodian files many patents . To minimize leakage , the company seeks to reduce the rate of rotation to keep its developers. It also protects its developments by limiting the spread of sensitive knowledge within a group bound by secrecy
Yihaodian takes advantage from the firepower of Wal–Mart It is also a financial strategy. In 2011, an agreement was reached with Wal- Mart, the world’s largest distributor. The American took a 51% stake . It provides cash for development investments required by the growth of the company. Most purchases are made but today Yihaodian bypassing the purchasing power of Wal -Mart. Yihaodian has also established its own market place , ie a computer system for providers to compete on an order. Wal -Mart , one can imagine that eventually the supply of Yihaodian activities can be reconciled with his own in China to further increase the bargaining power with their suppliers. Today the two central purchasing cooperate through the exchange of information about their contracts with suppliers – all information that can be used in negotiations. Yihaodian thus indirectly benefit from the firepower of Wal -Mart.
In sum, Yihaodian receives valuable assistance from Wal-Mart on two essential components of business:
- Range of products offered.
The other two key factors for success , speed of delivery and customer services , being under their sole responsibility. The strategy ultimately has a geographic component. Like many Chinese companies, Yihaodian assured its initial development with the first-tier cities and the richest provinces – which are also the coastal provinces. The company has still 70% of its business on the coast. Penetration rates are twice as high in the first-tier cities than in cities of the second level.
The current bet is made on the development of the cities of second and third level ; the company could increase its revenue by 4 or 5 if the standard of living in these cities is increasing as you might expect. All these means are put at the service of a single cause : the customer satisfaction. Yihaodian follows its clients closely. Monitoring claims shows that the rate of dissatisfied consumers was drastically reduced the number of phone calls per order decreased constantly from 40% (first quarter 2011) to 3.7%. As expected , customers of Yihaodian are richer and better educated than the average Chinese ( Yihaodian also has a focus on imported food ). Delivery within an hour is guaranteed in Shanghai. E-commerce is growing strongly in China. It was worth 1.300 billion yuan ( 150 billion euros ) in 2012 – 6.2 % of retail ) ;
Incidentally, 2012 is the year the Chinese B2C exceeds the US B2C. It reached 1850 billion ( € 217 billion) in 2013 ( 7.7 %). Yihaodian expected to be at 3,600 billion (€ 423 billion ) in 2016. These distribution patterns appear much more reactive than the traditional distribution in stores. Yihaodian strategy is to internalize a maximum of activities. This case is a good example to wake up the sleepy Europe . Yes, it can do wonders even in a mature business – especially if you believe in the technology.