Walmart's Online Success in China with Yihaodian.com

Walmart’s is the third largest retailer in China in China, but recently has seen its sales suffer with same-store sales dropping 2.3%. Despite being the largest retailer in the world, with over 400 stores in China, they are not finding the success they expected because of a variety of reasons: consumers believe Wal-Mart sells cheap and low quality products, a number of products they stock have been hit by food safety scandals and they have had problems with accounting compliance. However, where its brick and mortar stores have struggled, its online store Yihaodian has truly shined.

Set up in 2008, Yihaodian (YHD) wanted to bring grocery shopping to customers online. In 2011 Wal-Mart invested in YHD and in 2012 bought a 51% stake in the company. This is a move that seems to have paid off with estimated sales on YHD reaching over $1.9 billion in 2013. The only other online e-commerce platforms making over $1 billion are Taobao, Tmall, Jingdong and Suning.

YHD only has 1.4% market share of the e-commerce market and is currently in fourth place. However, it has been growing tremendously in recent years. Here are some quick facts:

• They doubled their product offerings to 8 million in 2014
• Users grew to 57 million in 2013 from 29 million in 2012
• YHD turns over its entire inventory in 10 days, down from 50 days when they started
• Increased imported food products from 14,000 in 2013 to 70,000 in 2014

YHD has managed to be successful for a few reasons:

1. Focus on delivery speed. With over 20 fulfillment centers and hundreds of delivery stations across China, YHD can offer same-day or next-day delivery for the majority of its items. YHD has even started setting up shipping centers in individual apartment complexes, such as Shanghai’s Zhongyuan Liangwancheng which houses over 50,000 residents.
2. Focus on genuine, quality products. Consumers seem to trust YHD’s products. Despite baby milk powder scandals in recent years, YHD dominated this sector with a 37% market share in 2013.
3. Focus on expanding its product line. Not only has YHD doubled their product offerings every year for the past 2 years, they also recently acquired a license as part of a pilot program to sell over the counter medication online in China.
4. Constantly innovating and improving their business model. YHD has launched “Yihao Finance” which sells insurance and offers loans to merchants online. In addition, YHD has set up a number of brick and mortar stores which it uses as a showroom where customers can go and see the products YHD offers online. Sales from surrounding residents of these stores doubled after they opened these stores.

While YHD may not be the leading e-commerce marketplace in China, it is growing fast and has the potential for further success. It is important to be aware of the many different online marketplaces and channels available in China. This way, companies looking to expand to China can make an educated decision on which e-commerce platform or combination of platforms fits its strategy the best.