September 11, 2013, 11:03 AM

Wal-Mart’s Chinese e-commerce partner starts selling fresh food

The Chinese e-retailer Yihaodian is selling fresh fruit in Beijing and Shanghai.

Frank Tong

Senior editor, China

Lead Photo

Chinese online retailer Yihaodian is expanding its sale of fresh food with the help of its majority shareholder, Wal-Mart Stores Inc.

Yihaodian announced late last month that it had started selling fresh fruit to consumers in Beijing, five months after first offering fresh produce from its e-commerce site to shoppers in Shanghai, the e-retailer’s home city. Yihaodian officials say they now receive 1,200 orders per day for fresh fruit, and that they aim to add fresh meat and vegetables at a later date. The e-retailer says it hopes to offer fresh food delivery this year in other large cities, including Guangzhou and Shenzhen.

“Since Yihaodian can get the support of the logistics networks of Wal-Mart China, we could enter the fresh food section faster and easier than others,” says Guo Dongdong, vice president of Yihaodian. Wal-Mart, which raised its stake in Yihaodian to 51% last year, operates some 390 stores in 150 cities in China.

Wal-Mart’s assistance takes several forms. Wal-Mart warehouses store the fresh fruit that Yihoadian sells, though Yihaodian contracts with delivery services that can handle perishable items to deliver orders to consumers. Another important aid is that Wal-Mart, which sells fresh food in its bricks-and-mortar stores in China, hold import licenses for fresh food. Many Chinese prefer imported food items as there have been many press reports about contaminated Chinese food products.

Guo notes that fresh food makes up about 20% of sales in physical supermarkets, and that offering items like meat, vegetables and fruit could give Yihaodian a big boost. “It is an attractive category that could enhance repeat purchasing for e-retailers,” he says. 

China’s farmers are also seeing the opportunity to sell food online directly to residents of major cities. According to a 2012 report on sales of agricultural products from  Alibaba Group, the dominant e-commerce platform in China,  260,000 merchants last year sold near 20 billion yuan ($3.3 billion) worth of agriculture and food products on Alibaba’s sites, Tmall and Taobao. Alibaba predicts 1 million merchants will sell 50 billion yuan ($8.2 billion) worth of food or agriculture products on its platform this year. Alibaba is No.1 in the Internet Retailer Asia 500.

There is still, however, plenty of room for growth in selling fresh food online in China. Only 1% of food is now purchased on the web in China, according to Alibaba. By comparison, the online penetration rate for beauty and cosmetics was 16.3% by the end of 2011, for electronics 15.6% and apparel 14.3%.

Yihaodian, founded in 2008, says the knowledge it has gained about its customers will help it gauge demand for fresh products. The company has grown rapidly in the past five years, founder and CEO Yu Gang said at a press conference late last month announcing the fresh fruit delivery program in Beijing.

“Our traffic has increased 1000 times from five years ago, and listed products have grown from only 3,000 to 2 million,” Yu said. Yihaodian says  its web site traffic exceeds 10 million visits per day.

Wal-Mart does not disclose Yihaodian’s sales, but says they are growing at a double-digit percentage rate and that Yihaodian has doubled the number of active customers from a year ago. Internet Retailer estimates Yihaodian’s 2012 sales at nearly $224, and ranked the e-retailer No. 42 in the Asia 500.

“We have six fulfillment centers with 260,000 square meters of storage space,” Yu told reporters. “Since the market develops so fast, the orders of Yihaodian exceeded the maximum capability of warehouses by six times in five years. Now we are building hundreds of thousands of square meters of warehouse space in Shanghai and Dongguan.” He noted that Yihaodian provides same-day delivery in major metropolitan cities and that its own fulfillment network delivers 70% of orders. “Our customers’ satisfaction ratio for delivery is 90%,“ he added.  

The e-retailer says it is also making progress in attracting mobile shoppers. Yihaodian says it has more than 10 million mobile registered users and that mobile sales increased 10 times over 2012 in the first half of this year.

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