Sun­ing leads fundrais­ing round in Yiguo

China Daily (Canada) - - VIEWS - ByWUYIYAO in Shang­hai wuyiyao@chi­

Chi­nese home ap­pli­ance re­tailer Sun­ing Com­merce Group is lead­ing a $200 mil­lion round of new fundrais­ing in, a fresh pro­duce e-com­merce plat­form backed by Alibaba Group Hold­ing Ltd, bring­ing the to­tal of Yiguo’s fundrais­ing in 2016 to $500 mil­lion.

Zhang Ye, CEO of Yiguo, said the funds raised will be used to de­velop its sup­ply chain ca­pac­i­ties, lo­gis­tics in­fra­struc­ture and dis­tri­bu­tion chan­nel ex­pan­sion.

Zhang said he ex­pects 11-year-old Yiguo to be prof­itable in 2018, but he did not dis­close Yiguo’s fi­nan­cial goals.

“In a mar­ket with de­vel­oped stan­dards, buy­ers would not ask the seller to help them pick a ‘sweet’ wa­ter­melon be­cause it is as­sumed that ev­ery wa­ter­melon on sale must be ‘sweet’. In China, we want to set stan­dards in terms of food safety, qual­ity, sup­ply chain, dis­tri­bu­tion chan­nels and lo­gis­tics. It will take huge funds to reach this goal,” said Zhang.

The fresh pro­duce e-com­merce­mar­ket has been ex­pe­ri­enc­ing dif­fi­cul­ties, with low pen­e­tra­tion and a small mar­ket share.

Ac­cord­ing to a re­search re­port by Kan­tar World­panel, a mar­ket re­search ser­vices provider, e-com­merce plat­forms’ share in the fresh pro­duce sec­tor is below 5 per­cent, the low­est among all on­line trad­able prod­ucts. E-com­merce plat­form’s mar­ket share in clothing, books and fast­mov­ing con­sumer goods is above 20 per­cent.

Ac­cord­ing to a re­search re­port pub­lished ear­lier this year, only 1 per­cent of some 4,000 fresh pro­duce e-com­merce play­ers are prof­itable, 4 per­cent break even, and 95 per­cent are loss-mak­ing.

Sev­eral mar­ket play­ers, in­clud­ing, which was among the top 20 play­ers in terms of users and trans­ac­tion vol­umes, closed down in the past 12 months due to sig­nif­i­cant losses, ac­cord­ing to the re­search.

Bruno Lannes, a part­ner with Bain & Co China, said fresh pro­duce plat­forms are fac­ing dif­fi­cul­ties be­cause con­sumers still have con­cerns over the qual­ity of prod­ucts and their shop­ping ex­pe­ri­ence.

“When buy­ing fresh pro­duce, con­sumers would like to touch, smell and feel, as a way to con­firm the qual­ity is good. When con­sumers are not as sat­is­fied as ex­pected when fresh pro­duce are de­liv­ered, the shop­ping ex­pe­ri­ence is not nice and they stop shop­ping for fresh goods on­line. It is re­ally dif­fi­cult for play­ers to al­ways main­tain the high­est stan­dards be­cause there are so many steps to man­age and han­dle,” said Lannes.

But Wang Wei, head of Muheng In­vest­ment Man­age­ment and Con­sul­tancy Ltd, re­mains con­fi­dent about the mar­ket’s prospects.

“De­spite the dif­fi­cul­ties in the fresh pro­duce e-com­merce mar­ket, the out­look for big play­ers with high stan­dards, large mar­ket share and a solid foot­print is most likely to be good, be­cause the mar­ket vol­ume could reach tril­lions of yuan. As both a con­sumer and an in­vestor, I believe that de­mand for high­qual­ity fresh pro­duce will grow at a fast pace,” said Wang, whose com­pany also pro­vided fi­nan­cial back­ing to Yiguo.

It is re­ally dif­fi­cult for play­ers to al­ways main­tain the high­est stan­dards ...”

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