Yunniao's Bankrupt: E-commerce to Survive and Thrive

Yunniao company founded in November 2014, was one of the biggest supply chain distribution and gained investments from Sequoia Capital and GoldenSand Capital for more than 2.2 billion dollars. In November, 2021, Yunniao officially announced bankrupt, because its cash flow "dried up". The company used to be the biggest provider of delivery service for factories, distributors, chain businesses and express services. It was present in a broad range of cities: Beijing, Shanghai, and more than 50 second-tier cities, with more than 10000 stores and companies as their customers. One of the main reasons causing the bankrupt relates to the sharing economy. OFO, a company providing shared bikes, arrears Yunniao more than 1 billion RMB for the arranging fee, which caused the capital chain crack. Besides the service toward shared bikes, Yunniao was also in charge of the fresh food delivery.

The concept of farm-to-table became a popular topic in 2014, when e-commerce was focusing on selling fresh leaped in an explosive form. However, there are multiple obstacles to fresh food e-commerce. First, the distribution chain is difficult to be organized. If the e-commerce has its delivery, it costs extra money for the license fee. Cooperating with other companies providing delivery service also takes extra costs, because it has to guarantee the quality. During the delivery, the temperature is important for keeping the food fresh, but it’s hard to manage for the drivers to set up the exact temperature. Some delivery guys would turn off the AC for less fuel charge. At the same time, different cities have different transportation rules. For example, tricycles are allowed in Beijing, but not Shanghai. Regulating and forming a distribution chain is an essential problem for many e-commerce companies. Second, the float between the needs and products’ price is huge and uncontrollable. The output of traditional products is decided by plenty of reasons: season, temperature, and global climate, which can influence the price in a big range. For example, in December 2014, two fresh food e-commerce companies advertised that the cherries will be sold at a lower price than in the market, however, it didn’t end well. Because of the sudden shortage of cherry that year, one company had to withdraw the ads, and another one insisted to sell at a loss. On the other hand, compared to the traditional market, e-commerce always has to pay more effort on preserving the quality of the products. The quality of some products can be influenced by many uncontrollable factors, at this point, removing it from the selling list is the only way, which decrease the diversity of the products.

At the same time, fresh food e-commerce challenges the traditional markets. For the traditional markets, pedlars can spend 200 RMB to get a stall and sell products by only following the basic rules. The process is easy, simple, and quick, even though the gained profit is low. For some people, shopping in the local market is the only way, but for more people who have fast life speed in big cities, e-commerce becomes a better way. Fresh food e-commerce spends costs on advertisement and promotion, which is highly welcomed by young people. With the promotion, lower prices, traditional markets seem to lose their status. Traditional market contains many stalls, where the pedlars gain few profits under the competition with their neighbors. The appearance of e-commerce brings a surviving risk to them. However, at the same time, fresh e-commerce doesn’t gain more profit than the traditional market. Compared to traditional pedlars using plastic bags, e-commerce needs package or box for delivery, it increases the costs. Second, customers can choose the product by themselves, but e-commerce needs to hire people to check the quality, which raises the costs again. Traditional pedlars are experienced with the market, that they would sell the products to the nearby restaurant if they can sell them all because of the weather or emergent condition.

Fresh food e-commerce is a challenge to the traditional market and an evolution of people’s lifestyles. Some various risks and problems still needed to be solved. For young people, cooking seems unnecessary, especially with the growth of food delivery. For people of older age, particularly living in under 3-tier cities, grocery shopping in supermarkets or local markets is a part of their life that they would not want to change. There’s still a long process that fresh food e-commerce needs to go through.