People visit France exhibition area during the Top Wine China 2011fair at China World Trade Center on May 25, 2011 in Beijing, China. ChinaFotoPress / Getty Images This post is in partnership with Worldcrunch, a new global-newssite that translates stories of note in foreign languages intoEnglish. The article below was originally published in EconomicObserver. Yuan Jiang started his first business, a direct marketing servicesprovider called Roadway, in 2001. Seven years later, Roadway rankedfirst in its sector in China, with profits twice that of itsnearest rival. |
At that moment, Yuan agreed to a merger with theAmerican firm D&B (Dun & Bradstreet) for more than $40million. It was 2008, when the financial crisis occurred. There wasnt muchhope for my company to be listed, Yuan says. (Read about the Bordeaux bubble.) Yuan Jiang thought it best to use his experience with Roadway to gointo B2C (business-to-consumer) commerce. But he still needed topick a product.
After flirting with several ideas, Yuan decided onwine mostly because of its high profit margin. In China, a bottleof French or Italian wine that costs 3 euros from a European winerywill be sold for about 11 euros retail. And in a restaurant or barit can go for three to four times higher. I had some competitors in 2008.
But the crucial point is that winewas small change compared to other consumer items. A lot of middleclass families had already started to drink wine, but not yet inway where it had become a fixed part of their expenses. Yuan did some simple calculations, and decided the numbers wereright for him to jump in headfirst. He was most definitely on tosomething.
Through his 4 million-member website, yesmywine.com,Yuan enjoys average sales of 10,000 bottles per day. The real challenge, as with all B2C commerce, is figuring out howto deliver the product. With wine its more challenging still. Bigdistribution companies are not interested in delivering wine. Itsheavy and fragile, so we are obliged to use small companies.
Still,breakages are inevitable. After improving the packaging six times,yesmywine has been able to reduce the breakage rate to less than2%. (Watch "California's Bargain Wine Boom.") How to keep your clients? A social solution Yuan Jiang is now working on building up his own distributionsystem to guarantee the quality of his wine. He also alreadyestablished his own delivery service for the central Shanghai area.His delivery truck is equipped and air-conditioned like a winecellar to guarantee the wines quality and taste.
Starting inAugust, his team in Beijing will follow suit, then Shenzhen andGuangzhou. Hed eventually like to cover the entire Chinese marketwith his own distribution system. And why should a customer come to me at all if he can buy his wineanywhere else? What else can I provide to my customer apart frombeing cheaper? Until last year, this was the one question thathaunted Yuan how to keep his clients faithful. The answer to that question came in the form of a microblog, calledMy Cellar, which Yuan embedded into his website.
Visitors can opentheir own accounts to the blog and thus display their wine cellarsand share their appreciation of wine with other connoisseurs. As aresult, Yuan has developed not only a large customer base, but alsoa faithful wine-loving community. (Read about China's wine bubble.) While the members are interacting, the bloggers questions andresponses also attract the attention of non-members. This idea ofgaining customers through existing customers is what Yuan is mostproud of. No wonder, in comparison to other competitors, he spendsa lot less in advertising.
Yuan often describes himself as a lazy ant, a concept he borrowedfrom a book he read about management. The books message was: youhave to be lazy about details in order to save time for diligentthinking. Yuan says the My Cellar idea was the product of just thatkind of reasoning. Yesmywine also sells tea.
Yuan had the ambition create a yesmyXseries of products. I thought it would be difficult to maintain abusiness in a vertical market. I was afraid the company would getstuck in a bottleneck after reaching a certain size. But, as his wine business expanded quickly, Yuan decided in the endto keep his focus just on wine.
It would be quite difficult to runa multi-line company since each line is in essence an individualbusiness. The tea side of things is currently being sold off. Thelazy ant is now concentrating. Yuans current annual sales in the 20-30 million euro range. By 2013hes hoping to surpass the 100-million-euro mark.
Thats when Illconsider going for a stock listing. The venture capitalists arealready lining up outside his door.
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