The Shanghai-based retailer aims to break even in three years and will “most likely” sell shares to the public in the U.S., said Chairman Yu Gang, who co-founded the company in 2008 after working as a supply chain executive at Dell Inc. and Amazon.com Inc. There is no timetable for the sale, he said.
Yu expects to conclude the Wal-Mart investment agreement this month as Yihaodian aims for a larger slice of China’s online commerce market, which CLSA Ltd. estimates will almost double to 904 billion yuan ($140 billion) next year. Baidu Inc., China’s most popular search engine operator, and Sina Corp., which owns the nation’s third most-visited website, are among China-based companies that have chosen the U.S. for initial public offerings.
“We’ll do whatever it costs to secure a bigger slice of the market,” Yu, 52, said in a July 1 interview. “Market share is our top priority.”
To take on Taobao Mall, a unit of China’s biggest online commerce company, Yihaodian is expanding its workforce to about 3,000 employees by the end of this year from 2,000 now and adding a fifth warehouse this year, Yu said in Shanghai.
Quadrupling Sales
Sales at Yihaodian, which offers consumers 100,000 types of products from mayonnaise to disposable diapers, tablet computers and mobile phones, will almost quadruple this year to as much as 3 billion yuan from 805 million yuan in 2010, he said. Sales have been increasing about 28 percent a month on average, a pace Yu said he expects the company to keep.
Even at that rate, the online retailer has far to go to catch the market leaders, said Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai.
“The rule for the e-commerce sector is that only the big get bigger,” Tang said by telephone. The challenge for Yihaodian is to boost its transaction volume and grab a bigger market share so that it can control costs, including purchasing, marketing and logistics, he said.
China’s Online Leaders
Taobao Mall led China’s business-to-consumer online market with 30 billion yuan of transactions in 2010, followed by 360buy Jingdong Mall with 10 billion yuan, according to IResearch Inc. Yihaodian ranks 10th, data from the Beijing-based research company shows.
Among China-based companies listed on U.S. exchanges, the four largest by market value are Internet businesses, Baidu, Sina, Netease.com Inc. and Ctrip.com International Ltd., according to Bloomberg data.
Yu founded Yihaodian with former Dell colleague Liu Junling, now the Chinese retailer’s chief executive officer. The two started the venture with their own savings.
Wal-Mart, the world’s largest retailer, agreed in May to buy an unspecified minority stake in Yihaodian to tap growth in China, the world’s fastest growing major economy. The companies didn’t disclose financial details.
--Michael Wei, Editor: Dave McCombs, Lena Lee .
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