(Chinese Version)

“Increase farmers’ income, reduce their burden.” this is literally the Wi-Fi password of Yimutian’s headquarter in Beijing, which had also been used as the slogan of the company. However, everything Yimutian had done seems to be in vain now, leaving only bubbles behind.

Editor's Note:

Founded in 2011, Yimutian has only been in the field of bulk agricultural product trade for about a year. In the past 4 years, the company has achieved a growth of 2000%, claiming to have a raise every single month. By June this year, Yimutian had accumulated a trading volume of 15.3 billion RMB. From June 20th to July 21st, Yimutian even attainted a volume of 9.9 billion RMB within such a short time, with a total order number of 65,602 and a daily volume of around 320 million RMB.

The incredible statistics from Yimutian shocked everyone, making the company well-known overnight. As a professional and dedicating media, TMTpost has always been extremely careful when dealing with such dramatic statistics. Long before Yimutian went famous, we had also done researches based on different information sources but never drafted a piece until now, when we have solid evidence to write about.

Soon after Yimutian went big, crises were cast on this startup company. Recently, sources revealed that Yimutian was in a financial crisis and it’s currently having a massive staff reduction. Over 1,500 staff and 75% of the first-line workers had been laid off. Rumor also has it that the company is going through crises such as divestment and statistics fraud etc. What led Yimutian to where it’s today? This is the question our journalist at TMTpost tried to answer with an in-depth investigation.

The complexity of the agriculture industry determines the fact that few companies really dare to only run e-commerce business in this particular field. Most companies that are involved in the agricultural e-commerce industry currently are just merely testing the waters. As a startup company, Yimutian continued to produce fake orders to make their statistics look good, eventually ending its own future in the field. The sad truth is that the investors and the company’s management team all allowed it to happen. What follows is an investigation report from our journalist at TMTpost:

2,500 grass-roots staff of Yimutian made a sudden appearance in the country and led a “great leap forward” movement in the farmlands. 

Faking orders to survive

Wang Fei joined Yimutian six months ago as a member of the grass-roots staff who worked at the source areas to collect information on agricultural products and promote the Yimutian app. The performance requirement for them changed monthly. He told TMTpost that he was asked to have a volume of 3 million RMB, made three connections, and have 30 people installed the Yimutian app during the first month at Yimutian. Order faking was therefore quite common among the Yimutian staff. If they didn’t fake some orders, then they would be fired. By far, about 1,500 employees were fired from the company for violating the sales management regulation of Yimutian. “Our superiors asked us to fake orders. It’s the company that’s pushing us to do such things.” Wang Guang was frustrated. “They said it’s only a small proportion of the staff that was doing this, but the thing is almost every grass-roots staff was fired.”

One month before the massive staff reduction, Yimutian was once questioned by the public about its statistics that just didn't seem possible. Weird statistics such as some Mr. Liu purchased 999.999-ton wild peaches even appeared online. It was the first crisis that the company had ever faced. To adjust the crisis, Yimutian called for an emergent news conference and released its background data to prove its statistics. Yimutian was desperate. However, one month later, the massive staff reduction took place, which is just ironic. “I have been keeping close tags on Yimutian since that incident. First I only thought it was just some publicity stunt made by the company,” What really made Wang Fei alert was the fact that Yimutian delayed the distribution of their merit pay last month. Yimutian claimed that due to statistics error, the merit pay would be distributed next month. However, the employees got fired before they got their hands on those cash.

The violation that Yimutian had quoted was indeed about order faking. To meet the performance requirement, almost every grass-roots staff had participated in order faking. To complete a deal, the money has to be transferred to the company’s account and the company would then send the subsidy back. This is the whole process of Yimutian’s transaction. “According to the requirements, we need to find purchasing agents. But sometimes there aren’t much agricultural products in the source area. For instance, sometimes the volume is a hundred thousand, but we would fake orders to make it to five hundred thousand or even a million.” Wang Fei explained.

Compared to the grass-roots staff, Yimutian’s physical stores had even higher standard and requirement, which made them fake even more orders. Credible source revealed to our journalist at TMTpost that the staff worked in the physical Yimutian store was required to have a volume of ten million every month. To meet the requirements, the staff would turn to wholesalers for help. “Some bold wholesalers would give out one hundred thousand RMB, get twenty bank cards from their friends and relatives and make transactions between the twenty accounts. If they could fake a volume of one million RMB per day, they would be able to get a 2000 RMB subsidy.”

Besides the trade statistics, most providers on the Yimutian App were faked as well. Our journalist at TMTpost had tried to reach several providers on the Yimutian app, but none had responded. “Last month we sent out 10 providers’ information on the App everyday. Through the App you can learn about the condition of every county. In the county I was in, most information was from the staff.” Wang Fei stated.

The business model was in the wrong direction even in the beginning

Order faking seemed to be accepted the investors without acknowledging it. It appeared that in their mind, if a little subsidy could transform the circulation pattern of agricultural products, then everything would be worthwhile. But unfortunately, subsidy couldn’t change the face-to-face and money-for-goods trading habit among the farmers. It did quite the opposite: Yimutian’s model in fact increased the trading burden on the farmers.

After working in the field for Yimutian for over half a year, Wang Fei had only one conclusion: Yimutian’s model was not useful to the farmers at all. The connection process, which was to help sell products for the farmers, was a very important part of the assessment of the grass-roots staff’s performance. In July, Wang Fei needed to sell 8 orders of products for the farmers. Whenever he sold a load of products, he would need to take a picture and send out an email to confirm the transaction. In fact, most news about Yimutian’s dull sale was based on the grass-roots employees’ emails.

“On the surface, it seemed like they are helping the farmers sell products, but their efforts turned out to be in vain. The complex circulation of the agricultural products made it very easy to lose money. For instance, the cherry tomatoes in this source area could only be sold in Taiyuan, but would never be circulated in Xi’an. Every kind of products has their own target area,” Wang explained. “Some clients came to us and purchase goods from us and then lost a great deal of money. These clients would never come back again. What’s really influencing the market is the market quotation of the agriculture industry, which has nothing to do with us.” This year, when welsh onions were in dull sale, no matter how hard they tried to find clients, the goods just wouldn’t sell. Fruits that are in large demand didn’t need any help from them to have a great sales performance.

From the perspective of purchasing agents, major supermarkets and restaurants all have a mature purchasing system, and therefore they don't really need platforms like Yimutian to make purchases. Most real wholesalers on the Yimutian app were newcomers that had just entered the business. “They needed supply source but couldn't find any. That’s why they turned to Yimutian to find some. After they contacted us, we would take them to the source area and they would load up their trucks with goods. However, 80% of them wouldn’t make any money for that, and they wound never come back to us for supply. The main problem here is that those wholesalers didn’t sell the right products in the right place. Some products could only be circulated in certain areas and they are deeply influenced by the season and the circulated areas. Sometimes if you get your goods too far away from the source area, the price would be high. But if you get them to somewhere too close, the consumers might not like them. Simply just connecting wholesalers with the farmers makes no sense. It won’t make them stay on your platform.”

Aside from that, Yimutian had also once announced that they had cooperation with Dachu.com who focused on catering procurement and the founder of Dachu, Liu Zhijia, was one of the co-founders of Yimutian. “The company always said that Dachu was going to team up with us and purchase agricultural goods from our source areas,” Wang Fei said. “But such cooperation never appeared.”

This order-faking movement of Yimutian, which was accepted by the investors and the management team, eventually burnt out the company’s fund and led to the end of Yimutian’s business in the agriculture sector.

“From farms to tables.” Yimutian’s slogan turned to be just a beautiful dream

The circulation process of agricultural products has several parts: farmers-local markets-wholesalers-target markets-retailers-consumers. In this complex circulation chain, whether it’s the duration time, circulation efficiency or the goods preservation method, none of them could achieve to sell goods directly to consumers without compromising a bit. A proportion of fresh goods will always be lost due to the freight fare, freight capacity, transportation condition and goods preservation technology, leading to major losses. According to statistics, Guangdong province alone loses fruit and vegetable goods that worth 7.5 hundred million RMB in total every year.

Besides that, the logistics condition of agricultural products in the country is actually in a pretty bad shape. Agricultural products are usually transported in normal temperature or with common normal logistics methods. During the process, agricultural products will be damaged partially. Statistics also show that the loss rate of agricultural products in China is around 25%-30% while that of developed countries is less than 5%.

From farms to tables has been the concept that’s often brought up during Yimutian’s staff training courses, which aims to get fresh goods from farms directly to tables, avoiding the increase of price during the traditional circulation process and assure freshness of the goods. This concept is like an unrealistic dream in Wang Fei’s eyes: “It's just not feasible. Local agricultural products could go directly to the local markets. If our products were to go to Guangdong, then they had to be transported through wholesalers from Guangdong. We can’t get the goods to the markets in Guangdong due to the scale.”

Yimutian once publicly stated that they were willing to help merchants get supplies, solve the logistics problem of agricultural products. However, according to staff of the local stores, such things hadn’t been achieved yet for the fact that logistics was just complicated and the cost to do so was also high. Additionally, third-party logistics companies’ fare standard is rarely accepted by the farmers. Generally farmers rely on independent shippers to get their goods out. If Yimutian were to offer logistics service itself, changing the user habit and lowering the logistics cost would be the two major problems the company had to address.

After the massive staff reduction, Yimutian might turn to run other business

At present, it appears that it was due to the lack of new round of investment that Yimutian had no choice but massively reduce its staff. The mass amount of subsidy had led the company into a financial crisis. Wang Fei did the sum for our journalist at TMTpost: the company had about three thousand employees, among which the grass-roots workers had a monthly salary of ten thousand RMB and the technical staff had even more, meaning the company had to give out 60 million RMB as salary every month. In accordance with the daily volume of Yimutian, which was three hundred million, the company had to give our 600 thousand RMB subsidy everyday.

Additionally, Yimutian required cash deposit from the farmers: 1000 RMB per vegetable group, 2000 RMB per fruit group. Farmers that put cash deposit could get a better position for the information they put on the app and the deposit would be returned to them six months later. Every staff would need to have three orders monthly, which means the company got a cash deposit of ten million RMB in total.

According the former employees of Yimutian, the company now only has two workers in every county to comfort local farmers. In the Yimutian rights protection group, some employee stated that the company only had a couple tens of millions RMB left, meaning that if the company gave them the salary as usual and returned the cash deposit to the farmers, then Yimutian would go bankrupt. Former Yimutian employees believed that the company would probably keep a few technical staff in the future and change its line of business.

At last, Wang Fei expressed his desperation toward agricultural e-commerce: “This industry will only work when the farmlands in China are bought by major large-scale growers. In today’s situation where individual farmers dominate the market, such platforms will never have a significant impact on them. They will sill grow whatever they want every year.”

The agriculture industry has always been a headache for China.
The complexity of the agriculture industry determines the fact that few companies really dare to only run e-commerce business in this particular field. Most companies that are involved in agricultural e-commerce currently are just merely testing the waters. There’s still a long way for the agricultural e-commerce industry to go. But as only a startup company, Yimutian faked orders to make its performance look great and tried to use subsidy to suddenly change the habits of the users, eventually leading to its own destruction. In fact, startups that used middle and small-sized restaurants as entry points to develop are having a great and solid start. They get goods supplies from local wholesalers and deliver the goods to local middle and small-sized restaurants, truly freeing the purchasing agents of restaurants. In the future, then the purchase volume becomes larger enough, they would consider going straight to the source areas and get goods there. When that time comes, they will face the same obstacles that Yimutian had encountered,

Even though Yimutian has failed this time, the Internet will not stop penetrating the agriculture industry.

[The article is published and edited with authorization from the author @Ma Jing, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.