As businesses, especially brick-and-mortars, scramble to find new sources of funding through loans, grants and crowdfunding, one business has found a new revenue stream and a win-win business strategy in the form of fresh food delivery.
“The impact of the coronavirus includes long-lasting effects to consumer behavioral change, and businesses should be aware of that because this will also cause their business models to change,” says Andrew Pan, senior vice president and head of China business and strategy at East West Bank.
Yamibuy, an e-commerce business that sells a large inventory of Asian snacks and other goods such as cosmetics and household items, has ventured into fresh food delivery. “We’ve been in the e-commerce space for more than 6 years now, and we have almost 1.5 million customers through our app and services, but we’ve only delivered nonperishable products to people. Delivering fresh food has always been in the back of my mind as a new venture for the business,” says Alex Zhou, CEO and founder of Yamibuy. “So, when the coronavirus situation emerged, I told my team that this was the time to launch the idea, and we had to move fast.”
“The impact of the coronavirus includes long-lasting effects to consumer behavioral change, and businesses should be aware of that because this will also cause their business models to change.”
With only a few weeks to prepare for the launch, Zhou and his team came up with the best solutions on how to keep overhead costs low, support local supermarkets and find ways to amass a capable delivery team.
“To build your fresh food delivery from scratch, you’d need everything from building the right warehouse, to having a supply chain and operation unit that would take months and even years to grow across the country,” says Zhou.
While Yamibuy has a warehouse in California to store nonperishable items, the team didn’t have the time or additional capital to pour into finding a space to store fresh produce. “We knew, after looking at what happened in China, that most of us in the U.S. would be staying at home,” says Zhou. “Given this knowledge, we knew that [the] customer acquisition cost for our service would be low.”
With the means to reach customers through their app and offer delivery services, Zhou was able to get many local Asian supermarkets in strategic geographic areas to become partners. “We predicted that foot traffic to supermarkets would also significantly decrease, and I’m sure local supermarkets have noticed this change as well. So, onboarding supermarkets was relatively straightforward,” he says. “These supermarkets already have a very strong supply chain, but what they don’t have is the technology and data that we could provide, so it really made for a win-win situation.”
Yami Fresh officially launched in April across Los Angeles and Orange County. The company is aiming to launch in Texas, New York, Illinois and Washington state in the next two to three weeks.
“These supermarkets already have a very strong supply chain, but what they don’t have is the technology and data that we could provide, so it really made for a win-win situation.”
“There are challenges for every new project and new business model,” says Zhou, “and for this model, we realized that we weren’t in control of everything.” By working with multiple supermarkets, Zhou and his team had to get acquainted with each supermarket’s unique system and communicate with them regularly to have a streamlined process. “We essentially had to create a new standard operating procedure (SOP),” he adds.
To gain stronger insight into how this SOP would work, Zhou worked with one supermarket to test the model and identify areas with potential problems. Once the team had a robust SOP, they then applied it to other supermarkets. “It was very successful, and I think during the first few hours of our launch, we already had a couple hundred orders,” shares Zhou.
Zhou also needed to hire a team of delivery staff, which meant additional costs. “You have to deliver these fresh products directly to a customer’s home, so it’s not like using UPS or FedEx,” says Zhou. “We had to work with third parties and come up with something similar to an Uber model to have part-time drivers.”
Whenever customers request a delivery, it alerts nearby drivers, and they are paid per package delivery. “We also predict that the density of orders will grow in each of our targeted areas,” says Zhou. “So once it reaches a certain threshold, we can significantly lower the delivery cost.”
“As an e-commerce and technology company, we have a lot of data. So, our initial objective has been to focus on our existing customer base. We would target customers located in areas such as Irvine, Pasadena or San Gabriel Valley, and send them emails and advertisements to let them know that we have this new service,” says Zhou.
Doing so allowed the company to start delivering right away. “We also rely on word-of-mouth,” says Zhou. The team has leveraged social media, especially WeChat. On WeChat, they created multiple chat groups based on regions, such as Yami Fresh Pasadena and Yami Fresh Irvine, to get customer feedback. This has also encouraged existing customers to add their networks of friends and family into this chat group.
He stresses that the key to maximizing their dollar per order is to market only in specific areas. “We also want to market to people in specific geographic locations to keep our costs low,” says Zhou. “If we want to create more density in Pasadena, for example, we would want to market just in that area. Because if you get 20 orders, you’re going to have a lower delivery cost if they’re all from Pasadena, as opposed to if you have orders coming in from West Hollywood, Pasadena and Long Beach.”
“This isn’t a temporary service during the coronavirus,” says Zhou. “We see it as a long-term project, and we want to continue working with supermarkets for the future, as well, because I still believe that this model will stay a win-win situation for us all.”
Once Yami Fresh expands nationwide, Zhou is already thinking steps ahead on how to increase the variety of products. “Right now, we’re still focusing on food because this is what the customer needs most, and this is what we’re currently able to provide,” says Zhou. “But in the future, we would like to offer everything that your local supermarket may offer through delivery.”