• This case is about a shanghai based online grocery

store(as of summer 2014)

• Consumers could place orders online by phone or
computer
• Delivery made to home/office
• Delivery made within an hour( in some cases
overnight delivery)

Introduction • Delivery of items of modest value(cheaper rates)

• Ensuring temperature control and delicate
handling of perishable fruits/vegetables
• Challenges – growing competition and fixed costs
associated with store maintenance (capital
intensive structure)
 • Founder and CEO – Ping Mi .Founded in Shanghai in May 2013
• Vision – “Our goal is to provide convenience, freshness and value for
average people”
• Began by billboard advertising campaign (e.g. Mona Lisa smiling with
a platter of fish). Gave early promotions by waving off delivery fees,
special prices for featured products) and free samples given with
related products
• Offered 2000 items including fruits, vegetables, meat, poultry, fish,

Dawn of seafood, milk, egg, grains, oils and snacks( including premium
imports from 20 countries)
• Initially next day delivery for orders placed till 4 PM(Deliveries in slots

Yummy77 of 4 hours between 9 AM to 6 PM each day and only in Shanghai

delivery between 6 PM to 9 PM at additional fee of 5 yuan)
• Target audience – China’s upper middle class and office goers(e.g.
imported cherries, kiwifruit and avocados were sold at lower prices)
• Delivery charge of 10 yuan was waived off for orders above 99 yuan
• Delivery was a 3-step process : –
• A single warehouse
• 30 delivery stations (serving 10 km radius)
• Scooters for final delivery
 • Market for e-ordering of fresh food doubled
in China from 2013 to 2014 (about 2.89
billion yuan)
• Major Competitors – 1mxian, Beequick,
Benlai, Dmall, Epermarket, Farmlink, Fields,
Fruitday, Kate & Kimi, Meicai, S.F. Best, Tesco,
Too , Womai, Xuxian, Yiguo, Yihaodian
Competition • Market changes – Lose money on fresh food
to attract customers for clothes and
electronics(Durables with less spoilage risk
and high prices relative to product size)
 • By summer 2014, Yummy77 had expanded to the major cities
in almost all provinces throughout China—but competitors
were equally aggressive.
• While Yummy77 offered imported goods, it maintained a
reputation for low cost.
• Yummy77 recognized that certain niches could support
premium pricing, but the company was unwavering in its

Reinventing The
insistence on serving the mass market.
• Yummy77 moved towards opening its own retail locations
throughout Shanghai.

Model • These neighborhood stores were approximately 2,000 square

feet, like the size of a midsized Starbucks in the United States,
and much smaller than a standard grocery store.
• They therefore stocked only the items that were purchased
most frequently, typically about 2,500 items (SKUs) per store.
• Popular items included dozens of types of fresh fruits and
vegetables, as well as meat and, in a popular addition, live fish
in tanks.
 • Neighborhood stores served both to display goods and to store
inventory for rapid delivery by Yummy77’s staff.
• In the revised operating model, customers’ online orders would be
fulfilled from inventory in the nearest store, then delivered by
scooter by a Yummy77 staff person.
• More stores therefore reduced delivery distance as well as the
customer’s wait for items to arrive.
•

Reinventing The
Yummy77’s small stores brought logistical benefits. With stores so
close to customers, it was realistic to deliver most orders within an
hour.

Model
• More than 98% of orders were delivered within an hour, on average
in just 43 minutes, and company projections suggested it would be
possible to reduce the average delivery time to just 30 minutes.
• Customers clearly appreciated the faster deliveries: With in-an-hour
delivery, Yummy77’s retention rate for first-time customers nearly
doubled, growing well above 50%.
• Customer order frequency also increased; as of October 2015, the
average customer ordered more than three times per month, with
some customers ordering twice a week or even more than that.
 • In June 2015, the company began to pursue commercial
sales.
• At first, Yummy77 treated small restaurants the same as
consumers, letting them order one day for delivery the
next. Restaurants already used this approach for orders
from other suppliers, so this fit both restaurant routines
and Yummy77’s operating model.

Business To • As Yummy77 shifted to within-an-hour deliveries,

restaurants got the benefit of that speed, allowing them to
adjust to unexpected demand—particularly useful for

Business Prospects small restaurants with limited space to store ingredients

and with significant uncertainty about customer demand.
• Yummy77 also added discounts for frequent customers.
The largest and most frequent customers received
discounts of approximately 20% compared to the prices
charged to consumers.
 • In the first four months, more than 1600 small restaurants signed
up.
• Their average order was 430 yuan (about US $68), but with daily
orders increasingly common, restaurants could have an outsized
impact on company revenues.
• Orders also tended to emphasize larger quantities of fewer distinct
items, such as a whole case of a given drink, which offered
additional efficiencies in packing and fulfillment.

Business To • As of October 2015, restaurants and other commercial accounts

totaled 25% of Yummy77’s business, growing notably faster than
consumer sales.

Business Prospects • More sales helped justify additional neighborhood stores which in
turn increased efficiency. Furthermore, greater sales improved
purchasing power to lower prices for everyone.
• The restaurant supply business was notably fragmented, with
regional firms and no national incumbent. Indeed, other restaurant
supply firms tended to use multiple layers of brokers and
distributors, potentially adding cost over Yummy77’s direct model
and shorter supply chain.
 • Yummy77’s site proclaimed that the company’s “Delicious
Feast” would help busy urbanites “decompress” from
Shanghai’s “pressure-cooker-style living” to “discover the
fun of food.”
• The company hoped to add 72 more Shanghai
neighborhood stores by summer 2016, taking the total to
at least 120 and perhaps somewhat beyond.
• It would also be natural to expand the neighborhood store
concept to other cities in China.

Looking Ahead • Yummy77 managers projected that they would need at

least US $100 million to expand in the way that they
hoped.
• Far from getting rid of stores, grocery delivery might turn
out to entail building more retail locations.
 •Many companies tried to enter the online grocery but failed
to survive, the reason behind the failure is that the
companies failed to fulfill the customers’ desires.
Q1. Many companies •The customers wanted that the items should be fresh, and
delivery should be quick together with competitive market
have tried and failed at prices.
•This news was a good news for Yummy77, because if the
online grocery ordering competitors would be out of the market then Yummy77 will
gain large market share. Ultimately, large market share will

and delivery. Is there increase the profitability of the company.

•Yummy77 sought to offer prices like standard retail stores so

grounds to think
it focused on simplifying its supply chain to reduce costs.
•It also offered rapid delivery of perishable items.

Yummy 77 will fare •For high end products, it by-passed the brokers, forwarders
and other intermediaries that inflated the price of these

more favorable? Why?

products at other retailers.
 Considering the aggressive approach of delivery by
Yummy77 these features may decrease the chance of
success because it needs specialized logistics:
Q2. Yummy77’s approach is • Some products require cold chain storage.
• Some need same-day delivery.
more aggressive than prior • Fruit and vegetables are difficult to store and keep
attempts by others. Consider fresh.
• The waste rate of most agricultural products is quite
rapid deliveries, short delivery high compared to other goods.
• High cost and time associated with importing frozen
windows, and perishable foods from overseas and then supplying to
merchandise. Do these features customers.
• Religiously abiding by the food and safety standards.
increase or decrease
Yummy77’s chances of
success?
 • Any further improvement should be clear, concise and
free of complexities.
• The best approach would be to be a part of Amazon’s
online grocery store so that it can be a backend
Q3. The case offers two support.
•
operational models for •
Launch monthly subscription plans.
Yummy77 could also employ blockchain in its logistics
Yummy77: the original •
network.
To provide more visibility to the customers, they can
delivery stations and have real time tracking of scooter by GPS-enabled
equipment.
subsequent neighborhood • An optimized transportation routing system which
stores. Is there room for facilitate the cross-docking of perishable products to
ensure freshness.
further improvement in the • Due to these new efficiencies, it can also reduce its
delivery fees by half. Peapod is one such example.
company’s approach? How?
Thank You