The last week of August was especially hard for Yimutian employees. On Aug. 28, the agricultural e-business site announced the overnight termination of half its staff.
News first appeared on Ebrun.com, which cited anonymous sources who identified themselves as former Yimutian employees. The mass layoffs were attributed to employees?alleged violations of company policy.
“During the day I worked hard to win a customer. That night, they sent me a message telling me not to come in the next day,”said Li Wei (pseudonym), an Yimutian employee. “It was too sudden, and the reason the company fired me was groundless.”
More than 1,500 employees were fired overnight, Li said. Yimutian had 3,000 employees at its peak.
Industry watchers took the mass layoffs as a sign that Yimutian is in trouble. Rumors that Sequoia Capital is withdrawing its investment in the company have been circulating for several weeks.
Although Yimutian has officially denied the rumor, Sequoia Capital has been ambiguous about its interests in the company.
August was not not the first time Yimutian experienced a reputation crisis.
In July, Yimutian was caught making false transaction reports. Among the more questionable trades were the sale of 999.99 tons of peaches to a man surnamed Liu and 1.07 million tons of onions to a client surnamed Li.
Even Xichang, a city in Sichuan province known for producing an absurd number of onions, can only produce 300,000 tons in a full year.
Yimutian announced its trading volume was only 500,000 yuan per month in 2014. This year, it declared it was processing 10 billion yuan per month.
Faced with doubts and criticism, Yimutian held a press conference to declare its strange numbers only reflected test data, and that the data shown on its website was very different from the company’s private records.
But the 300 million yuan in sales per day were absolutely correct, it said.
Nevertheless, the damage to the company’s public image was done, and its two reputation crises pushed it to the center of a debate about the viability of agricultural e-business.
Obstacles to Developing Business
When Yimutian was formed in 2011, investors hoped it could become a second Taobao – China’s e-commerce goliath.
Deng Jinhong, creator of Yimutian, described the company’s organization as a decentralized network of top-talents with paychecks to match. The main job for its staff would be to hit the countryside and train farmers in how to do business with buyers from around the country. It would also help buyers to locate farmers with high-quality products.
The reality ended up more complicated. Yimutian never reached its promising idea because the dream was completely out of line with the habits of Chinese farmers.
Although mobile phones are everywhere in China, not all villages have the kinds of towers needed to make them work.
Even where technology could allow Chinese farmers to surf the Internet, most are too occupied with sowing, planting, fertilizing and harvesting their fields.
It needs huge investment, including time, money and equipment, to change the basic habits of Chinese farmers and to introduce them to e-business. Analysts said it would be a doomed battle without a huge amount of investment and incredible patience.
Moreover, the phrase “seeing is believing”is engraved on rural trade. In China, where almost every image is digitally altered, no one can tell whether the goods they see online will arrive the same. Most buyers prefer to inspect produce on their own rather than rely on a picture.
In the rare cases where a suitable farmer and buyer manage to meet, the payment process can become another barrier. Buyers must pay Yimutian through the bank before it will transfer the money to the farmer, who can then get it out of the bank.
Rather than address these core challenges, Yimutian attempted to win users by subsidizing sales.
From December 2014 to June 2015, sellers and buyers were given an 0.001 percent rebate. From June 3 to 17, the subsidy increased to 0.002 percent of the sales volume.
Yimutian said it sold 9.98 billion yuan worth of produce in June.
However, the fact is that before doing business through Yimutian, many sellers and buyers completed their deals. The parties only finished the transaction through Yimutian to get the subsidy.
In other words, their sale was just a show.
Yimutian returned the subsidy rate to 0.001 percent per person on June 17. Last month, it canceled all subsidies for any users other htan its VIP suppliers.
According to an email the company sent to Lu Ye (pseudonym), an employee, Yimutian is canceling its VIP subsidy and moving all sales to a branded members-only app.
It’s hard to speculate whether Yimutian can get survive this crisis and adjust its business model.
But Yimutian’s experience is a lesson for other e-business operators: in the Chinese agricultural product e-business market, a pure information provider cannot survive.