Uncertain times for local online shopping platform

Shanghai-headquartered online shopping platform Ymatou is reported to be struggling with dwindling cash flow and a challenging business outlook.

Some sellers have complained that they had to wait months to collect their receivables from the platform since early 2022.

The company's headquarters in Jing'an District was closed down and there has been speculation that the company will no longer be able to pay back lenders and suppliers.

Shanghai Daily tried to reach Ymatou by calling the telephone number on its website but no one answered.

The company said on Tuesday that it removed a number of sellers peddling fake goods from its platform, and those who were unable to collect their receivables spread rumors that the company was refusing to pay suppliers and debts.

Ymatou officials said it has not laid off employees even though its office is closed down for the time being.

Last month, Zeng Bibo, the company's founder and chief executive, acknowledged in an open letter to sellers and suppliers that the company is facing mounting challenges, but he pledged to make all efforts to keep the business running, stick to customer service and pay its debts.

Zeng said Ymatou had to close its office because the lease expired at the end of August, and it has asked employees to work from home to cut rental expenditures.

He said it has suspended payments to some sellers because they were selling fake merchandise and their online storefronts didn't comply with the platform's rules. He also said these sellers have spread rumors that the company is going bankrupt.

Digital retailers of imported goods are still favored by domestic shoppers seeking niche overseas products, but individual sites face various challenges and have more difficulty winning back shoppers' trust than e-commerce giants like Alibaba and JD.

Zhang Zhouping, analyst at the Internet Economy Institute

The crisis faced by Ymatou highlights the uncertainty and competitive landscape of the country's online shopping environment, especially for imported goods.

Ymatou started its business by offering individual sellers, or sourcing agents (daigou), a platform to sell niche foreign products to Chinese buyers and gradually added small businesses and overseas brands to its offerings.

Founded in 2010, Ymatou has since attracted hundreds of millions of yuan in venture capital investment and has been bullish on building its own cross-border logistics facilities to speed up deliveries.

At its peak, the site had about 116 million users and more than 80,000 overseas sellers.

But in recent years it has faced challenges. Unlike established overseas product vendors like Tmall Global, JD Worldwide and Alibaba's import e-commerce unit Kaola that allow brands to set up official flagship stores, Ymatou lags behind in terms of supply chain, delivery and customer service.

Many shoppers have turned to social media to complain of fake or inferior products sold without proper subsequent customer service.

Chinese social media Sina Weibo's online customer complaint segment received hundreds of requests for Ymatou to properly handle refunds and after-sales service.

An online shopper with the nickname "Forest Island 518" complained that she asked for a refund for facial masks she purchased in early August, but the vendor has been delaying her request for about one month.

Ymatou's business performance and shoppers' sentiments have been unfavorable as pandemic restrictions have limited deliveries of imported goods. Some said it took several months to receive their purchases from overseas sellers.

Chinese Internet consultancy iiMedia said Ymatou has only about 5 percent of market share compared with market leaders like Tmall and JD that combined have more than 50 percent market share.

Cross-border e-commerce trade is still booming, with a total market size that grew 14 percent in 2021 to 3.2 trillion yuan (US$460 billion) and a consumer base of 155 million, according to private consultancy Internet Economy Institute.

Last year, Ymatou tested the waters with new offline stores offering imported products at lower prices than duty-free shops in cities like Shanghai and Chongqing that leveraged livestreaming sessions to win back shoppers.

Digital retailers of imported goods are still favored by domestic shoppers seeking niche overseas products, but individual sites face various challenges and have more difficulty winning back shoppers' trust than e-commerce giants like Alibaba and JD, said analyst Zhang Zhouping at the Internet Economy Institute.

"Customers now have a wide range of shopping sites to choose from, and even niche imported goods are not difficult to purchase from domestic retailers right now," said Zhang. "It's hard to differentiate what they're offering considering the highly competitive landscape."