From baby formula to fruit, more and more mainland consumers are starting to buy food from overseas on the internet or through agents as they believe its safer and of higher quality. But the online farmers’ market Yimishiji, a Shanghai-based start-up launched last autumn, aims to support local producers who say their organically grown food is just as good. Matilda Ho, the website’s Taiwanese founder and a former consultant, is also launching a company that invests in startups that tackle global, food-related problems such as food waste, healthy forms of dieting and environmental degradation linked to agriculture.
Why did you change your career path?
Before I started the Yimishiji venture, I worked at the strategic consulting firm BCG for three years advising CEOs on future growth strategies before going to the consultancy IDEO for two years, focusing more on innovation strategy. After five years’ experience, I felt the biggest achievement with consulting is to come up with the most logical solutions for the future. However, it was like you’re a doctor and you give advice for a patient, but you couldn’t see whether they recover because of the medicine or device that you prescribed. You don’t know whether this patient gets healthier again because of you. So I decided to do something myself, something more meaningful. Aside from the fact that I really enjoy cooking, I chose a food-related project mainly because of my two years at IDEO where I basically only worked on food projects. I helped set up organic farms. I also helped farms set up restaurant chains and did a couple of digital marketing projects related to food. During these two years I started to realise how challenging the food system is and how many problems there were that need thinking about and fixing. I felt like I wanted to be contributing to that.
Which kind of consumers are you targeting?
We have two kinds of target consumers. The first are those who have experience overseas, who are maybe very aware of food safety and health and nutrition issues. The second segment are families with young kids who really care about their food source and its quality. Because of this we use a lot of different ways to make sure the quality of our products is right. For example, we send our food journalists to farms to see their farming methods. The farmers cannot use pesticide or chemicals. And then we send their vegetables to testing facilities to make sure that they are pesticide free and chemical free. We publish that report on our website, too.
How do you and the farmers divide revenues?
We don’t have a single purchasing price and then mark it up high to get a really high profit margin. Instead, we benchmark the market price compared to other high-end grocery websites. We share the profits with the family farmers that work with us. We do so because we want to reward farmers who are willing to have the risk of zero yield to be able to continue to support this organic project. Vegetables, fruit and meat, they’re all different. But generally, for our produce, we share 60 to 75 per cent of the revenue with the farmers. We take the rest, which covers losses during transportation, marketing, branding, packaging and delivering from farm to the door.
Logistics is a big problem for online fresh produce sellers. How do you cope with this?
Since day one it was very clear that we had to build our own warehouse and logistics team to have the best quality delivery. So we have our own trucks, our own delivery staff and we help farmers to ship the food from farm to the door. We are a regional online fresh market that only serves Shanghai. Because we only aim at Shanghai it’s not a big burden to have our own logistics operation. The population density in Shanghai is really high compared to many other big cities. So we can justify handling our own logistics, especially when we provide fresh produce. We tried every logistics partner, but they couldn’t deliver the standard we wanted – on average, four eggs out of 10 would be broken. And the consumers don’t blame the delivery companies, they blame us or the farmers, which dilutes our brand’s value.
What’s the furthest place you’ve gone to find the right produce?
A vast majority of the vegetables we sell are produced locally. Obviously fresh produce can go bad within two days so it’s very important we find local producers. We work in suburban districts such as Chongming, Fengxian and even Kunshan. However, for fruit there are some natural constraints. We can find berry farmers and pear farmers, but there’s no way we can find apples, which can’t be grown in this geographical area. So we need to go to Shandong or Shaanxi provinces for apples, even Mexico for avocados. But our priority is always local food because promoting local food is something we want to educate our consumers about. It’s not only easier to manage our suppliers, but also lowers the carbon footprint of transportation.
Do you think Shanghai’s become a mature market for high-end, online food markets?
E-commerce websites for groceries started to appear in China in 2005 and the first higher-end and more crafted sites started in 2008. I have a lot of respect for those people who really wanted to fight for this market in the early days. We chose to do this eight years later because we feel that the average customer has become more sophisticated, not only due to food scandals, but because lifestyle concepts have started to boom. You can find internet platforms such as Yirenshi showing short video clips encouraging people to cook and eat healthily at home. So an overall trend is rising. People are willing to spend more of their income on better and safer food. So the readiness is there and it’s just how we gain consumers trust.
How do you build that trust?
The term organic is so commonly used that some people really have doubts about it. We focus on transparency and sustainability. We name each product with the farmer’s name and publish the distance from the farm to downtown Shanghai because we want to encourage the consumers to go to the farms themselves, to meet the farmers and build up a relationship in person. So far there are 800 to 900 types of food on our platform and we aim to double that by the end of next year. But our goal is not to have the largest number of items because we only want the best to be on our shelf. We meet farmers face to face, building up a relationship with them. Every quarter we sample the products to make sure they maintain their quality. If they fail, then we will take it off our list it right away and terminate the partnership.
Do you have a goal for profits?
One market report says there are 4,000 grocery e-commerce platforms in China and only 1 per cent are profitable at the moment. The difficult thing for e-commerce firms with your own warehouse and logistics teams, or even testing facility, is you have very big, upfront fixed costs. It also needs time and people to reach the different groups of target customers and gain their trust. I wouldn’t imagine any grocery e-commerce website will be able to hit their profitability goal within one year. But we do have a solid plan to hit that in the foreseeable future.
What is the idea behind your food start-ups investment firm?
In a few weeks Bits x Bites will open applications and interview and select five to 10 start-ups that meet our ambitions and mission. They will be able to come to our base to work for 15 weeks. It’s not only about providing capital. What’s more important is the mentoring, the coaching part and the community.
Any other challenges for your venture at the moment?
Consumer education is an ongoing challenge for us to tackle. It’s important to know where your food comes from, and where it goes, because if you don’t reduce food waste there will be consequences for the whole environment. People don’t usually understand this. We spent a year to find our pesticide- free bananas, but they are ugly because there’s no chemicals used. It’s not the same beautiful, shiny yellow bananas you see in the supermarket. So we’ve got a lot of complaints from our customers recently. How come you sell us those ugly bananas? It takes time for them to understand the story behind the journey of this banana or other fresh produce.
Matilda Ho spoke to Mandy Zuo