Zhejiang firm seeks growth(2)

Higher costs also mean higher risks. So Dai wanted to do better than other companies' crude "warehousing-plus-transporting model" and lower the costs in an innovative way.

Youcan developed its unique "check-free delivery model". Generally speaking, when a truck is sending goods from the warehouse to convenience stores, it stops at store A, unloads the requisite goods and cannot leave for store B until the staff from store A finish checking the goods with the truck driver. The process typically takes from 20 to 30 minutes and inevitably delays a truck's delivery round.

Under Youcan's system, trust has been established between the deliverer and the recipients, allowing a truck to go to store B immediately after it drops off goods at store A, leaving the store staff to check the goods by themselves. Because Uni-Champion serves around 28,000 outlets in Hangzhou, the system saves a tremendous amount of time and delivery costs.

Cai Wenguang, general manager of Uni-Champion Logistics, said in the past five trucks were needed to serve 100 stores. Now only four trucks are needed, which is equivalent to a 20 percent cut in costs.

Data management necessarily follows the "check-free delivery model", Cai said. Traditionally, a delivery center works only by acting upon the orders from stores in a passive way. The lack of planning tends to make many logistics companies' operation costs unmanageable.

But now, there is a system through which Youcan's delivery center can collect real time sales data from stores and react accordingly, dispatching replenishments right away.

"Our technology has liberated us from being a simple, passive delivery provider to become a real logistics coordinator," Dai said, adding now Uni-Champion is serving up to 70 corporate clients in Hangzhou, including Tesco, Starbucks and the domestic restaurant chain Waipojia. The logistics business now contributes 15 percent to the group's revenues.

Interestingly enough, Youcan's initial success in its logistics venture has led it to realize how much value it can produce for retailers. So, why not enter the retail business itself?

In fact in 2005, Dai opened several Youeasy convenience stores in Hangzhou.

For retail, rent makes up a large portion of total cost. How to make the most of space thus becomes a critical question for managers. For Youcan, this can be done with the help of its smart logistics service.

"In the past for example, one square meter of space could store four cases of beverages (100 bottles). But not all of them would sell out in one day. Now, with our delivery system, our stores can put, say, just 20 bottles on the shelf and leave more space for other goods or purposes," Dai said.

Now Dai has 100 convenience stores in Hangzhou, although, as a whole, his commerce arm has yet to prove as profitable as his logistics venture.

During his interview, Dai liked to use the phrase "resource consolidation". And, over the last decade, he certainly has done so much of that as to have consolidated his resources into a growing value chain.

Nowadays, food manufacturing remains the cornerstone of Youcan and contributes the largest share of its group profits. It is important because it still provides the financial resources for Dai's mini-conglomerate to explore its way forward.