© Maris G. Martinsons 2001, last updated in 2005
This case is based primarily on interviews with key players conducted by the author in 2000 and 2001. Data from the interviews are supplemented by information extracted from media reports.
Hong Kong-based businessman Jimmy Lai Chee-ying launched adMart in June 1999 to sell groceries over the Internet. This start-up was the cornerstone of an effort by Mr. Lai to once again demonstrate his entrepreneurial acumen by successfully diversifying into e-commerce. Back in 1981, Jimmy Lai set up a garment factory and started to sell casual clothing in Hong Kong under the brand name of Giordano. He subsequently developed the Giordano brand into a multinational company that became one of …show more content…
One newspaper report suggested that IBM and Procter & Gamble were among the few top-tier suppliers to resist this pressure. If this allegation were true, adMart would have been forced to make use of grey market channels and/or to source lower-quality products. AdMart initially limited its product scope to 60 core items. Those included beer, cola and fruit juice, canned goods and rice, soap and laundry detergent, and baby products like disposable diapers. By selling bulk groceries instead of fresh produce, the company saved money on refrigerated storage even though it may have neglected certain high margin items. The decision to sell only a few products and making bulk purchases should have enabled adMart to keep down the costs of its goods sold. However, several key suppliers appeared reluctant to deal with adMart let alone to offer it preferential prices. At the beginning, adMart aimed to operate its own warehouses and delivery systems. Despite its limited reliance on leading brand names, adMart made large investments in both its goods inventory and capital assets. At one point, it had 48 outlets and/or warehouses while employing more than 1500 people – 150 to take orders and almost 1000 to handle logistics. The last CEO of adMart, Mr. Anton van Gorp, admitted that "We had excessive