(Yicai Global) Dec. 2 -- Dailuobo, a fresh groceries e-commerce platform, is to close its Hangzhou center despite securing CNY634 million (USD90 million) in an A-round of financing just five months ago, the Beijing Youth Daily reported today.
The Hefei, Anhui-province based company also raised an unspecified amount in a B-round last month from Russian venture capital firm Digital Sky Technologies, the report said.
Encouraged by this injection of capital, operator Anhui Caicai E-Commerce decided to grow from 100 to 10,000 stores. But it appears that the planned expansion was too rapid and financing was delayed, resulting in overstretched finances.
This has led to the closure of the online-to-offline grocery delivery firm's base in the bustling metropolis of Hangzhou, capital of Zhejiang province. Employees claim that the company owes CNY30 million (USD4.3 million) in unpaid wages and social insurance payments to 300 employees in Hangzhou and Hefei.
Proper arrangements have been made for all employees, the firm's partner Liu Feng said on his WeChat account on Nov. 28.
Based on the concept of 'today's order, tomorrow's delivery,' Dailuobo runs a chain of fresh groceries stories located in dense residential communities. Consumers make their purchases online and can pick up their order from the nearest outlet the next day. So far, the firm has opened 1,000 stores in 19 cities in Anhui, Jiangsu, Hubei and Henan provinces.
Poor management has caused Caicai E-Commerce to default on payments to its suppliers and to lay off workers, a report said on Nov. 22. There were even rumors that suppliers had looted the firm's warehouses, something Dailuobo denies.
The company will work hard to find a solution to its problems and to raise enough funds to meet its obligations, it said on Nov. 22. Suppliers have been supportive and the company has one month's worth of reserve supplies, it added in a separate statement on Nov. 25.
To make matters worse, at the beginning of the year, Dailuobo offered store managers the opportunity to become partners for an investment of CNY156,000 (USD22,169) each. Should the firm cease operations though, the managers not only face losing the money, but are also liable to the customers in their community who will want their payments honored.