---
title: "Orange Heart Preferred Self-Rescue, Shifts Focus to Wholesale Business"
description: "Starting in September, Orange Heart Preferred (Chengxin Youxuan) shrank its service area from 31 provinces to 9, cut staff from 16,000 to 5,000, and saw orders drop from 12 million to 2 million. Now, it is pivoting to a wholesale business model to survive."
author: "晚点团队"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-11-23"
language: "en"
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# Orange Heart Preferred Self-Rescue, Shifts Focus to Wholesale Business

> Starting in September, Orange Heart Preferred (Chengxin Youxuan) shrank its service area from 31 provinces to 9, cut staff from 16,000 to 5,000, and saw orders drop from 12 million to 2 million. Now, it is pivoting to a wholesale business model to survive.

Source: LatePost (ID: postlate)

**No longer need grand ambitions and big goals; survival is the most important thing.**

Starting in September this year, Orange Heart Preferred's service area shrank from 31 provinces nationwide to 9 provinces, its workforce was reduced from 16,000 to 5,000, and order volume dropped from a peak of 12 million to just 2 million. It seemed there would be no new stories until Orange Heart Preferred decided to shift its focus to wholesale business.

Orange Heart Preferred is a community e-commerce retail platform created by Didi. Its newly incubated platform, "Orange Wholesale," is a platform that connects retail terminals like small supermarkets and mom-and-pop stores with wholesalers.

Goods on the platform are provided by wholesalers, and warehousing and delivery are also handled by wholesalers. The platform transfers its agency rights for many brands to wholesalers and charges a commission of 1-2% of total merchandise value.

This business began in September when community group buying business contracted significantly. Chen Ting, head of Orange Heart Preferred, decided to test the waters in wholesale. Yunnan was the first to try wholesale business, with the logic that if the lower-tier market with scarce supplier resources could succeed, then other regions could also be promoted.

Since there was no longer a need for warehouses, ground promotion manpower, and other costs, Lijiang and Kunming in Yunnan achieved profitability after just one month of testing. At the end of September, leaders from various regions visited Yunnan to learn.

Subsequently, Chen Ting stated at a meeting of more than 20 people that they should "forget the old model and go all in on the new model."

This decision was so fast that some employees felt sudden. An employee who had visited Yunnan for study said he didn't expect that after the meeting, each region would receive tasks—to emulate Yunnan's agent model and achieve profitability within a month.

Some interpreted Chen Ting's words as no longer using the previous subsidy model but pursuing profitability from the start.

Didi maintained its usual strong execution. "Orange Wholesale" is currently available in Yunnan, and in the next month, it will be launched in Northwest China (Shaanxi, Gansu, Henan, Xinjiang), Southwest China (Sichuan, Chongqing), and Zhejiang-Fujian (Zhejiang, Fujian).

This transformation is hard to say has been fully validated. When the above employee tried to discuss whether this model could be replicated, his leader retorted, "If Yunnan can do it, why can't other places?"

The ultimate goal of the transformation is also unclear. Multiple Orange Heart Preferred employees said they only know that the goal of the wholesale business is profitability, but what the next step after profitability is, they are not clear.

A vague direction is to first roll out the wholesale business nationwide and achieve overall profitability, then find opportunities to synergize with the retail business.

How exactly to synergize? How big can the wholesale business become? A middle-level manager who is preparing to leave said, "Don't interrogate me anymore. Those are the second and third steps. Now the first step is the most important: to survive and have food to eat."

"Maybe we can turn things around? Who knows?" this employee said.

The above sources said that before the September contraction, the net profit margin was -50%. After the contraction, the goal for each region was to improve this indicator to -10% (the industry average is -40%), but it was difficult to achieve with the original retail model alone. Shifting to wholesale could narrow losses.

Another Orange Heart source said that in the past two months, internally they realized that the current personnel and funds of Orange Heart Preferred could not support the team continuing to fight on the front lines against Meituan Select and Duoduo Maicai, and the wholesale model could reduce fulfillment costs. "Panning for gold is not as good as selling water."

LatePost learned that each region has now formed a 10-20 person investment promotion team responsible for persuading brand owners and wholesalers to join. The total number of investment promotion personnel in the three regions is within 60. The headquarters has more than 100 product research and development staff supporting the wholesale business, accounting for about 60% of the total headquarters product research staff.

Headquarters personnel believe that the wholesale business is just a trial, and the retail business remains the focus, "at least for the next six months." Going forward, they "don't want to mention grand ambitions and big goals anymore, just want to do business down-to-earth." One Orange Heart Preferred person responded.

Meituan Select and Duoduo Maicai have both tried wholesale business, but they found that wholesale reduces the warehousing and logistics efficiency of retail, so it was stopped internally.

Orange Heart Preferred completely separates wholesale and retail, which can avoid affecting retail, but there are still many issues to solve.

As a matching platform, the core value "Orange Wholesale" provides to wholesalers is bringing more brand products to wholesalers who could originally only represent 1-2 brands. But whether these brand products are popular locally and whether the platform has the ability to obtain multi-category brand agency rights still need to be tested.

The core value "Orange Wholesale" can bring to retail terminals like small supermarkets and mom-and-pop stores is a wide variety of cheap goods. However, compared to Alibaba Retail Link and JD New Channel, which are more mature in wholesale business, "Orange Wholesale" still has a gap in product variety.

Currently, "Orange Wholesale" has 700 product categories in Lijiang, Yunnan, while Alibaba Retail Link can stock 3,000 products in city warehouses. However, Alibaba Retail Link has been online for 6 years, while "Orange Wholesale" has just started.

The business has only been tested for one month, and the ultimate goal has not been fully determined, yet nationwide promotion has begun. This is a hasty transformation and a helpless self-rescue.

**Are you "watching" me?**


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