The 'Direct-from-Factory' Ambition: How Ding Lei's NetEase Yanxuan Sparked a 'Quality E-commerce' Revolution

Prologue: An "Expensive" Shirt

The story begins with one of Ding Lei's shopping experiences.

Once, he went to a top luxury store to buy a shirt. He found that a simple all-cotton shirt, which seemed ordinary in material and workmanship, was priced at several thousand RMB just because it had a famous logo on it.

"This is so unreasonable!" Ding Lei was full of confusion as he walked out of the store.

As an entrepreneur with a deep understanding of the manufacturing industry, he knew very well that the production cost of this shirt was probably less than a tenth of its selling price. The huge brand premium and the multi-layered distributor system were ultimately paid for by the consumers.

"Could there be a model that cuts out all the unnecessary intermediate links, allowing users to pay only for the 'quality' itself, not for the 'brand'?"

This idea, like a stone cast into his mind, created ripples.

At that time, China's e-commerce market was entering a new stage of "consumption upgrading." People were no longer just satisfied with "being able to buy," but were beginning to pursue "buying well." However, the market was filled with either high-priced international brands or Taobao's miscellaneous brands of varying quality, with a huge market gap in between.

Ding Lei keenly seized this opportunity. He wanted to create a "different" e-commerce platform, one that could provide high-quality and cost-effective goods for China's emerging middle class.

This platform would later be known as "NetEase Yanxuan."

Act I: The "Anti-Business" ODM Model

In April 2016, NetEase Yanxuan was officially launched. Its business model was highly disruptive, even somewhat "anti-business" at the time.

It featured a model called "ODM" (Original Design Manufacturer).

In simple terms, NetEase's team went deep into various parts of the world to find the top factories that manufactured for international first-tier brands (such as MUJI, Coach, Zwilling, etc.). Then, NetEase placed orders directly with these factories to produce goods of the "same quality" as those big brands, but cut out the brand premium, attached the "NetEase Yanxuan" label, and sold them to consumers at a price close to the factory price.

"A better life doesn't have to be expensive"—this slogan accurately hit the pain points of countless middle-class consumers at the time.

The essence of this model was a "revolution" against the traditional brand value system. It told consumers: you can buy three towels of the same quality on Yanxuan for the price of one towel at MUJI. The only difference is that the towel doesn't have the MUJI logo.

This was tantamount to dropping a bombshell in the e-commerce industry at the time. It completely bypassed brand owners and distributors at all levels, connecting "factories" and "users" in an unprecedented way.

Act II: The "Tortoise Speed" Expansion Philosophy

Compared to the tens of millions of SKUs (Stock Keeping Units) of platform-based e-commerce giants like Alibaba and JD.com, NetEase Yanxuan's expansion speed seemed exceptionally "slow" and "restrained."

In the early days of its launch, Yanxuan had only a few dozen SKUs. Every product launched went through an almost "perverted" strict screening by Ding Lei and his selection team.

Ding Lei personally served as the "Chief Product Experience Officer." It is said that he had to personally try every product launched on Yanxuan, from the water absorption of a towel to the smoothness of a suitcase's wheels. If he was even slightly dissatisfied, he would immediately reject it.

He would even travel around the world to find the best ingredients. In order to make the most delicious pork jerky, he had his team scrap tens of thousands of pounds of pork to repeatedly adjust the recipe.

This almost "obsessive" pursuit of product quality was another embodiment of Ding Lei's "craftsman spirit."

He knew very well that as a latecomer, Yanxuan could not compete with Taobao and JD.com on being "big and comprehensive." Its only chance was to be the ultimate in being "small and exquisite."

"We don't aim to sell the most things," Ding Lei told his team. "We only aim to make every item we sell the one that users can buy with their eyes closed in the same category and not go wrong."

This "tortoise speed" philosophy, although out of place in the traffic-is-king e-commerce world, accumulated the most precious asset for Yanxuan—the "trust" of its users.

Epilogue: A "Revolution" in Lifestyle

The significance of NetEase Yanxuan's appearance has long surpassed that of a simple e-commerce platform. It is more like a "revolutionary manifesto" for a lifestyle.

It made the new generation of Chinese consumers begin to rethink: what do we really need? Is it the expensive logo, or the high-quality experience brought by the item itself?

The success of Yanxuan also led to a new wave of "factory stores" and "private labels" in China's e-commerce industry. Latercomers like Xiaomi Youpin and Taobao Xinxuan more or less bear the shadow of Yanxuan.

With a seemingly "unserious" crossover, Ding Lei once again proved his precise vision as a top product manager.

He can always find the most essential user needs that are overlooked by the giants in a seemingly saturated and opportunity-less market, and satisfy them in the "stupidest" and "heaviest" way.

From gaming, to music, to e-commerce, every move Ding Lei made seemed "illogical," but behind it all, there was a clear main line: the ultimate pursuit of "good products" and the ultimate belief in "user value."