Chinese online retailer Yihaodian -- minority-owned by Wal-Mart -- investigating potential security breach; roughly 70% of Chinese online customers have been victims of online consumer-data leaks, survey finds

Cindy Allen

LOS ANGELES , June 5, 2012 (Industry Intelligence) – Chinese online retailer Yihaodian, in which Wal-Mart Stores Inc. currently holds an 18% stake, is investigating a potential security breach, The Wall Street Journal reported June 4.

Yihaodian and local public-security officials are currently investigating the security breach, company spokesperson Zou Pine confirmed while declining to provide details relating to the incident such as how many customers could have been affected.

Zou Pine stressed that Yihaodian has added features intended to increase the security of accounts including account-verification codes and a warning system that automatically freezes accounts in response to suspicious activity.

Yihaodian, which was founded in 2008, provides next-day delivery for a product range that includes more than 180,000 items such as clothing, electronics and groceries. In 2011, its reported sales rose to 2.72 billion yuan (US$426.9 million), up from 805 million yuan the previous year. It has 18 million registered users, the company said.

In February, Wal-Mart announced that, pending approval from the Chinese government, it intends to raise its stake in Yihaodian to 51%.

In 2011, the value of online business-to-consumer transactions in China more than doubled year-over-year to 240 billion yuan, market-data firm Analysys International said.

The rapid rate of change in the Chinese e-commerce industry has left sites vulnerable to cyber attacks, particularly since retailers have little time to implement thorough security updates, said CEO Steve Mushero of ChinaNetCloud, an Internet-service company that is based in Shanghai. In addition, hardware and security systems in China are roughly a decade behind those in the U.S, Mushero noted.

Online consumer-data breaches in China have increased as more and more Chinese consumers go on online. Personal data for roughly 70% of Chinese consumers has been leaked from Internet sources, according to a 2012 survey of 3,000 consumers in China that was conducted by Xinhua, a state-run news agency.

The hackers are interested in selling personal data to commercial companies, said CEO David Wolf of Wolf Group Asia, a marketing strategy firm that is based in Asia.

The primary source of this article is The Wall Street Journal, New York, New York, on June 4, 2012.

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