The economies scales were developed. Since all the stores were in Shanghai, it saved goods shipping costs, lowered down supplier' barging power, saved management transportation costs, lowered down finance transaction costs, etc, Yaohan was able to make a lot more profits at a time of economies scales in Shanghai, but when the finance crisis went into the picture, everything was changed to the opposite.
The larger, the more profits, this is a wrong business strategy.
It will be beneficial for some companies expend business scales for some certain degrees, when the average unit costs to fall as the scales of output is increased, the company produces higher revenues. Yaohan benefited from the early expansions, but there are another two big indicators of Yen raising and the 1997 Asian finance crisis lead to its bankrupt- die young.