How Can E-commerce Transactions Move Beyond "Price by Inspection of Goods"?
Editor's note: Recently, after review and deliberation by industry experts from the Ministry of Agriculture, the China Association of Traditional Chinese Medicine, the China Traditional Chinese Medicinal Materials Logistics Expert Committee and other departments, the "Electronic Trading Specification Standards for Traditional Chinese Medicinal Materials Products" (hereinafter referred to as the "Standards"), completed by Chengdu Tiandiwang Information Technology Co., Ltd., was approved, pioneering electronic trading standards for agricultural products. How were these standards formulated, what are their characteristics? How will they be implemented? What insights do they offer for China's agricultural product e-commerce?
If you were to ask what the price of fritillary (Beimu), used to relieve cough and resolve phlegm, is, an expert would certainly ask you in return: do you want Zhejiang fritillary (Zhebeimu) from Zhejiang, Pingbei from Jilin, Jiangbei from Xinjiang, or Chuanbei from Sichuan? And Chuanbei is further divided into three types: Songbei, Qingbei and Lubei. Different producing areas and varieties mean different prices. In addition, depending on grain size, breakage rate, oilseed rate and other quality characteristics, the price must be judged separately. Because there are far too many categories and specifications, "price by inspection of goods" is a trade practice in traditional Chinese medicinal materials that has continued for a thousand years.
Under the wave of "Internet Plus," it is nothing new for traditional Chinese medicinal materials to go online. According to statistics, China's traditional Chinese medicinal materials e-commerce platforms currently have annual sales of 20 billion yuan, but transaction disputes caused by unclear standard specifications continue unabated, becoming a bottleneck for e-commerce development.
From General to Precise
Sorting out and distilling thousands of specification standards for 202 commonly used traditional Chinese medicinal materials
During the National Day holiday, Long Xingchao, chairman of Chengdu Tiandiwang Information Technology Co., made a special trip to Shiyazi Village, Jifeng Town, Zhongjiang County, Sichuan, where the local traditional Chinese medicinal material, white peony root (Baishao), was in harvest season across the hills. Long Xingchao wanted to reacquaint himself with this medicinal material starting from the field, personally processing and grading it, in order to further refine and improve the e-commerce trading standards for white peony root.
Long Xingchao, who has worked deep in the traditional Chinese medicinal materials field for 26 years, is the founder of the B2B platform Tiandiwang for traditional Chinese medicinal materials and a core promoter of the "Standards." "The formulation of the 'Standards' is not something invented out of thin air, but rather a scientific method of systematically analyzing, summarizing, consolidating and distilling existing trading specifications," said Long Xingchao. Within the traditional Chinese medicinal materials industry, some generally recognized specification standards have already taken shape, such as producing area, size and diameter, dryness and moisture level, broken grain rate, impurity rate and so on. However, because these standards are relatively general, in an online trading environment buyers and sellers often find it difficult to reach a precise and unified consensus on these standards based solely on the other party's description, thereby causing disputes and seriously affecting the development of traditional Chinese medicinal materials e-commerce.
In 2012, Long Xingchao specially formed a standards formulation team and, using industry connections accumulated over many years, began contacting several major traditional Chinese medicinal materials markets such as Yulin in Guangxi and Chengdu in Sichuan, as well as senior experts from dozens of traditional Chinese medicinal materials producing areas across the country, to discuss standards formulation together. After 3 years of systematic summary and sorting, 1,184 subdivided product specifications for 202 commonly used traditional Chinese medicinal materials varieties were put into application.
"The formulation and improvement of standards is a long-term and ongoing process," Long Xingchao told reporters. By the end of 2016, the "Standards" will cover more than 5,000 product specifications for 1,200 commonly used traditional Chinese medicinal materials varieties. Moreover, "as understanding deepens and market demand becomes more refined, the standards will continue to become more detailed; for example, in the future pesticide residue content, trace element content and other factors may all be included."
From Offline to Online
Medicinal material merchants taste the sweetness of e-commerce standardization
Tang Ning has been running a traditional Chinese medicinal materials business for 8 years. In August of this year, he began opening a shop on the Tiandiwang B2B platform for traditional Chinese medicinal materials with a try-it-out mindset. Out of caution, he listed only one variety, "burdock seed" (Niubangzi), and strictly followed the "Standards" classification for product specifications. What he did not expect was that in just 2 months he sold more than 200 tons, several times his offline sales.
"I used to think that online transactions where you don't see the person or inspect the goods could not be reliable. Take burdock seed, for example: it is generally divided into two types, cleaned goods and unified goods. Cleaned goods have good dryness and a low impurity rate, while unified goods are somewhat inferior, but different specifications of unified goods correspond to different prices, and generally one can only price by inspection of goods," said Tang Ning. Because he worried that the two parties would have disputes over standard specification issues, he had delayed developing e-commerce business.
After 2 months of experimentation, Tang Ning's thinking underwent a major reversal, and he decided to shift his main energy from offline to online. "After using this set of standards, it has been a great help both for sales communication and for goods supply management," Tang Ning told reporters. Because customers can see at a glance the differences between different specifications of the same variety, communication between the two parties is very smooth; moreover, after using the standards, it is no longer a matter of accepting whatever goods the supplier brings, but rather requiring them to supply strictly according to the standards. Although costs have increased, it is much less worrisome, and the goods also sell at better prices.
Long Xingchao revealed that in order to truly "land" this set of standards and let more buyers and sellers of traditional Chinese medicinal materials benefit from this system, starting from November 1 of this year, the Chengshilong e-commerce platform of Tiandiwang for traditional Chinese medicinal materials will fully roll out this set of standards, requiring settled merchants to strictly classify goods according to the standards, and specially certifying merchants that use this set of standards.
In order to let merchants fully understand this set of standard specifications, Tiandiwang for traditional Chinese medicinal materials, in addition to using information technology means to carry out training and popularization, has also produced a batch of standard samples, which will be mailed one by one to e-commerce operators on the platform.
From Production-Driven to Consumption-Driven
Standardization of ordinary agricultural products is not a difficult problem
"Ordinary agricultural products, like traditional Chinese medicinal materials, do have standards in the traditional trading system," believed Long Xingchao. Distilling and summarizing a set of standardized and operable standards from the existing vague and general standards system for agricultural products is not a difficult matter. "Take Chinese cabbage as an example: quantitative provisions can be made for its height, diameter and so on, which can guarantee its marketability," said Long Xingchao.
Since formulating agricultural product standards is not difficult, then why does fresh food e-commerce still face standardization challenges? According to the relevant person in charge of the Informatization Division of the Chengdu Agricultural Commission, the key is that the current agricultural product market is driven by production rather than by consumption. "Agricultural producers have a vague understanding of consumer preferences, can only follow their feelings in production planning, and do not carry out refined sorting in post-production handling," said the person in charge. Even if a set of agricultural product standards is promoted and established, if the tradition of production-driven agricultural production is not changed, the standards will still be difficult to implement.
Long Xingchao also believed that consumption-driven contract agriculture benefits most from standards. "For example, for large procurement orders of certain agricultural products, it is entirely possible to exercise strict control over the quality and specifications of agricultural products by refining standards, avoiding disputes between buyers and sellers arising from inconsistent views on grade and specification," said Long Xingchao. Conversely, a set of authoritative and scientific agricultural product standards is also conducive to the development of contract agriculture.