Agricultural e-commerce suffers widespread losses, yet internet giants remain optimistic
Recently, the agriculture-related e-commerce company Yimutian has frequently been thrust into the spotlight of public opinion due to news such as "data too good to be true, accused of falsification." A report claims that among the thousands of agricultural product e-commerce companies nationwide, 95% are operating at a loss, which has triggered public doubts about agriculture-related e-commerce. However, major internet giants and listed companies are rushing to secure entry points into agricultural product trading. At a recent event held by The Beijing News to find Chinese makers (ID: xjbmaker), many investors and entrepreneurs also believed that agricultural product trading will become the fourth wave of e-commerce after books, clothing, and 3C. Agriculture-related e-commerce is on the eve of an explosion and will become the next venture capital hotspot.
Why is it that on one hand agriculture-related e-commerce is suffering widespread losses, while on the other hand it has attracted a large number of investors and entrepreneurs? What is happening in the agriculture-related e-commerce sector?
Widespread losses in agriculture-related e-commerce
Under fierce competition, some agricultural product e-commerce companies have already gone bankrupt. According to the reporter's incomplete statistics, those that recently went bankrupt include Xiaonongnv, Youcaiwang, and Yiwanjia, and Yonghui's "Banbiantian" also voluntarily went offline. Against the backdrop of a cooling capital market, more and more players are being eliminated. Xu Xiaofeng, founder of Anyoutian, told The Beijing News that according to his observations, in Shanghai alone, more than a dozen agriculture-related e-commerce companies have died this year. Youzhigong posted an emergency notice half a month ago, stating that due to business adjustments it would close on August 31, and currently all products on the page have been taken down.
Xu Xiaofeng said that agricultural e-commerce is a very difficult field to crack, and without securing financing, it would have been hard for him to survive until now. Wang Xiang, founder of Taodi Technology, said that the added value of agricultural products is very low, but logistics and preservation costs are high, and in some cases even exceed the cost of the goods themselves. These are all problems that agriculture-related e-commerce must face.
To reduce spoilage, agricultural products, especially fresh food, require cold-chain transportation. Dai Shanhui, vice president of Benlai Life, told reporters that currently third-party logistics does not have last-mile cold-chain transportation capability, so vertical agriculture-related e-commerce companies can only choose to build their own logistics. And the cost of cold-chain logistics is far higher than ordinary transportation.
According to the "2014-2015 China Agricultural Product E-commerce Development Report," there are currently nearly 4,000 agricultural product e-commerce companies in China, but only 1% are profitable, while another 7% suffer huge losses, 88% suffer slight losses, and 4% break even. Has the crisis for agriculture-related e-commerce arrived?
Internet giants and investors remain optimistic
While negative news keeps emerging, agriculture-related e-commerce has attracted attention from VC/PE investors as well as listed companies. Many listed companies, including JD.com, Alibaba, Longping High-Tech, and Dabeinong, have also shown strong interest in agriculture-related e-commerce, rushing to stake out territory and build internet agricultural ecosystems.
Some agriculture-related e-commerce companies have also frequently obtained large investments. The bulk commodity trading platform "Nongchanpin Jigouwang" recently announced that it had obtained tens of millions of yuan in Series B financing led by China Science and Merchants Investment and its chairman.
Jin Zhongren, partner at Purun Investment, told The Beijing News that over the past dozen years, the books, clothing, and 3C sectors have all achieved a high degree of e-commerce penetration, but the degree of e-commerce penetration in agriculture-related fields remains very low. According to statistics from the Ministry of Agriculture, in 2014 the national online transaction value of agricultural products exceeded 100 billion yuan, accounting for 3% of agricultural product sales, lower than the average level of 7.9% for retail e-commerce online shopping.
With the entry of capital, more and more players are participating. According to the "2014-2015 China Agricultural Product E-commerce Development Report," by the end of 2014, China had 31,000 agriculture-related e-commerce companies of various types, including nearly 4,000 agriculture-related trading e-commerce companies.
Wang Wenlong, executive director of Legend Capital, told reporters that no monopolistic enterprise has yet emerged in agriculture-related fields, and internet giants have only just begun to lay out their positions. For startup companies, they are on the same starting line as the giants, and entrepreneurs still have room to tap into dividends.
In 2015, the Central Document No. 1 proposed supporting e-commerce, logistics, commerce, finance, and other enterprises in participating in the construction of agriculture-related e-commerce platforms, once again giving a strong boost to the development of agriculture-related e-commerce.
Industry insiders said that with the boost from capital, agriculture-related e-commerce is very likely to become the next venture capital hotspot after O2O and B2B.
"What wins consumers is service and quality"
Agriculture-related e-commerce has encountered many difficulties, but at the same time, more entrepreneurs believe they have already found the crux of the problem.
Since 2014, with the massive influx of capital, agriculture-related e-commerce companies have set off a subsidy war to seize the market, with one-yuan fruit, first-order free, first order gets apples, and so on. In response, industry insiders said that subsidies can only bring short-term benefits to consumers, and in the future what wins consumers will definitely be service and quality.
Dai Shanhui, vice president of Benlai Life, believes that agriculture-related e-commerce has natural barriers and obstacles, first of all the issue of standardization; second is quality control. "Unlike clothing, travel, and other fields, low-price strategies do not work in agriculture-related fields. If the quality is poor, no one will buy it no matter how low the price is."
Unlike industrial products, agricultural products have a low degree of standardization. There are many types of agricultural products. Fresh products alone include vegetables, fruits, seafood, freshwater fish, poultry meat, eggs and dairy, and grains, and each category has further subdivisions. The same product with different appearances, specifications, and parts also has different pricing. "For example, a piece of pork has different prices for different parts." Wang Wenlong, executive director of Legend Capital, told reporters.
Another difficulty lies in quality control. Dai Shanhui told reporters that the current state of China's agriculture-related industry is small production and a large market. Upstream suppliers are generally small in scale and cannot achieve economies of scale, making quality hard to guarantee, while downstream market demand is very large.
Win-win for upstream and downstream is the future direction
Jin Zhongren, partner at Purun Investment, told reporters that the advantage of agriculture-related e-commerce is directly connecting the upstream and downstream of the supply chain, benefiting farmers while also allowing urban residents to enjoy inexpensive and high-quality agricultural products.
Source control and direct intervention in the upstream supply end are the guarantees of agricultural product quality. In order to find high-quality agricultural products, Benlai Life, Yidi Yiwei, and Fruit Butler all formed offline teams to search nationwide for distinctive agricultural industrial parks and intervene in planting and cultivation methods.
Giving farmers tangible benefits is the greatest guarantee of food safety. Liu Hongyan, founder of Bengai Ruci, told reporters that in the previous model, farmers were the lowest link in the entire industrial chain, bearing the greatest risk yet having the least bargaining power and say. In order to ensure the harvest of maximum output, farmers had to abuse chemical fertilizers and pesticides. He tried to use a preferential selection mechanism to guide and reward farmers for obtaining benefits through quality rather than yield.
Investor Wang Gongquan once said at the "Finding Chinese Makers" landing forum that a truly good business model is a win-win for upstream and downstream. These entrepreneurs in the agriculture-related e-commerce field are working hard in this direction.
According to the "2014-2015 China Agricultural Product E-commerce Development Report," there are nearly 4,000 agricultural product e-commerce companies in China, but only 1% are profitable, while another 7% suffer huge losses, 88% suffer slight losses, and 4% break even.
Agriculture-related e-commerce has natural barriers and obstacles, first of all the issue of standardization; second is quality control. Unlike clothing, travel, and other fields, low-price strategies do not work in agriculture-related fields. If the quality is poor, no one will buy it no matter how low the price is.
-- Dai Shanhui, Vice President of Benlai Life
Founder: Xu Xiaofeng Financing: Has obtained millions in angel investment.
Anyoutian The key to agricultural product trading is offline
Anyoutian founder Xu Xiaofeng previously worked as general manager of an industry business unit at Digital China. In 2012, because he wanted to become a farm owner, he left Digital China after seven years and contracted 500 mu of land on Chongming Island to grow vegetables. After much hard work, the sales channels for the vegetables were not ideal. Selling to wholesale markets fetched too low a price, and selling to supermarkets had no connections. After discovering that the vegetable farmers around him all faced this dilemma, Xu Xiaofeng simply started his own business, building an agricultural product B2B trading platform to clear obstacles for high-quality agricultural products entering supermarkets.
On the Anyoutian platform, farmers submit and fill in the category, output, and characteristics of their own agricultural products, and upload pictures. The platform calls this "setting up a small stall." At the same time, supermarkets post demand information on the platform, after which the system automatically matches. After a successful match, Anyoutian invites the farmers to Shanghai for detailed negotiations and ultimately signs a contract.
Supermarkets that Anyoutian has currently established cooperation with include 58 Carrefour stores in East China, as well as Auchan and Metro stores nationwide. During the matching process between the two sides, Anyoutian does not charge fees, but after agricultural products enter the supermarkets, Anyoutian provides more detailed services, such as logistics, display, and small-scale in-store shopping guides, to help increase product sales, and takes a 10% fee from the final settlement amount. The greater the sales, the higher Anyoutian's commission.
Xu Xiaofeng told reporters that unlike categories such as 3C and clothing, agricultural products are non-standard goods, and differences in quality directly affect prices. Pure online trading is very difficult to do well and requires more detailed offline operations.
Xu Xiaofeng said that Chinese agricultural e-commerce is very difficult to do, mainly because the current state of agriculture is too backward. Specifications, quality, scale, and packaging all fail to meet supply requirements, making it very hard to operate. But he also said that under such circumstances, only by persisting, making the model heavier, and doing service well can industry barriers be established.
Founder: Liu Hongyan Financing: Self-raised 10 million yuan
Bengai Ruci Growing rice "honestly" for trust
Wuchang rice is famous for its high quality. Liu Hongyan just wanted to buy some for his children to eat, but after arriving in Wuchang, he found that even locally it was very difficult to buy pure Wuchang rice. "Wuchang rice has an annual land output of 1 million tons, but the actual market circulation volume exceeds 10 million tons. Of the Wuchang rice you buy on the market, 90% is blended fake rice." Liu Hongyan told reporters.
This matter made Liu Hongyan determined to start a business and grow rice himself. Starting in August 2014, he successively organized 46 farming households in villages under Wuchang, gathering 1,000 mu of land. He provided money, materials, and experts, while local farmers provided land and labor, and in the end he purchased the harvest. The rice grown was sold to urban families with children.
The model is reverse ordering, with production determined by sales. From November each year to April of the following year, consumers submit demand on the Bengai Ruci platform. After April, farmers are organized to sow according to demand. When the rice matures in November, the rice is delivered to consumers.
Liu Hongyan told reporters that for a long time, farmers have been at the low end of the agricultural industrial chain, bearing the greatest risk yet having the least say. In order to increase output, they had to use large amounts of chemical fertilizers and pesticides. What Bengai Ruci does is help farmers unload the biggest "risk burden" pressing on them, and then guide and reward farmers for obtaining benefits through quality rather than yield.
The biggest difficulty is trust. Liu Hongyan said that frequently exposed toxic food incidents have made people extremely vigilant about food safety. Once trust is broken once, no one will trust you again. This forced him to be cautious at every step, even paying higher costs for it. For example, he signed an agreement with farmers for manual weeding, for which he had to pay nearly 1,000 yuan per mu. In many places, this is almost equivalent to the output of one mu of land.
"If you grow rice honestly, someone will buy your rice for a lifetime." Liu Hongyan told reporters.
Founder: Li Wenxian Financing: Obtained tens of millions of RMB in Series A financing from Legend Capital
Fruit Butler Solves the pain point of fruit "ripening"
Against the backdrop of widespread unsold pears this autumn, a company called "Fruit Butler" contracted the entire 1,600-mu pear orchard of Dongliushangu Village in Xingtai, Hebei. The 40 tons of pears from this orchard will be shared by Fruit Butler's 200,000 users.
Fruit Butler is a C2B-model fruit e-commerce platform. Founder Li Wenxian told reporters that traditional supply chain logistics takes a long time, so fruit must be picked before it ripens and is ripened during transportation, making it difficult for consumers to taste truly "tree-ripened" fruit. And the two different ripening methods differ greatly in taste.
Fruit Butler happens to solve this pain point. It has two sales methods. Regular fruits use accumulated-order sales. After consumers place orders, the company purchases from orchards according to the accumulated order volume, determining production by sales and directly connecting the supply end and consumers.
Seasonal fruits are pre-sold. Taking Sichuan red-fleshed kiwifruit as an example, given its short preservation period and ripening period, Fruit Butler launches pre-sales 10 days in advance, accumulating order volume to 100,000 boxes. After the kiwifruit ripens on the tree, it is picked from the tree and air-freighted to Beijing, truly "picked and eaten immediately."
The advantages of this model are obvious. The tailor-made consumption model easily forms user stickiness, and the repeat purchase rate is very high (75%). Fruit Butler adopts a community group-buying method, building fruit-friend circles based on communities. After fruit friends accumulate orders, deliveries are made twice a week to community pickup points, reducing the average cost per order.
Quality is most important, and the source is key. Before signing with orchards, they need to observe the entire fruit season and understand quality and growth conditions. After signing, they put forward clear requirements for planting and cultivation methods, "for example, no chemical fertilizers or pesticides may be used, and manual pest removal must be used."
Fruit Butler cuts out the logistics transfer links and reduces costs. More importantly, the price at which farmers sell to Fruit Butler is higher than before.
Founder: Liu Yong Financing: Obtained millions of RMB in angel investment
Yidi Yiwei Making market price equal to origin price
The newly launched Pujiang Hongyang kiwifruit has become a hot seller on the "Yidi Yiwei" platform. Compared with products on the market, the semi-wild growing environment makes Hongyang kiwifruit taste more natural and sweet.
All products launched on Yidi Yiwei are specialties from different places, one place, one flavor. "For example, Yunnan's small-bowl brown sugar, Qinghai's Chinese native honey, and Huangshan's Maofeng." Founder Liu Yong told reporters that finding these specialty agricultural products cost the "flavor-seeking team" a lot of effort. Taking Hongyang kiwifruit as an example, the flavor-seeking team searched village by village around Chengdu as the center, spending a full half month.
Liu Yong once served as a regional manager for Alibaba's 2B business. In 2012 he left to start a business and entered the field of agricultural product trading. In early 2014, Yidi Yiwei launched, beginning a journey of "travel + food."
Unlike B2C e-commerce malls such as SF Best, "Yidi Yiwei" positions itself as a light-model trading platform that does not involve logistics and warehousing, with a transaction process similar to Taobao. After finding specialty agricultural products, Yidi Yiwei packages them into a brand and sells them on the platform. After users place orders, farmers use third-party logistics to ship on their own. Every product on the platform has been tested and selected by the flavor-seeking team to ensure quality.
Yidi Yiwei optimizes the complicated circulation links and sends fresh agricultural products directly from the fields to consumers' hands, preserving the best taste. At the same time, because logistics and warehousing costs are saved, product prices can be lowered, even making the market price equal to the origin price.
"Yidi Yiwei" positions its product types as niche products within mass products, such as Yunnan's small-bowl brown sugar, which has an annual output of only 5 tons. Liu Yong told reporters that niche agricultural products find it very difficult to enter urban large-scale sales channels. The emergence of Yidi Yiwei can both help farmers solve sales difficulties and allow urban users to eat fresh, distinctive agricultural products from all over the country.
Founder: Wang Xiang Financing: Self-raised 5 million yuan
Taodi Technology Turning farmers into workers with options
Wang Xiang is not a farmer; he is a veteran agricultural practitioner. After coming to Beijing from Inner Mongolia, he once contracted 200 mu of land in Xiaotangshan to grow strawberries. But after three years, he had not earned any returns. This forced him to think about whether there was any space for corporate-style planting if even a high-value-added product like strawberries could not make money.
His experience in planting, transportation, and sales gave Wang Xiang a deeper understanding of the agricultural upstream and downstream industrial chain. In his view, traditional agriculture has already fallen into difficulty: agricultural product prices are getting higher and higher, yet farmers' incomes have never risen correspondingly; agricultural products must pass through four rounds of reselling from origin to dining table, with unavoidable spoilage reaching as high as 20%; supply and demand information is unbalanced, and unsold goods occur repeatedly. Facing these problems, he began to consider using the internet to connect consumers and farmers, allowing farmers to earn more, with less spoilage and safer products. Thus Taodi Technology was born.
During the planting season, cooperatives package the land, agricultural product types, output, quality, and other content into a product and sell it on the Taodi Technology platform. After consumers purchase, the Taodi platform arranges for farmers to plant, producing according to demand. Taodi Company installs cameras and carbon dioxide detectors and other equipment in cooperative greenhouses to dynamically monitor and control the growing environment of agricultural products. Consumers can see the process of vegetable and fruit cultivation in the greenhouses, making product safety traceable.
Under this model, farmers no longer need to bear any risk, and at the same time the more the harvest, the more income they receive, equivalent to workers holding options.
At present, Taodi Technology is still in its initial stage. One week later, Huailai red grapes and Xiaotangshan strawberries will be the first batch of products launched to accept consumer pre-orders.
The rural market is especially large. If the internet can be used to solve geographical difficulties, there is great potential. A truly good business model is a win-win for upstream and downstream. These entrepreneurs in the agriculture-related e-commerce field are working hard in this direction. -- Renowned investor Wang Gongquan
The advantage of agriculture-related e-commerce is directly connecting the upstream and downstream of the supply chain, benefiting farmers while also allowing urban residents to enjoy inexpensive and high-quality agricultural products. -- Jin Zhongren, Partner at Purun Investment