Performance of Agricultural Wholesale Markets Declines; Industry Insiders Say Sector Is at a Critical Stage of Transformation and Upgrading
Xinhua News Agency, Beijing, November 30 (Reporter Lei Min) - As economic growth slows, China's agricultural wholesale market industry is also facing the predicament of declining transaction volumes and falling profits, with a small number of markets even shutting down. Industry insiders point out that market pressure has provided domestic agricultural wholesale markets with an opportunity for transformation and upgrading. Brand chains, the “Internet Plus market” model and international trade are the three major directions for transformation and breakthrough, and the agricultural wholesale market industry is ushering in the 3.0 era of modern upgrading.
At the recently held “8th China International Agricultural Trade Matchmaking Conference and 2015 China International Green Ecological Health Food Expo,” data released by the National Federation of Urban Agricultural Trade Centers showed that as of the end of 2014, there were 4,512 agricultural wholesale markets across the country, with total annual transactions of 3,978.53 billion yuan, up 6% year on year; total annual transaction volume was 774.823 million tons, down nearly 0.9% year on year.
“The wholesale market industry is highly open. In the years of rapid economic development, a large amount of capital entered this field. Coupled with factors such as lack of planning, incomplete laws and regulations, and blind investment attraction by some local governments, this led to severe overcapacity in industry investment and intensified vicious competition. These accumulated contradictions have become even more prominent under the increased downward pressure on the economy,” Ma Zengjun, president of the National Federation of Urban Agricultural Trade Centers, told Xinhua reporters.
Reporters learned through interviews that in recent years, vicious competition in the wholesale market industry has been very common, with similar situations occurring in Wuhan, Chengdu, Xi'an, Shenyang, Harbin and other places. A small number of wholesale markets have adopted tactics such as rent-free and commission-free terms for dealers, cash subsidies and roadblocks to intercept goods, engaging in vicious competition that has caused fluctuations in local wholesale market transactions and pushed up agricultural product prices.
Before old contradictions have been resolved, new challenges are already “at the gates.” According to industry insiders, in recent years, due to the implementation of anti-corruption policies, transaction volumes at some markets dealing in high-end fresh agricultural products have dropped sharply, and the rise of agricultural e-commerce has also dealt a blow to physical markets.
“Agricultural e-commerce does not profit from the transactions themselves, but obtains investment from third parties to sustain operations. It has overturned the original wholesale trading model, rapidly captured the market, and brought pressure on physical enterprises,” Ma Zengjun said.
Liu Zhiren, a counselor of the State Council and researcher at the Rural Economy Research Center of the Ministry of Agriculture, pointed out that China's wholesale market industry has “shortcomings” such as insufficient understanding of the new economic situation, insufficient ability to grasp the situation, and insufficient momentum for industrial innovation, and is in urgent need of transformation and upgrading.
Ma Zengjun believes that the wholesale market industry must sprint into the 3.0 era. The characteristics of first-generation wholesale markets were “enclosing land, enclosing courtyards, building walls,” with inadequate hardware facilities. Although second-generation wholesale markets basically had adequate hardware facilities, their functions were not fully developed. Third-generation wholesale markets are modern markets with advanced facilities, complete functions, scientific management and a proactive assumption of social responsibility.
Liu Zhiren believes that during the “13th Five-Year Plan” period, consumption upgrading will bring major opportunities to China's agricultural product circulation industry. Agricultural wholesale markets should study the new trends in consumption upgrading, create corporate brands, and take the path of group-based, chain operations.
In fact, in recent years, the trend toward branding and group-based development in the agricultural wholesale market industry has become increasingly obvious. Currently, the company with the largest number of markets is Shenzhen Agricultural Products Co., Ltd., which already has more than 30 markets in various locations.
Industry insiders believe that agricultural products are a new hotspot following the three major e-commerce hotspots of books, clothing and 3C, and that e-commerce will play an increasingly important role in agricultural product circulation.
Reporters learned that domestic wholesale market enterprises have basically all “gone online” now, with some doing platform e-commerce and others doing operational e-commerce. Although there are not yet any successful cases to speak of, all are actively exploring new business formats.
Sun Yujiao, general manager of the Jilin City Grain and Oil Wholesale Market, told reporters that the market has built a unified Jilin Grain and Oil Specialty Products Network for dealers, selling local specialty agricultural products such as soybean oil and premium japonica rice directly to consumers. “Some e-commerce platforms now advertise direct supply, but in fact many of them get their goods from wholesale markets, because the goods here are the most complete and the prices are cheap. Rather than that, it would be better to make the market a product base and do e-commerce ourselves,” Sun Yujiao said.
Some physical wholesale markets have also begun trying to expand into international markets with the help of the “Belt and Road” initiative and multilateral and bilateral trade arrangements. For example, Huo Jianguo, former president of the International Trade Research Institute of the Ministry of Commerce, suggested that Chinese agricultural wholesale market enterprises could study the upgraded arrangement of the China-ASEAN Free Trade Area, make full use of policies such as zero tariffs, and proactively connect with wholesale markets or buyers in the ASEAN region to achieve trade in each side's competitive agricultural products.
“Building the international trade platform function of wholesale markets can create an international agricultural product pricing center and enhance the bargaining power of domestic agricultural products,” Ma Zengjun said.