A Sober Reflection Amid the Rural E-commerce Boom: A Blue Ocean Is Not Everywhere
Against the backdrop of the "Internet Plus" era, traditional agriculture is being redefined. Spurred by policy support, industrial and commercial capital eyeing this blue ocean has been flowing into the countryside, especially after large companies such as Lenovo and Evergrande made cross-sector forays, making agriculture a red-hot investment field.
Regarding capital flowing to the countryside, Gao Haiyan, vice president and dean of the research institute of Yimutian Group, said in an interview with China Business News that this is a good thing. It can not only bring capital to rural areas, but also bring industrial thinking, knowledge, experience and resources, which is precisely what Chinese agriculture lacks most.
This year's Central Document No. 1 proposed vigorously supporting e-commerce, logistics, financial and other enterprises in participating in the construction of agriculture-related e-commerce platforms and carrying out comprehensive demonstrations of e-commerce entering rural areas. During the Two Sessions, Premier Li Keqiang of the State Council said that we should ride the tailwind of "Internet Plus." In May, the State Council issued guidelines calling for actively developing rural e-commerce and put forward specific measures.
Recently, according to a May 21 report by Shanghai Securities News, the first draft of the Guiding Opinions on Accelerating the Development of Rural E-commerce, led by the Ministry of Commerce and involving more than 20 ministries and commissions including the National Development and Reform Commission, the Ministry of Finance and the Ministry of Agriculture, has been completed and is currently in the stage of inter-ministerial joint signing, with the final document to be issued in the form of a State Council General Office document.
This is the first document to comprehensively deploy the development of rural e-commerce. Agricultural materials services will be the focus of future rural e-commerce policy. The national-level "Internet Plus" strategy has already emerged.
The Blue Ocean of Agricultural Product E-commerce
In modern society, online shopping has become a consumption habit. E-commerce is essentially a means.
Gao Haiyan said that this is the process transformation of consumption methods and market transaction methods by internet technology, and the transformation process is irreversible and will penetrate every field to become the norm. Wherever there is trade, there is e-commerce; this is the future of e-commerce.
Undoubtedly, the involvement of e-commerce in rural areas, with "industrial products going to the countryside" and "agricultural products entering the cities," has played a role in improving farmers' living standards and increasing farmers' incomes. Gao Haiyan said that this "de-intermediation" effect can promote "fair trade" in the agricultural product sector, transforming the traditional circulation market's pattern of "the middle gets fat while both ends lose" into "removing the middle and benefiting both ends."
Due to the huge population base, along with the increase in internet penetration and the improvement of logistics infrastructure, rural areas will soon become a massive potential online shopping market and online trading market for agricultural and sideline products.
According to the rural e-commerce consumption report released by AliResearch, the proportion of rural online shopping on Taobao remains relatively low, at 8.6% in 2013, but it is showing an upward trend. It is expected that the rural online shopping market will reach more than 180 billion in 2014 and exceed 460 billion in 2016.
In addition, according to data released by the Ministry of Commerce in the first half of 2014, the total transaction volume of China's agricultural products was around 4 trillion yuan, yet only 1% of agricultural products circulated through e-commerce. A large amount of the sales profits of agricultural and sideline products are captured by circulation links. This sketches a blueprint of unlimited imagination for agricultural product e-commerce.
In April this year, the 2014-2015 China Agricultural Product E-commerce Development Report (referred to as the Report) was released. The Report pointed out that agricultural product e-commerce has become a new hotspot after books, clothing and 3C, and is regarded as the crown of e-commerce, while fresh food e-commerce within it is called "the crown jewel of the crown."
The Report shows that the sales of agricultural products on the largest domestic e-commerce platform increased from 3.7 billion yuan in 2010 to more than 80 billion yuan last year, with an average annual growth rate of 112.15%; in terms of the number of e-commerce businesses, according to statistics, in 2014 China had 31,000 agriculture-related e-commerce enterprises, of which 4,000 were agriculture-related trading e-commerce businesses, and Alibaba and JD.com, as the two largest e-commerce companies, held more than 80% of the market share.
The Disruptive Innovation of "Internet Plus Agriculture"
According to the 2011 Urban Blue Book released by the Chinese Academy of Social Sciences, from 2000 to 2009, China's urban middle-income class grew at an average annual rate of 3.8%, and by 2009 this group had reached 230 million people, accounting for nearly 40% of the total urban population. It is predicted that this figure will reach about 47% by 2020.
In 2013, in a public speech, Zhang Yansheng, secretary-general of the Academic Committee of the National Development and Reform Commission, said that in the next 20 years, China's middle class will increase from 230 million to 630 million people. With such a massive consumer group, they are willing to buy high-quality products, high-quality services and high-quality human capital. These changes will force enterprises to invest in innovation, creativity and creation.
Wei Sanshui, founder of Dafood.com, told China Business News that industrialization and urbanization are the backdrop of the times, with rural populations moving to cities. The rise of more than 600 million urban middle-class consumers in the future will precisely provide opportunities for enterprises that offer "top-notch goods." "Internet Plus Agriculture" means that agriculture needs disruptive innovation and must shift from product logic to industrial logic.
Dafood.com was founded in June 2014. It is an agricultural product e-commerce website focused on healthy, green and organic rice, flour and miscellaneous grains and other healthy staple foods as its core. Wei Sanshui said that Dafood innovates in four aspects.
First, redefining rice, flour and miscellaneous grains by treating them as fresh food.
If stored for too long at one time, food will lose moisture and cannot guarantee freshness. What Dafood does is deliver freshness to the home. What is stored at the production base is harvested rice, which is hulled in corresponding quantities according to the monthly home delivery volume for household users. To ensure freshness, it reaches users' hands within 8 days. The rice is packaged in small bags precisely to ensure that customers can finish it within a month.
Second, in terms of business model, Dafood sells "top-notch goods" and follows a premium route.
Unlike many e-commerce companies that choose a marketplace model, pursue being big and comprehensive, and attract users through price leverage, Dafood mainly focuses on the family staple food table, pairing rice, flour and miscellaneous grains with some ingredients, and only sells scarce, high-quality products. This is because "the dividend of good quality at a low price is gone."
Third, in terms of channel selection, it chooses the new O2M e-commerce model. O2M is a refined market scope of O2O, namely the combination of online e-commerce and the mobile internet. By cooperating with major clients such as banks, financial institutions and home appliance companies, it solves 2B and 2C problems, and ultimately serves family users pursuing a quality life. More importantly, to achieve "from the place of origin to the family dining table," one must find what is closest to the family dining table, and cooperation with B-end players such as household appliance enterprises is undoubtedly one of the best choices at present.
Fourth, the user model. Dafood mixes the B2C model, home delivery model and customized agriculture model, "no model beats having a model."
Wei Sanshui said that the biggest pain on the mobile end now is choice. Consumers should be told directly that this is top-notch goods, and that is enough. Moreover, people's stomachs are hard to change easily; once recognition is gained, it is hard to accept similar products again. In building trust with users in the early stage, others rely on price, while we rely on products.
Rural E-commerce Must Be Down-to-Earth and Benefit the People
According to media reports, A-share listed companies such as New Hope, Dabeinong, Stanley and Kingenta are all laying out "Internet Plus Agriculture." On May 18, New Hope, the largest domestic agriculture and animal husbandry enterprise, carried out deep industrial chain cooperation with agricultural product B2B trading platform Yimutian to jointly lay out the agricultural product e-commerce market.
In addition to professional agricultural enterprises, cross-sector moves by non-agricultural enterprises are also due to the huge investment opportunities they see. The reason lies in the massive domestic population base; scaleization and intensification have become the basic policy orientation for developing modern agriculture in China, providing very favorable conditions for the entry of industrial capital. In addition, Chinese people increasingly value food safety, and demand for consuming high-quality agricultural products is increasing.
From the perspective of the entire agricultural industry chain, current investment hotspots are mainly concentrated at both ends of the "smile curve," which are also the relatively high-profit parts. Specifically, these include upstream seed sources, high-end agricultural technology, agricultural equipment and high-end pesticides, as well as downstream circulation and sales links.
Diandou Agricultural Chain E-commerce Service Platform, which recently launched as China's first comprehensive agriculture-related e-commerce trading platform, innovates its service model by establishing "one station per village" smart agricultural service stations. Liu Feng, chairman of Diandou.com, said in an interview with China Business News that "Internet Plus Agriculture" is about solving farmers' pain points, and rural e-commerce must be down-to-earth, benefit farmers, and solve the problems farmers truly need solved.
So what are farmers' pain points? At present, farmers face two major dilemmas, mainly related to too many intermediate links. First, agricultural materials such as pesticides and fertilizers, these rigid-demand means of production, have excessively high costs after layer upon layer of markups; second, agricultural products such as local specialties, after being squeezed layer by layer, leave farmers in the upstream production link actually at the end of the value chain.
Liu Feng said that solving farmers' pain points requires lowering the prices of agricultural materials, raising the prices of agricultural products, and also improving farmers' professional knowledge of agricultural technology. Relying on the advantage of self-built logistics, the Diandou Agricultural Chain E-commerce Service Platform directly establishes smart agricultural service stations at the village level, creating an agricultural chain e-commerce service platform that delivers agricultural materials directly from manufacturers to farmers and agricultural and sideline products directly from the place of origin to consumers.
In addition, the smart service stations can also partially solve the rural logistics problem. He said that the service platform will develop corresponding systems, and the service stations will coordinate and integrate rural transportation resources, solve the problem of farmers' information asymmetry through instant messaging, and let the service stations provide services for farmers, solving the problem of carrying goods and delivering goods, thereby reducing logistics costs.
Relying on agricultural big data, the service platform will also provide financial services for farmers. After farmers register as members, the platform will evaluate the registered member information, make calculations based on their usual spending capacity, and then consider providing loans. Because there is data support, this is also guaranteed.
It is worth noting that according to the Report's statistics, among current domestic agriculture-related trading e-commerce businesses, only 1% are profitable, 7% have huge losses, 88% have slight losses, and 4% break even. The most typical problem in the development of agricultural product e-commerce is homogeneous competition. This leads to disordered competition, operating at a loss, and the coexistence of site building and site closure. In addition, high logistics costs are also a prominent problem.
In response, Wei Sanshui said that agricultural product e-commerce is still in an initial layout state. Every industry has profits and losses. The statement that only 1% of agricultural product e-commerce businesses are profitable precisely shows that the real commercialization model and path innovation of agricultural product e-commerce are still insufficient, and a mature profit model has not yet been built. But "using industrial logic to do small-scale, segmented, strong-relationship markets is an attempt worth making."
Gao Haiyan said that on the whole, profitability for agricultural e-commerce is not a problem.
First, unlike traditional models, agricultural product e-commerce starts from nothing, and establishing a conceptual market, promoting online transactions, changing traditional habits and forming scale effects all take time. So it does not mean that agricultural e-commerce cannot be profitable; it means profitability takes time.
Second, different business models have different profit cycles. For example, for platform-type business models, in the short term, doing scale may be more important than profitability, so not being profitable may be a short-term strategy, rather than because it cannot be profitable.
She said that some e-commerce businesses themselves fail to be profitable because of their own positioning and operational capabilities. For example, some product e-commerce businesses and third-party channel e-commerce businesses (especially B2C). Because agricultural products have low value and high logistics costs, if the average order value is not high, it is very difficult to be profitable.
"But everything has only just begun, and it is not yet time to draw conclusions." Gao Haiyan believes.
A Sober Reflection Amid the Rural E-commerce Boom
Riding the favorable policy wind, rural e-commerce is now in full swing. From the premier down to village heads, all levels are discussing e-commerce and promoting e-commerce. However, China's "three rural issues" have existed for a long time. To what extent can the e-commerce industrial parks blooming everywhere solve this deep-rooted chronic problem?
Wei Sanshui believes that "Internet Plus" makes producers and consumers tend toward equality, and upstream producers gain respect. Previously there was only longing, not participation. There was sentiment, but no action. How could that be called promotion? Now, rural e-commerce gives agriculture's relevant stakeholders unlimited possibilities for spatial connection and spatial extension.
On January 23 this year, the State Council Leading Group Office of Poverty Alleviation and Development was promoting the implementation of ten major projects for targeted poverty alleviation. E-commerce poverty alleviation, as a new means and new method, has attracted much attention. Recently, Qu Tianjun, inspector of the Department of International Cooperation and Social Poverty Alleviation of the State Council Leading Group Office of Poverty Alleviation and Development, said at a press conference that e-commerce poverty alleviation, as the name implies, incorporates "Internet Plus" into the poverty alleviation work system. He said that e-commerce is actually a means, while poverty alleviation is the goal.
He Yong, a doctor at Guilin University of Aerospace Technology, told China Business News that rural e-commerce provides new perspectives and possibilities for solving the "three rural issues." Through the reverse-pressure mechanism of e-commerce development, infrastructure construction can be accelerated, the pace of poverty alleviation and prosperity in poor villages can be promoted, and the self-development capacity of poor areas can be improved. For example, the "farmer + company + network" model is rapidly extending, greatly changing the traditional agricultural economy and industrial form, and changing local people's production and lifestyle.
Regarding the e-commerce fever, Li Changping calls it the "rural e-commerce Great Leap Forward movement" and says it should be "doused with some cold water." He said that if e-commerce cannot solve the two difficult problems of ineffective rural financial supply and ineffective organizational supply, rural e-commerce will also be just another new Great Leap Forward movement.
Li Changping is now dean of the China Rural Construction Institute and a researcher at the China Society for Economic Reform. In 2000, when he was secretary of the Party Committee of Qipan Township, Jianli County, Hubei Province, he wrote to then Premier Zhu Rongji of the State Council saying, "Farmers are truly suffering, rural areas are truly poor, and agriculture is truly in danger!"
Regarding cross-sector moves by large enterprises such as Lenovo and Evergrande, Wei Sanshui said that doing rural e-commerce should not just plunder rural agricultural products. It should do more to redefine the industry. It should shift as quickly as possible from existing product logic to industrial logic and promote agricultural development. To do agricultural product e-commerce well, one should do some things and not do others.
As for the development bottlenecks of rural e-commerce, he believes: first, the degree of capital participation is still insufficient, and it is necessary to break out of the logic that farmers are hard to deal with and that agricultural investment has a long cycle, high risk and unstable returns; second, innovation in the industry itself is insufficient, mainly because agricultural products need to be repositioned with more attention to upstream production links; third, industry segmentation is also insufficient, and more people need to enter vertical segmented fields; fourth, policy obstacles.
"In fact, the core of agriculture being redefined lies in this: agriculture cannot simply be seen as agricultural products, but should be seen as a safety industry, and this is precisely where the industry's efforts at innovation should be directed." So said Wei Sanshui.