Agricultural e-commerce is booming, so why are the five business models so similar?

Agriculture is a very traditional industry, closely tied to every one of us. One company plans to invest in chicken farming in the Hotan region of Xinjiang, with the goal of raising one million chickens and ultimately reaching a output of ten million. This investor is a real estate developer who wants to get into the chicken business, and came to talk with me about how to do this. Whether they are real estate developers, newly rich entrepreneurs, or outside capital, everyone is especially keen on agriculture. Agriculture is extremely hot and closely related to each of us, but when we actually get involved in this industry there are still far too many blind spots. We see plenty of optimism about the future market, but we ignore the specific paths and methods. Agriculture is a rather special industry. Coming back to the question of roughly how much one of these chickens can sell for, after calculating costs over a year, it would need to sell for around three or four hundred yuan per chicken. In e-commerce, no matter how good the taste and quality of the chicken, it still sells for within one hundred yuan, so there is still a gap between the ideal and reality. That above serves as an opening.

The collision of traditional agriculture and the advanced internet brings us unlimited imaginings. This is what we need to explore. What kind of value can e-commerce and agriculture create together.

The day after Jack Ma rang the opening bell at the New York Stock Exchange, he told the world that he would only do three things. First, rural e-commerce; second, cross-border e-commerce; third, big data. So rural e-commerce should be the trend for future development.

China has 1.4 billion people, and for thirty years the economy has mainly depended on the urban population. The so-called 900 million farmers are actually still at the very bottom of the internet. Recently the Ministry of Commerce issued a document, and the document mainly conveys these ten words: industrial goods go to the countryside, agricultural products go to the cities.

Five business models of agricultural e-commerce

Agriculture is currently at a very preliminary stage, and each business model overlaps and intersects with the others. Platform e-commerce, county-level agricultural e-commerce, vertical B2C e-commerce, social e-commerce, and community O2O. These five are the more prominent phenomena in agriculture, and I will summarize them for everyone.

1. Platform e-commerce

In the national market, agriculture has a regional character, so I copy my management experience over, have the local area produce according to my standards, and then I handle sales in a unified way. This should be a kind of vertical B2C approach. For example, SF Best relies on its own supply chain to do direct sales of assets, and Benlai Life's webpage created a buyer system; essentially they are the same, hoping to have some control and sourcing at the source, at the place of origin. Letting goods be sold directly to consumers through my mall, these are all different approaches. This is about platform e-commerce.

2. Vertical B2C e-commerce

As for vertical B2C, 2012 was hailed as the first year of China's fresh food e-commerce, and many companies were basically invested in and built around 2012, such as Benlai Life, Tuotuo Community, SF Best, and so on. This is what we call the vertical B2C business model.

Tuotuo Community has an organic farm of more than one thousand mu in Pinggu, Beijing, growing some melons, fruits, and vegetables, and also raising chickens, ducks, and so on. Before 2012, more than one thousand mu of land could still be self-sufficient, but as customer numbers increased, supply fell short of demand. The development strategy now adopted is to unite farms. That is, I define my production according to my standards and find some suitable producers to do OEM production. This places especially high demands on standardized processes, because Tuotuo Community itself has planting and management experience, so it replicates that planting and management experience.

3. Community O2O

Now this approach has appeared especially in Beijing, Shanghai, and Shenzhen. This case is called “Youzhigong”, founded by a former executive of Xunlei, and this company's community store in Shanghai is twenty or thirty square meters, with no on-site sales. If you buy their products, they give you a slip of paper, you tick the products you want, and they tell you to come pick them up the next day. The next day your phone receives some text messages telling you which numbered locker your products are in and what the password is, and then you can take your password to the designated locker and take the things away. This is a so-called online-offline combination method. Actually, to put it another way, this is also a kind of presale.

A further upgraded approach is to directly put smart vending machines into the community, just like putting three yuan into a machine in the subway to get a bottle of water. Now we can directly buy meat or vegetables through smart terminals.

And the smart cabinets can keep things fresh. It is an unmanaged operation, completely controlled through back-end data. This model now exists in Shanghai. Regarding this business model, I want to raise a thought: why does something like “Youzhigong” not sell on site? This thought is especially valuable. Turning back again, is presale a good solution for agricultural products? Personally, I believe that adopting presale is a market choice, and is not enough to serve as the ultimate method to support this concept. The reason our current consumer market has not yet been opened up is that within this period a dense order volume has not yet formed, so we are forced to choose advance delivery, like “Youzhigong”. If our store had sufficient foot traffic, then we would not need to use presale at all. So because our foot traffic is not that large, we use presale. I think presale itself is not a good solution.

Presale can lower our overall costs, reduce losses, and increase returns, but I do not think it is a reasonable model. Never do presale for the sake of presale. Our order volume is not large right now, so we are forced to choose presale, hoping to save orders through presale. As consumption upgrades and transforms, if we have sufficient traffic, we simply do not need presale. This is my understanding of presale.