China's Fresh Food Market Is Huge, and Connecting the Cold Chain Logistics Is the Key

China's fresh food market is so huge, yet the circulation of fresh products has long suffered from a lack of professional cold chain equipment and facilities, causing annual losses of over 100 billion yuan in fruits, vegetables, aquatic products and the like, and inadequate cold chain transport has become the bottleneck restricting the development of fresh food e-commerce

Recently, the fresh food e-commerce market has been booming. China's fresh food market is so huge, yet the circulation of fresh products has long suffered from a lack of professional cold chain equipment, resulting in cold chain circulation rates of only 5%, 15% and 23% for fruits and vegetables, meat and aquatic products respectively, causing corresponding losses of over 100 billion yuan. By contrast, in developed countries the cold chain circulation rate for fruits and vegetables is above 95%, and the cold chain circulation rate for meat products and aquatic products reaches 100%.

Clearly, this is not an easy game to play. The supply chain for fruits and vegetables, meat products and aquatic products includes upstream procurement, cold chain packaging and transport, midstream cold storage and sorting, and downstream cold chain delivery, and a full-process cold chain requires specialized talent, equipment and facilities. For our agricultural products, meat products and the like to achieve efficient circulation along the long road of cold chain logistics, they must overcome at least a “fourfold gate”:

First, the regulatory environment and professional standards are incomplete. Problematic fresh foods are repeatedly exposed, which ultimately comes down to lax institutional regulation. Second, there is the obstacle of the dual urban-rural circulation structure. Farmers' scattered cultivation of fruits and vegetables and raising of poultry and livestock are difficult to smoothly connect with urban bulk purchasing and cold chain circulation. Third, there is a lack of aggregating physical platforms. The central and western regions lack functionally integrated large-scale trading and logistics platforms for fruits, vegetables and aquatic products, while the layout of trading and logistics platforms for fruits, vegetables and aquatic products in the developed eastern regions is not entirely reasonable, restricting the integration of upstream and downstream cold chain resources. Fourth, there is a lack of professional cold chain logistics providers. Although regional cold chain logistics enterprises in our country are too numerous to count, there are very few logistics enterprises with a nationwide service network capable of providing full-process cold chain.

These four problems make it difficult for companies such as Alibaba and JD.com to develop comprehensively in the fresh food e-commerce market. At the corporate level, Alibaba chose third-party logistics services, and its challenge lies in how to control the quality of cold chain services. If Alibaba seeks a major breakthrough, it needs to do a good job in platform building, strengthen the rules of the game and improve its service system. JD.com, meanwhile, is exploring self-operated cold chain logistics, but cold chain logistics differs from ordinary cargo logistics in that it places higher demands on talent, equipment and facilities, and full self-operation is no small challenge.

The US e-commerce giant Amazon also adopts a self-operated cold chain logistics system in the fresh food market. Looking at its strategy, first, it lays out steadily and controls quality. Second, it uses information technology to strictly control the warehousing back end and to grasp the key circulation nodes and hubs. Amazon also spent huge sums to acquire a robotics company in order to build an intelligent, efficient sorting and management system, enabling Amazon to process orders three to four times faster per hour than traditional methods. Third, it standardizes full-process cold chain services. By comparison, China has differing standards for cold chain logistics packaging, pallets and other equipment, and coupled with an incomplete service system, the result is a half-way cold chain. Amazon's experience is worth learning from for China's fresh food e-commerce.

Once the problems of cold chain logistics are effectively solved, the development bottleneck of fresh food e-commerce will be broken through. This will greatly enhance the quality of public dining and will also promote the development of modern agriculture and modern commerce through deep integration.