Cold chain logistics is the lifeline of fresh food e-commerce development
Today, fresh food e-commerce is always in a state where investors keep coming one after another, with constant bankruptcies and constant new investments, which makes many people feel confused: since so many fresh food e-commerce platforms have gone bankrupt, why are so many capital institutions like Alibaba and JD.com still favoring fresh food e-commerce?
An exciting rapid growth rate
First, fresh food e-commerce has a huge market size, and its future growth rate is also very rapid. According to the "China Fresh Food E-commerce Logistics Industry Special Report 2016" released by Analysys, as of the end of 2015, the market transaction scale of China's fresh food e-commerce logistics industry was 16.26 billion yuan, an increase of 87% compared with 2014. At the same time, along with the rapid growth of the fresh food e-commerce market transaction scale, it is predicted that in 2016 the transaction scale of China's fresh food e-commerce logistics industry will reach 27.42 billion yuan, an increase of 68.6%, and in 2017 the market transaction scale of China's fresh food e-commerce logistics industry will reach 43.49 billion yuan, an increase of 58.6%. Second, relevant data shows that as early as 2011, the online retail penetration rate of cosmetics reached 16.3%, 3C products reached 15.6%, and clothing reached 14.3%. By 2016, the current market penetration rate of fresh food e-commerce is still less than 2%, which is a blank market area still greatly in need of development and exploration.
The growing scale of the lazy economy market
Finally, with the continuous improvement of domestic informatization, and as more and more post-80s and post-90s people begin to form their own families, especially with the gradual expansion of the lazy economy market scale, these people are busy with work every day, and the frequency with which they go to supermarkets and vegetable markets to buy fresh products is also becoming lower and lower. Their acceptance and recognition of fresh food e-commerce is also relatively high.
It can thus be seen that although the current development of fresh food e-commerce is not entirely smooth sailing, its huge market potential is enough to drive entrepreneurs and the capital market crazy about it.
So where exactly is the difficulty for fresh food e-commerce?
In fact, far more than the several companies mentioned above have fallen into operational difficulties. Relevant data shows that among nearly 4,000 agricultural product e-commerce businesses nationwide, 7% have huge losses, 88% have small losses, and 4% are break-even, which means only 1% of fresh food e-commerce businesses are profitable. So why is fresh food e-commerce so difficult, and where exactly is the difficulty?
The first and greatest difficulty actually lies in the extremely high requirements of fresh food e-commerce for cold chain logistics. Fresh food e-commerce is different from other products. It must ensure sufficient freshness, but during the storage, transportation and distribution of fresh products, product loss is extremely easy to cause, which requires fresh food e-commerce to use refrigeration. Data shows that the cost of fresh food cold chain logistics is 1-2 times higher than that of ordinary goods, and cold chain costs account for 25%-40% of sales. Therefore, for fresh food e-commerce, the construction cost of the entire cold chain logistics is very high, and the return time is also relatively long. Most fresh food e-commerce businesses find it difficult to bear such huge costs, which is why everyone sees that fresh food e-commerce burns so much money.
The second difficulty lies in the fact that users' consumption habits for fresh food e-commerce have not yet been fully cultivated. For most families, when buying fresh products they often go to the vegetable market or supermarket around their residential community, especially for older people who do not know how to use the internet. Even if they were asked to buy fresh products through their mobile phones, they would not know how to do it. At present, the domestic penetration rate of fresh food e-commerce is still less than 2%, and the entire user market still needs a period of education.
The third difficulty lies in the fact that there are too many competitors flooding in. At present, there are nearly 4,000 fresh food e-commerce businesses nationwide, and most of them are still concentrated in major first-tier cities such as Beijing, Shanghai, and Shenzhen. In the face of so many competitors, severe homogenized competition is unavoidable. Fresh food e-commerce already has high costs and low unit prices, and a price war of burning money on subsidies will only hurt both sides, ultimately reducing the profitability of fresh food e-commerce platforms.
The fourth difficulty lies in the supply chain, which is actually closely related to cold chain logistics. The problem that the supply chain needs to solve is the issue of the source of the products: whether to purchase directly from the place of origin or wholesale from the wholesale market? Solving the problem of the procurement source is also quite important. On the one hand, it can ensure the quality of fresh products, especially food safety; on the other hand, it can also solve its own procurement cost problem.
The fifth difficulty is the standardization of fresh products. There are many varieties of fresh products, complex and diverse. Even for the same kind of fruit, pricing is difficult to unify because of different quality. Since standardized operation is difficult, it is also impossible to reduce its costs, let alone improve its operational efficiency. At the same time, it also makes it difficult for consumers to make horizontal comparisons and judge quality, so fresh products are not easy to accumulate consumer reputation.
The above five major difficulties are all reasons for the current widespread losses in the entire fresh food e-commerce market. However, to truly establish a core advantage in the field of fresh food e-commerce still depends on the construction of the cold chain logistics system, which is the key to determining the future victory or defeat of fresh food e-commerce.
Those who gain cold chain logistics gain the world of fresh food e-commerce
Regarding the current cold chain logistics distribution of fresh food e-commerce, Analysys's "China Fresh Food E-commerce Logistics Industry Special Report 2016" divides it into two categories: one is the self-built logistics model represented by Yiguo Fresh, SF Best, Liangxian, Missfresh, and Tuotuo Gongshe; the other is the third-party logistics model represented by Benlai Life, Yimixian, Miaoxiansheng, and Pinhaohuo. In fact, there are also two other categories: the combination of self-built logistics and third-party logistics, and crowdsourced logistics.
Self-built logistics distribution model, representative enterprises: Yiguo Fresh, COFCO Womai
JD.com was able to gradually grow and strengthen under the market structure in which Taobao dominated China's e-commerce, and form a tripartite balance with it. The fundamental reason lies in the success of JD.com's self-built logistics. Fresh food e-commerce self-built logistics represented by Yiguo Fresh and COFCO Womai also possesses many advantages.
First, compared with third-party logistics and crowdsourced logistics, the self-built logistics methods of Yiguo Fresh and COFCO Womai have a much stronger ability to control product quality, ensuring the "freshness" of fresh products and also ensuring food safety. This invisibly solves the problem of the product supply source, and customer satisfaction is also higher. Yiguo Fresh reached a strategic cooperation with Alibaba and established the wholly owned fresh food logistics company Anxianda. The fresh products purchased by users can all be delivered to the door in a one-stop manner, and three insulation layers have been achieved: room-temperature preservation, refrigerated preservation, and frozen preservation. COFCO Womai, backed by the powerful COFCO Group, has achieved a full-process self-owned cold chain logistics service system.
Second, Anxianda of Yiguo Fresh and the self-built logistics of COFCO Womai have also formed standardized warehousing operation models, which not only improves the efficiency of logistics distribution but also saves the cost of logistics distribution. At the same time, self-built logistics also helps to a certain extent with the standardized operation of products.
Third, from the perspective of service to the logistics team, self-built logistics not only guarantees delivery time but also allows better control over delivery service. It can greatly improve the user consumption experience and increase user stickiness. For example, in many first- and second-tier cities at present, Yiguo Fresh and COFCO Womai are already able to achieve same-day delivery.
Fourth, for fresh food e-commerce, a broken chain is the most fatal. It will not only cause high losses but also bring food safety risks. The distribution of the self-built logistics model will appear more secure. At the same time, it is also safe for the platform itself, and there is no risk of leakage of the platform's user data, transaction data, and so on.