Why are only 1% of China's fresh food e-commerce companies profitable?
Nowadays, if you want to eat bayberry from Xianju, Zhejiang, mangoes from Thailand, Boston lobster, Australian steak... you no longer need to run around looking for authentic sellers. With a gentle click of the mouse and an online order, you can wait at home for the food to "knock on your door." As consumer demand for shopping without leaving home grows substantially, fresh food e-commerce, relying on the internet, has become a new blue ocean for the industry.
In this year's "6.18 E-commerce Carnival," major e-commerce platforms elevated fresh food to a key competitive category. In addition to Tmall and JD.com, vertical fresh food e-commerce companies including Yiguo Fresh and Fruit Day also "posted" relatively good results. The rise of fresh food e-commerce has heated up the cold chain logistics industry. Data from research institutions show that in 2017 the market size of China's entire cold chain logistics industry will reach 470 billion yuan, with an average annual growth rate of 25%.
Industry pain point: incomplete cold chain logistics
Cold chain logistics refers to a temperature-controlled supply chain, mainly consisting of three methods: refrigeration (2°C), freezing (minus 18°C) and quick freezing (minus 29°C). Through a complete, uninterrupted cold chain system, products are kept in storage and distribution within a certain temperature range, thereby extending and ensuring their shelf life. Because fresh food e-commerce products are highly perishable, the cold chain is an important support for fresh food e-commerce. However, the development of domestic cold chain logistics is not yet mature, and there are still many deficiencies in infrastructure, technical equipment and standards systems, which at the same time constitutes the "pain point" of fresh food e-commerce.
The "2015 China Fresh Food E-commerce Market Research" released by iResearch shows that although the transaction scale of China's fresh food e-commerce reached 56 billion yuan in 2015, it could hardly conceal the large-scale losses in fresh food e-commerce. Among the more than 4,000 fresh food e-commerce companies in China in 2015, only 1% were profitable. Among them, food logistics costs accounted for about 70% of total food costs. According to statistics, the loss rate of fresh food categories in China is about 20% to 30%, most of which occurs during product circulation due to inadequate freezing, and excessively high product loss also brings safety hazards.
"When customers choose an e-commerce brand and judge whether they are satisfied, product freshness is one of the most critical factors." Yang Ping, vice president of Yihaodian, pointed out last Friday at the 2016 International Cold Chain Logistics Summit held in Shanghai, "Whoever is the first to create a controllable full-process cold chain model that meets customer expectations and delivers quickly will seize the fresh food market."
The key lies in controlling the energy consumption and cost of cold chain logistics
In addition to customer stickiness, cost control is the most difficult issue that fresh food e-commerce needs to solve. How can efficient control of the entire cold chain logistics process be achieved through deep technical cultivation and model innovation?
The starting point of cold chain logistics and the focus of the food source production areas: cold storage, with the arrival of summer, has also become a focus of industry attention. "Carbon dioxide cold storage refrigeration technology will gradually replace domestic Freon refrigerants." Gu Zhong, managing director of Zhejiang Dun'an Cold Chain System Co., Ltd., pointed out at the forum, "Carbon dioxide refrigeration technology has the characteristics of high efficiency, energy saving, economy and environmental protection, and can save up to 50% of energy consumption in summer, with an annual average saving of 30%." "To make fresh food delivery produce economies of scale, lower cost must also be considered." It is understood that carbon dioxide below minus 28°C, the lower the temperature and the larger the scale, and it will not contaminate food.
As the core competitiveness of fresh food e-commerce, cold chain transport and distribution is the most important and fundamental link in the cold chain logistics industry. Among them, the temperature control capability throughout the entire transport process is key, so the requirements for refrigerated trucks are very high. Xie Jian, chairman of Lantu New Energy Vehicle Company, told the Jiefang Daily·Shanghai Observer reporter: "Deep cultivation and innovation of cross-domain technology is key. For example, using aerospace composite materials and reflective coatings on the box body can not only make the refrigerated truck lighter and carry 10% more goods, but also save about 8% of energy consumption." At present, Lantu Enterprise has jointly launched a pure electric refrigerated truck with China Aerospace Science and Technology Corporation. Technologies such as temperature control systems and remote control can keep cold chain products under strict monitoring throughout the entire transport process. At present, China's refrigerated transport market is also ushering in a period of rapid growth. In April 2016, the "Opinions of the General Office of the State Council on Deeply Implementing the 'Internet Plus Circulation' Action Plan" specifically emphasized policy support for the construction of cold chain systems, supporting the construction of full-process cold chain systems for agricultural product circulation.
"Doing a good job in cold chain logistics can effectively increase the customer stickiness of fresh food e-commerce." Su Min, a supply chain expert at McKinsey, said, "According to McKinsey's '2016 China Consumer Report,' consumers are paying increasing attention to food quality and healthy living, and are even willing to pay a premium to buy high-quality products they recognize."