How can agricultural products break through regional limits to reach a larger market?

For many years, Lei Bingyi, the boss of Pingyao Guanyun Beef, had been torn over a question, and more than once discussed it with Cao Jianming, section chief of the Industrialization Section of the Jinzhong City Agriculture Committee in Shanxi Province: how can a regional product break out of its regional market?

In June 2014, the appearance of a virtual geographical indication specialty store, the Taobao Jinzhong Store, resolved Lei Bingyi's dilemma. It now sells 46 million yuan online.

The two years of market practice of the Taobao Jinzhong Store show that, at present, e-commerce plus regional specialties is one of the tangible, visible business operation models of "Internet Plus" agriculture, and has also become a channel for regional specialties to break into the national market; but e-commerce is not Sun Wukong, and sales of regional specialties will not work like magic just by going online. Effort still needs to be put into building business operation tools such as marketing teams and branding. This is true both of how sellers operate and how the government acts.

A virtual geographical indication specialty store steps toward the national market

It must be said that Jinzhong City is Shanxi's agricultural valley, with a dazzling array of local specialties. Many years ago, Pingyao beef and Taigu cakes, accompanied by Guo Lanying's beautiful singing, spread across the length and breadth of the country. Market awareness of these two local specialties nationwide should not be a problem.

The reality is that Guanyun Beef's market can at best reach the Beijing-Tianjin and Inner Mongolia markets, and its main market share is still in Shanxi or even Jinzhong. Taigu cake, as a small category, cannot even get out of the Jinzhong Basin or reach the Taihang Mountains.

In 2013, the Jinzhong Municipal Party Committee and Municipal Government decided to build the Taobao Jinzhong Store to support Jinzhong City's agricultural products in reaching the national market through e-commerce. In June 2014, the Jinzhong Store began operating. The e-commerce model of the government paying, agricultural enterprises selling goods and farmers increasing income became Jinzhong City's new method of using the market to drive modern agricultural development.

"We led the enterprise onto the road, got it onto the vehicle, and helped it keep pace with the times, turning the e-commerce dream that the enterprise could not see, touch or dare to imagine into reality," said Ji Fei, chairman of Rongxintang.

Previously, Rongxintang used local supermarket channels, with monthly returns and exchanges reaching 9%. In e-commerce, the return rate is zero. Going the e-commerce route also avoids supermarket entry fees, stall fees, barcode fees and so on. After reducing intermediate links, both producers and consumers gain.

With the low-cost operation of e-commerce, Rongxintang's Taigu cakes sold across the country, with its South China market share even exceeding local market sales, ranking among the national top 500 e-commerce food marketers.

Within half a year, sales of Jinzhong City's local specialties on this platform surged. There were 23 Jinzhong agricultural enterprises with Tmall stores and 167 market stores; sales reached 406,000 orders, with total sales of 15.73 million yuan.

Half a year later, market differentiation became the norm at the Taobao Jinzhong Store. By the end of 2015, sales in the store exceeded 70 million yuan, driving online sales of 150 million yuan, among which sales of Guanyun Beef and Rongxintang Taigu cakes were far ahead, while sales of some other local specialties showed no obvious increase after the "honeymoon period" of going online.

This means that e-commerce merely provides a window and channel for regional specialties to "see" the national market; how to actually reach it still requires hard skills.

"Profit partnership" takes a bite of the national cake

In 2016, Rongxintang's online sales breaking 50 million should be no suspense, which is of extraordinary significance for a small-category snack food that had long remained at the stage of peddling with a basket.

The greater gain after going online is that Rongxintang began implementing the project of Taogu County Taoguanjia Warehouse and Distribution Logistics Co., Ltd., providing logistics distribution and marketing output services for the county's local specialties. While reducing its own logistics costs, it found a new profit growth point for the company.

This means that the e-commerce awakening of the Taobao Jinzhong Store also catalyzed a new business format of Jinzhong e-commerce services, adding wings of specialized services for regional local specialties heading to the national market.

How did they do it?

In 2014, when Rongxintang entered the Taobao Jinzhong Store, it chose a profit partnership system with a mature e-commerce agency operation company, letting a professional team do professional work.

From art design to marketing, a total of 17 positions with annual salaries of 3 million yuan were all handled by the Hangzhou Baoce agency operation company. From expressing brand values such as China Time-honored Brand and intangible cultural heritage to advertising expressions such as tasty and inexpensive and economical and affordable, the company carried out all-around packaging and planning for the marketing of its products.

"The cost is a bit higher, but growth potential is there," Ji Fei said. Where are others doing local specialty e-commerce falling short?

Taking Shanxi as an example, there are 10,000 various local specialty online stores "registered" online, about 7,000 in a dormant state, about 2,000 with actual sales performance, fewer than 30 with sales over one million yuan, and no more than 10 that are larger.

Local specialty e-commerce is not about not wanting to grow big, but about it being difficult to grow big. Unless they are professional e-commerce operators, most e-commerce businesses face the dilemma of mismatched logistics and warehousing environments.

In addition, the images, pages and interfaces suitable for netizens to experience online all require professional teams to update and maintain in a timely manner. When these costs are spread into agricultural products with very thin profits, it is very difficult for sales to continue without going dormant.

It can thus be seen that the Jinzhong Taobao Store, this government-paid service method benefiting regional specialties, is win-win. Rongxintang became a winner among regional specialties going online, inseparable from its choice of professional teams for commercial operation cooperation.

It is understood that this year, Taobao Jinzhong Store merchants Haiyu Food and Heyu Millet also began replicating Rongxintang's path, seeking professional teams to ignite their national market marketing.

Government payment boosts regional specialties going out

The practice of the Taobao Jinzhong Store also answered a topic: how local governments can help regional agricultural products enter the national market.

"Confidence is more important than gold," Ji Fei said frankly. It was precisely with government support and policy guidance that his worries about market risks were eliminated.

Agricultural product e-commerce is, plainly speaking, an "eyeball economy": insufficient traffic affects sales results, and there are worries about not being able to sell. The advantage of Jinzhong's approach is that new-type business entities such as farmers' professional cooperatives and agricultural enterprises enjoy free agricultural-benefit services for going online on Taobao, and no longer worry about insufficient traffic.

What is the market significance of investing 2.6 million yuan to build a regional geographical indication specialty store and making e-commerce a universal-benefit service for local agricultural products?

First, the Taobao Jinzhong Store, marked by Jinzhong regional culture, completed a second marketing of local specialties in terms of cultural identity. Cultural Jinzhong became a means of brand differentiation for agricultural products sold online.

Second, in terms of operation model, according to the construction principles of the "Taobao · Specialty China" project, the Jinzhong Store adopted a "1+1+1" operation model of government, operation service provider and Taobao platform——

Taobao officially provides operation channels and resources for the Jinzhong Store; assists the operator in carrying out local store operations; supports data reports; provides e-commerce technical support; and provides service training and service supervision.

The Jinzhong Municipal Government determines key products to promote; formulates a local store online quality supervision system, strengthens quality and safety supervision of primary agricultural products and endorses them; and formulates and issues support policies to guide enterprises and farmers in developing e-commerce.

The operation service provider integrates local specialty sellers and recruits merchants according to Taobao standards; collects, reviews and submits merchant qualifications; builds and maintains the normal operation of the store platform; formulates operation strategies and completes operation targets; handles customer service work; incubates and promotes local specialty products; and assists the growth of small and medium-sized regional sellers.

Rongxintang's case also shows that the 1+1+1 of government, enterprise and market produced an effect greater than 3. The government purchasing services and professional teams operating commercially not only achieved booming national market sales of regional products, but also market-driven improvement of the e-commerce environment and service methods.

Thus, as to how to use the visible hand to open the door of the invisible national market for regional specialties, Jinzhong City provided its own answer. Although it is not a standard answer, the practice of the Taobao Jinzhong Store shows that it is a correct answer.