What are the future development trends of agricultural product e-commerce?
This year's No. 1 Central Document proposed accelerating the development of rural e-commerce and forming a pattern of online-offline integration and two-way circulation in which agricultural products go to the cities while agricultural inputs and consumer goods go to the countryside.
At present, the average annual growth rate of online transactions in agricultural products has reached more than 50%, but only 1% of the 3,000 platform-based agricultural product e-commerce businesses are profitable. How can agricultural product e-commerce stop losing money just to make a show? Which way will the "wind" blow next? A reporter interviewed experts and industry insiders.
From retail to wholesale
Agricultural product e-commerce applications are becoming increasingly complete
The "Alibaba Agricultural Product E-commerce White Paper" released by AliResearch shows that in 2015 the Alibaba platform completed 69.550 billion yuan in agricultural product sales, and the number of sellers dealing in agricultural products exceeded 900,000. In terms of regional distribution, Guangdong, Zhejiang and Jiangsu had the largest number of agricultural product sellers, with Guangdong exceeding 100,000; while Shaanxi, Shanxi and Jiangxi had the fastest growth, with Shaanxi reaching 56.35%.
At present, China's agricultural product e-commerce development has entered a growth stage and is shifting toward joint driving by multiple entities, from long hovering in information services to achieving online transactions. Right now, various market entities in agricultural product production, processing and circulation are all optimistic about online sales, and the role of organized promotion of agricultural product e-commerce development has become prominent. On the basis of physical store operations, e-commerce has been introduced, combining online and offline, with online stores and physical stores advancing side by side.
When it comes to combining online and offline, Lecuntao is one example. Lecuntao is China's first village and town O2O e-commerce platform, upgrading and transforming village and town convenience stores into offline experience stores, and through these experience stores helping farmers shop online and sell agricultural products. In March this year, Lecuntao launched the "Jujubes Gather in Luliang" campaign to sell red dates, with more than 60,000 village and town experience stores helping jujube farmers in Luliang, Shanxi, sell red dates. At present, Luliang red dates have reached more than 3 million yuan in sales nationwide.
Lecuntao launched "Le 6 Market," suited to the current situation in rural areas. Chairman Zhao Shiquan said, "'Le 6 Market' means going to market on days with a 6. Farmers like to go to market in the city. We bring this offline market-going onto the internet, so that farmers can go to the big online market without leaving their villages. On the 6th, 16th and 26th of each month, farmers place orders in a concentrated way, sell in a concentrated way and receive centralized delivery, greatly reducing logistics costs and procurement costs."
Not only is e-commerce transforming traditional rural retail terminals, traditional agricultural wholesale markets are also accelerating their integration with e-commerce. Agricultural wholesale markets are an important link in the circulation of agricultural products, and people's first impression of them is often one of disorder. At present, there are more than 4,000 large and medium-sized agricultural wholesale markets nationwide, and every year 80% of agricultural products must pass through agricultural wholesale markets before reaching consumers. But agricultural wholesale markets are mainly based on the traditional model of "cash on one side, goods on the other." In the transaction process, manual carrying, weighing and counting are time-consuming and laborious.
Recently, Wuhan Baishazhou Market joined the Gudeng e-commerce platform to upgrade its transaction model and implement an online trading model through a mobile phone APP, realizing offline experience and online transactions, and gradually cultivating new trading habits among merchants and buyers. Baishazhou Market has installed electronic scales. With the help of the e-commerce platform, the electronic scales are connected to POS machines. When weighing, an order can be generated with one click, and the transaction information is simultaneously sent to the APPs of both buyers and sellers. Buyers can learn the real product price information of the shops on the platform.
From brisk transactions to poor profitability
Competition among platform-based e-commerce businesses is white-hot
With a huge market capacity, agricultural product e-commerce naturally became an object of capital pursuit. In 2012, fresh food e-commerce started, Chu oranges entered Beijing, and the lychee war broke out. Large e-commerce and express delivery companies entered the fresh food sector one after another; from 2013 to 2014, multiple models such as B2C and O2O emerged at the same time, and internet agricultural innovations such as presale, crowdfunding and traceability surged; in 2015, agricultural product e-commerce entered a peak period of financing and mergers and reorganizations, with various types of financing exceeding 7 billion yuan... More social capital entered the feast of agricultural product e-commerce.
In 2015, online retail sales of agricultural products reached 150.5 billion yuan, an increase of more than 50%. Platform-based comprehensive e-commerce companies such as Alibaba and JD.com continued to expand the territory of village-level service stations; agricultural input e-commerce companies such as Nongshang No. 1 and Aizhongwang let farmers buy agricultural inputs without leaving home; fresh food e-commerce companies such as SF Best and Youcaiwang met the tasting needs of urban consumers; B2B agricultural e-commerce companies such as Yimutian and Yunnongchang drove the alignment of agricultural product production and sales... The major "outlets" of "Internet + agriculture" have all developed rapidly.
In sharp contrast to the booming market and delighted Taobao sellers is the bleak profit data of platform-based agricultural product e-commerce.
Data shows that at present only 1% of domestic agricultural product e-commerce businesses can be profitable, 7% have huge losses, 88% have slight losses, and 4% break even. Many agricultural product e-commerce websites suffer operating losses caused by convergent investment and duplicated construction, with website creation and closure coexisting. In 2015 alone, agricultural product e-commerce businesses that closed included Shuiguo Yinghang, Tetu Wang, Caigou Xiongdi, Houchu Wang and Caiguanjia.
"Investigating the reasons, the main ones are that thousands of websites look the same and lack distinctive features, the average order value is relatively small and the scale is not large, the user experience is insufficient and customer service quality is poor, the supply chain and cold chain models are imperfect, and self-operated logistics and outsourced logistics are opposed to each other," said Hong Tao, director of the Institute of Business Economics at Beijing Technology and Business University and an expert on agricultural product e-commerce. Although the agricultural product e-commerce industry has ushered in unprecedented development opportunities, the losses and closures of agricultural product e-commerce businesses must also be taken very seriously.
Industry insiders believe that the current insufficient standardization of agricultural products and the inadequate supporting fresh food logistics both constitute obstacles to the internet promoting the circulation of agricultural products. First, there is a lack of unified production standards and quality standards for agricultural products. Product standards, packaging standards, distribution standards and quality standards are still not complete enough; second, some rural areas are located in remote places, and the reach of logistics is not extensive enough. The development of the logistics industry is obviously lacking, and preservation technology, storage capacity and distribution strength vary greatly, especially cold chain logistics capacity is insufficient.
From policy to market
The e-commerce environment will improve markedly
At present, there are more than 3,000 agricultural product e-commerce platforms nationwide, online transactions of agricultural products are growing rapidly, and practice in many places has accumulated a great deal of experience. The AliResearch report believes that many new highlights have emerged in agricultural product e-commerce innovation, including innovation in supply systems from traceability to quality control; improvement of infrastructure from logistics to finance; and innovation in social responsibility from wealth creation to poverty alleviation.
Since last year, China's agricultural product e-commerce has shown the dual characteristics of government promotion and market promotion. On the one hand, more than 10 ministries and commissions including the Ministry of Commerce, the Ministry of Agriculture and the Ministry of Finance have issued multiple documents from different angles and fields that support the development of rural e-commerce. On the other hand, driven by the market, large enterprises such as Alibaba, JD.com and Suning have entered rural areas, increasingly showing a market pattern of "two super-large players, multiple strong players, and one large area."
As agricultural product e-commerce moves from the growth stage into the development stage, operators are required to shore up shortcomings in areas such as the marketing environment and infrastructure. Multiple industry insiders told the reporter that policy measures should be used to solve the things that a single e-commerce enterprise wanted to do in the past but could not do well, and to resolve the institutional and mechanism obstacles to the development of agricultural e-commerce. For example, rural logistics distribution needs to be advanced as a whole within the county scope in order to reduce costs; preferential support measures for land use, electricity use and internet use that e-commerce businesses have long awaited must also be implemented as soon as possible.
The reporter learned that due to information asymmetry and an imperfect credit system, consumers buying agricultural products on e-commerce platforms still have many concerns. For example, some agricultural products claim to be "organic," but in fact are not "organic"; some say they are free-range eggs, but in fact are not "free-range." In addition, construction of transaction rules, safety traceability, claim mechanisms and dispute resolution is still insufficient, resulting in a certain phenomenon of "bad money driving out good money" in agricultural product e-commerce.
"As the branding of e-commerce advances, e-commerce enterprises need to extend to the front end of the supply chain, ensuring the quality safety and standardization of agricultural products through breakthroughs in organized innovation, thereby laying a solid foundation for branding," believed Jiang Wenlong of the China Academy for Rural Development at Zhejiang University. Online problems need to be solved offline. The uncertainty of non-standard agricultural products should be resolved through standardization, so that Chinese agricultural products can return to the sense of value they should have.
"We encourage comprehensive e-commerce enterprises to expand their agricultural e-commerce business, support vertical agricultural e-commerce enterprises in growing stronger, and guide qualified traditional agricultural product circulation enterprises and agricultural production means production and distribution enterprises to develop e-commerce," said Wang Xiaobing, deputy director of the Market Department of the Ministry of Agriculture. The Ministry of Agriculture, the Ministry of Commerce and others have proposed implementing policies supporting land use, water use and internet use for the development of agricultural e-commerce, and establishing and improving diversified, multi-channel investment and financing mechanisms adapted to the development of e-commerce; by 2018, the infrastructure conditions for agricultural e-commerce will be markedly improved.