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By Cheng Yu

Research Report Vol.19 No.2, 2017

The application of the internet and other information technology in the agricultural sector has changed the way of production and circulation and given birth to creative marketing approaches and value creation patterns, thus providing new ideas and innovative methods for small-scale farmers to further benefit from modern production and better align their agricultural production with market demand. In recent years, major internet companies have accelerated their expansion into rural markets. The many emerging internet-enabled agricultural companies and internet-driven startups and innovation enterprises have helped to optimize the allocation of agricultural production factors and resources. Silently driving the restructuring of the agricultural industry chain, the internet has become a new engine for enhanced competitiveness of the agricultural sector.

I. Restructure the Circulation Pattern of Agricultural Products with Internet Plus

1. From hub-centered distribution to matched supply and demand and targeted distribution

Matching supply and demand information, the internet connects farmers directly to vendors and enables direct delivery upon the agreement of transaction details, thus cutting the previous more than five intermediate links to three or two, remarkably reducing distribution costs, and avoiding product losses. There are mainly five patterns through which the internet joins agricultural products circulation, namely, Farm Direct Distribution, Platform plus Direct Sales from Place of Origin, Vertical E-Business, Comprehensive E-Business, and Matchmaking Platform (see the table below). Except for matchmaking platforms which provide wholesale services and involve no direct delivery to customers, the other four patterns leverage the new agricultural circulation dynamism, independently or jointly, to significantly improve the efficiency of agricultural products circulation.

A far more powerful information collector, the internet provides much more information for both the supply side and the demand side in a much timelier manner than traditional wholesale markets, thus enabling the demand side to better compare quality and price and the supply side to better choose vendors and the selling price. Better access to the market allows farmers who are usually absent in the negotiation of market prices to have more options for selling their products and a better position when it comes to income distribution in the value chain of the agricultural sector. For example, ymt.com facilitates the direct contact between brokers in places of origin and organizational buyers, which helps to increase the price of agricultural products in their places of origin by 30%. In Zhouyi Village, Zhouzhi County, Shaanxi Province, kiwifruits are directly delivered to customers thanks to the local e-commerce service station and profits are 30 to 40 percent higher than on traditional markets. In Yunnan Province, the retail price of roses at a florist used to be three to five times or even ten times higher than the wholesale price in their place of origin¹. Thanks to the introduction of e-commerce, the gap has dropped to about 50%.

2. Recreate hubs with optimized logistics layout

Different from traditional channels where information flows and logistics only appear upon the completion of a transaction, the internet first collects information flows in order to facilitate transactions and following logistics. With such information, delivery channels and routes can be optimized, which makes it possible to reduce the waste of resources and the damage of products that are common with inappropriate logistics turnover. Big e-commerce vendors of fresh agricultural products have been strengthening construction their logistics networks and, leveraging their optimized and big data-based logistics layout, developed new circulation hubs for agricultural products based on their own logistics that enables close coordination with and speedy delivery from places of origin (see below). For example, jd.com has developed a complete cold chain logistics network for fresh products consisting of ten coordinating warehouses at places of origin, ten hubs, and over 3300 delivery stations, featuring coordinated warehousing, integrated warehousing and distribution, direct distribution from places of origin, nationwide transport, and end-to-end delivery. With Qinglong (Blue Dragon) Intelligent Logistics System providing support for an optimized choice of hubs, delivery stations, and routes of transportation, fresh agricultural products can reach the table of customers nationwide within 48 hours of pickup. For another example, easyflower.com has established in Yunnan Province 10 warehouses for directprocurement in An’ning, Yiliang, and other places and several front-end logistics centers in Yuxi and Kunming. For customers nationwide, its flower storage centers cover a total area of 100,000 square meters. Freshly picked flowers are sent from warehouses in places of origin directly to warehouses in places of customers², improving circulation efficiency by 70% and reducing costs by half³. As cold chain logistics networks covering places of origin to places of customers gradually take shape, e-commerce vendors are pleased to see that their hubs are gradually replacing traditional wholesale markets in places of origin and places of customers as circulation centers for agricultural products.

The large-scale cluster development of e-commerce companies has promoted the optimization and integration of logistics and other service resources and the emergence of e-commerce logistics centers. Wugong County, Shaanxi Province has established “procurement from Northeast China for nationwide sales” as the local e-commerce development strategy. After the delivery volume surges to a certain level, the county’s e-commerce development office negotiated with logistics companies and persuaded the latter to reduce logistics costs to 4 yuan per order, making the county an e-commerce circulation hub in the region⁴. Farms in neighboring areas have, therefore, abandoned traditional wholesale markets and turned to Wugong County and its e-commerce logistics services for delivering their special offer of agricultural products to customers around the country.

II. Recreate Modern Agricultural System with Internet Plus

1. Improve agricultural production management and achieve cost-efficiency through intelligent interconnectivity

Internet and information technology can be used for real-time monitoring and accurate management of agricultural production, better controlling agricultural risks, improving output efficiency, and upgrading product quality. With online interconnectivity, decentralized small-scale farmers can achieve scale aggregation and benefit from reduced costs thanks to collective procurement, group marketing, and intensive services. Da Bei Nong Group has launched its own online pig management platform (z.nxin.com) to help pig farms optimize the size of the herd, refine disease control, and provide proper feed. Ten months after the launch of the online platform, the number of weaned piglets⁵ that a sow annually gives birth to has risen from 20 to 22 while the feed to gain ratio has dropped by 0.1⁶. Meanwhile, the mating delivery rate has increased by 20% to 30%, while the morbidity and mortality rates have decreased by 5% to 8% and 3% to 5% respectively. One day has also been cut from the previous empty pregnant period. website focuses on soil testing and formula fertilization and provides a complete set of resources and technology services, helping farmers reduce costs of agricultural resources by 15% to 45%. Systematically integrating meteorological, vegetation, soil, and production monitoring data, GAGO 3S Big Data Platform helps farmers reduce the use of water and fertilizers by 30% and 20% respectively and provides effective protection against natural disaster risks.

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