Author: Chen Na
Posted on: Caixin Online, November 30th, 2016
China is counting on the booming e-commerce sector to transform the agricultural industry, but the plan has failed to generate much excitement among experts and farmers.
The Ministry of Agriculture recently announced an ambitious plan to increase online sales of agricultural produce by an average annual rate of about 40% to 800 billion yuan ($116 billion) by 2020. Last year, agricultural produce worth 150 billion yuan was traded online.
To achieve the goal, the government will “promote the use of big data, internet of things, cloud computing, mobile internet and other types of new-generation information technology” throughout the agriculture sector, including the use of production, management, processing and logistics, the Agriculture Ministry recently said in a statement on its website.
Shoppers are now flocking online for products as diverse as clothing, health-care products, household appliances and tech gadgets.
The potential of the online market has drawn a growing class of young tech-savvy farmers who, unlike their parents who worked small plots without access to market information, are trying to improve their livelihoods using technology.
The government also has high hopes that the online shopping industry will increase farmers’ incomes and modernize the agricultural sector. The average annual wage for a farmer was 11,000 yuan last year, according to the Agriculture Ministry.
Recent central and local government measures include doling out subsidies to farmers to open online stores, training farmers to use computers and cellphones, and seeking help from big companies such as Alibaba Group Holding Ltd.
However, limited distribution networks and fierce competition between big corporate players and small sellers may hinder the government’s plan, said Li Guoxiang, a researcher at the Rural Development Institute of the state-backed Chinese Academy of Social Sciences.
“The nature of the agricultural industry makes it hard to sell fresh produce online unless there is a strong logistics industry to support it,” Li said.
A fruit store called Tianmeizi, based in Xuzhou, Jiangsu province, opened an online store on Taobao, which is owned by Alibaba, last year, but revenue generated online still lags that of the physical store, said a manager who spoke on the condition of anonymity.
Although some delivery companies provide one-day services, a lot of fresh produce still spoils on its way to consumers’ doorsteps, Li said.
It’s not clear how the ministry will support the industry to achieve its goal in the next four years. As bigger players enter the market, many small-farmer vendors will soon be pushed out of the industry if they don’t have government support, Li said.
There were about 30,000 stores selling agricultural produce online in 2015, including small retailers and e-commerce giants such as Alibaba’s Tmall Supermarket and JD.com, official data from the Agriculture Ministry showed.
Both companies have invested heavily in logistics and warehouse facilities, enabling them to offer fresh produce sent directly from their own warehouses, rather than third-party suppliers. They have also plowed millions of yuan into a price war aimed at attracting shoppers.
“They don’t know if they’ll succeed, but everyone wants to try it,” Li said.