Nov. 9, 2017
A few years ago, there was a very popular expression in the agrochemical sector of China that is the agricultural inputs e-commerce (hereinafter referred to as “agri-inputs e-commerce.”)
Since 2014, this novel agri-inputs transaction pattern has attracted many enterprises and investors because of its charm of the Internet Plus concept, and the agri-inputs themed e-platforms mushroomed in a short period of time. The year, 2015 is even being termed as “The first e-commerce year of China’s agri-inputs industry.”
However, the situation has changed dramatically in less than two years. The previous rushing-in or burgeoning is replaced by wait-and-see conservatively or even quitting gloomily. Some of the once-favored well-known e-commerce service providers suffered a huge loss, which dragged down their performance.
In March 2016, a dozen domestic and foreign well-known agri-inputs enterprises announced one after another: the company did not authorize any individual organization to sell products on the Internet, and the company will bear no responsibility for the products purchased from e-commerce service providers in terms of product quality problem or any loss so caused. In a short period of time, the rumor that agri-inputs enterprises jointly “banned” e-commerce service providers spread everywhere.
What is more, Ye Xiaogang, a special contributor to AgroPages and the CEO of AgroAlliance (Australia) Pty Ltd. wrote that the last agri-inputs e-commerce service provider of Australia stopped its operations in November 2015, which concluded the era of agri-inputs e-commerce being all the rage in Australia.
Survey on the development of the global agri-inputs e-commerce industry
Global distribution of participants to complete the questionnaire on agri-inputs e-commerce
AgroPages has been closely following and reporting various related events since the concept of agri-inputs e-commerce emerged in China. During this period, AgroPages has been questioned by readers on whether the phenomenon of popular agri-inputs e-commerce in the past two years occurred just in China? Do other countries and regions have such kind of transaction pattern and what experience can be referenced to? In fact, such problems are not only the concern of readers but also of AgroPages. Subsequently, AgroPages launched a survey by distributing questionnaires among readers around the world, and got 142 copies of completed questionnaires from 26 countries globally.
The survey data showed that 51% of the respondents replied no agri-inputs have ever been sold on the Internet in their countries, and 49% of the respondents replied the new sales channel of agriinputs e-commerce has emerged in their countries. By region, Asia and North America are the relatively active regions of agri-inputs e-commerce. Most of the respondents from India, China and the United States replied that there exists a sales channel for agriinputs e-commerce in their countries.
Replies to AgroPages’ questionnaires on agri-inputs e-commerce by readers around the world
The respondents from Vietnam, Egypt, Brazil, Argentina and Uruguay also replied that agri-inputs e-commerce exists in their countries. 63% of the respondents believed that e-commerce will be the development trend of agri-inputs marketing in the future, and 37% of the respondents are not optimistic about this new sales channel.
Replies to AgroPages' questionnaires on agri-inputs e-commerce by readers from China
According to another survey conducted by AgroPages by distributing questionnaires to readers of China, 55% of the respondents believed that agri-inputs e-commerce will benefit the marketing of the products and the future development of enterprises. 12% of the respondents gave a negative answer, and 33% gave a reply of “not sure.” 52% of the respondents expressed it clearly that their companies have an intention to expand to e-commerce, 25% of the respondents gave a negative answer, and the remaining 23% said they have no idea.
For the question “Do you think the agri-inputs market of China needs an agri-inputs e-platform like Alibaba/JD.com/DangDang?” 48% of the respondents gave a reply of Yes, 34% said No, 9% selected an answer which was expressed as “The question is not whether it is needed or not. The question is whether it is allowed or permitted by the government or not,” and the rest expressed different views, such as it depends on the regions because it is more suitable for a developed region to choose a sales channel for e-commerce; no matter what the channel is, it is a good way if part of the profits can be surrendered to the farmers.
Advantages are obvious, but cannot offset concerns about many drawbacks
Regarding the third of the open-ended questions about the advantages and disadvantages of agri-inputs e-commerce as listed in the questionnaires distributed to the readers all around the world, the respondents expressed their thoughts and opinions. With regards to the advantages, almost all of the respondents mentioned firstly that the sales costs of the agrochemicals companies would be reduced to a certain extent if agri-inputs were sold online because of cutting out of intermediaries, and the prices could be further reduced which could benefit the farmers, and it is just like the e-commerce form of other industries where consumers are favored obviously.
A considerable number of respondents mentioned that for consumers, purchasing agri-inputs online would be convenient, fast and easy for price comparison, and could be a good consumption experience. Some optimistic respondents even said this would be a revolution for agri-inputs marketing and the prospect is promising.
Some other respondents mentioned that agri-inputs e-commerce would improve the efficiency of product marketing; it would be more feasible to start agri-inputs e-commerce for the horticultural products sector and the prospect would be better than in the major crops sector; and the promotion of agri-inputs e-commerce might improve the collection of accounts receivable by manufacturers.
Compared with the highly unanimous views on the advantages of agri-inputs e-commerce, the respondents had more comprehensive, specific and diversified comments on the disadvantages, which can be summarized as follows:
Product quality and after-sales guarantee
For the agri-inputs sold online, it might be impossible to accurately know the true source of a product, nor judge and confirm the quality of the product. In case of any quality and transportrelated problems, it might be impossible to enjoy a good after-sales guarantee. If customers want to buy trustworthy products, they might have to, based on the local concrete situation, check the business licenses of sellers, the registration status and applicable scope of pesticides and the transport-related statutory provisions. These would greatly reduce the good user experience of online shopping featuring rapidness and convenience. Not to mention that most of the end consumers of agri-inputs are farmers located in rural areas and other remotely undeveloped areas. Generally, there have a lower level of education and have never heard of such things. If they have to go through such a complicated process to buy a trustworthy product, it is undoubted that most of them will be discouraged. Although online shopping seems to be very good, it will be difficult for it to be accepted by target groups.
Information and technical support
The agrochemicals industry is a service-oriented one and the two sides of a transaction do not have a simple trading relationship only. Because of the particularity of agri-inputs products, the sellers need to provide consumers with very professional information and technical support, as well as qualified and knowledgeable personnel to give recommendations before the purchase of pesticides and instructions during the use of pesticides.
During the traditional sales stage when e-commerce was not so popular, these professionals had to be present on the farm land to give face-to-face training and guidance to farmers. This is hardly possible for the agri-inputs purchased online. The possible final situation might be such that the customers can buy the products, not the service, or the money saved by online shopping could not cover the additional costs spent on buying technical advice and field service. If not or less money is spent on information, it is unavoidable to face the risks of buying the wrong product, incorrect use of the product, and even damaging the crops. In addition, online shopping will impair the close contact with end users and it would be more difficult to keep customer loyalty.
Policy and regulation
Agri-inputs e-commerce is a brand new thing. It is illegal in some countries while in the countries where it is legally permitted, there still lacks sound policy and regulatory system. From a long-term point of view, the lack of such superstructure will be detrimental to the healthy development of the industry. Some respondents mentioned that because of policy related issues, the e-commerce service providers would encounter some limitations, e.g. they cannot have all kinds of products sold online, such as the toxic pesticides.
Logistics and transport
Agri-input products, especially pesticides which are mostly classified as harmful or dangerous goods, will face logistics and transport-related issues not common to ordinary goods, such as clothes and foods. These issues include statutory provisions, as well as the operation permit and qualification of the logistics companies. The logistics-related restrictions will increase the difficulty of product marketing, reduce the speed of product circulation and slow down the development and popularization of agri-inputs e-commerce.
Some respondents mentioned that even though these dangerous goods are allowed to be transported, the issues regarding after-sales guarantee will once again be involved like who will be responsible if the package is damaged and hazardous material leaks during the process of transport.
On the issue of counterfeit goods, the respondents expressed two completely different views. Some of them think a buyer could buy authentic agri-inputs from certified shops (usually the manufacturers/agrochemical companies or large dealers) opened on trustable e-platforms provided the source and channel of goods are dependable, and this would keep down the sales of counterfeit pesticides. While others believed that there still exists counterfeit and illegal products in traditional sales channels, let alone the e-commerce channel where the source of goods and the qualification of operators could not be guaranteed, and the situation would be worse.
Resistance from the traditional channels
Obviously, selling agri-inputs online cuts off many intermediate sales links. If it is popularized, the traditional agri-inputs distributors and retailers may disappear. Those whose "cheeses are moved" are bound to resist. Before agri-inputs e-commerce is widely accepted, the resistance from traditional intermediaries would force some of the pesticide suppliers that are still cooperating with them to abandon their investments in new channels.
Profit and innovation
The emergence of agri-inputs e-commerce will bring about more fierce competition, further suppress the prices of agri-inputs and squeeze the profits of manufacturers. It will become more difficult for agrochemicals enterprises to survive. What's worse, low profits will deprive manufacturers of the fundamentals to innovate and dampen their enthusiasm of innovation.
Although the industry players have a variety of worries and confusions about agri-inputs e-commerce, which is now in its early stage to burgeoning development, people still have a positive view on the future development of this industry.
Transforming ideas will lead the agri-inputs e-commerce to usher in a truly benign development way
Taking the development of China’s agri-inputs e-commerce in China as an example, after roller coaster-like ups and downs, the industry has entered a new stage of introspection, and an analysis and improvement were made on the disadvantages revealed by the survey. Though it is a bit early to predict which of the survived agri-inputs e-platforms may laugh last, we are pleased to see their transformation from concept to practice and from “floating in the air” to “rooting in the field.”
Coupled with the strong policy support of the Chinese government, such as “accelerating the promotion of e-commerce in the countryside, encouraging the presence of e-commerce in communities and promoting the development of cross-border e-commerce” to major aspects to be focused on in the 13th-Five-Year Plan period, it is believed the development prospects of agri-inputs e-commerce in China are still optimistic.
Finally, I would like to end this article with the reply which is of my personal preference from a reader from Paraguay's CHEMTEC SAE: “In this highly competitive market, companies must keep in a constant search for innovation.. Just as the numerous transactions of other commodities traded online nowadays, agri-inputs e-commerce is also experiencing rapid development.
Compared with regarding online trade as a sales tool, I see the online trade more as a support for corporate customers than as a sales engine for final customers. At this stage, the agrochemicals sales are still totally linked to the technical support of the agronomical engineers that act both as a salesman and as a technical consultant. The emergence of agriinputs e-commerce does not mean such services will be sacrificed. In Brazil, we have not only witnessed the development of e-commerce, but also noticed a number of multinational companies have developed the appropriate software to solve the issue of providing farmers with information, consultation and technical support services. The reasonable combination of e-commerce with technology and service may break the bottleneck encountered in the development of agri-inputs e-commerce for the moment. I believe that as a sales method innovation, the agri-inputs e-commerce will come to all markets sooner or later!”
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