Agri-Businesses and E-Marketplaces are re-inventing themselves through innovative channels to cut out the middle men, remove the distributors, displace the agents and in the process, improve economies of scale and cost savings for the end-consumers.
"How e-commerce is disrupting agribusiness from Brazil to China" - Pinduoduo Content Team, 5 Nov 2020.
Food demand is increasing worldwide, with growers seeking greater distribution and access to the regional or global supply chain. Consumers, on the other hand, are expecting round-the-clock convenience and greater transparency as grocery shopping increasingly goes digital.
E-commerce platforms from Brazil, Kenya, Indonesia and China took part in a Nov. 4 webinar organized by Thought for Food and Pinduoduo on how online marketplaces are changing the dynamics of agribusiness. One common “pain point” for agriculture producers across the different markets: How can growers break through geographical constraints and increase market access to capture more value from the supply chain.
Xin Yi Lim, Executive Director for Sustainability and Agricultural Impact at Pinduoduo, shared how the e-commerce platform connected farmers with consumers through its e-commerce platform and achieved a win-win for both. Pinduoduo, the largest e-commerce platform for agricultural products in China, achieved this by bypassing layers of intermediaries under the traditional wholesale system and giving farmers access to a far greater number of consumers. At the same time, consumers pay less than they would have at the local supermarket by purchasing directly from farmers through the platform.
Similarly, agricultural growers in Brazil were stuck with the traditional wholesale supply chain before the rise of e-commerce. The farmers had to do business locally with agents in the old model because they had no alternative or information about the broader market. But with the rise of online marketplaces, they were able to sell beyond their immediate vicinity and join a bigger network that gave them better pricing, said Ivan Moreno, Chief Executive Officer of Orbia, an online agribusiness platform.
In Nairobi, Kenya, physical wholesale markets have not kept pace with the growth of the urban population. The resulting bottlenecks created waste and inflation in a country where consumers spend 50% of their disposable income on food, said Peter Njonjo, Chief Executive Officer of Twiga Foods. E-commerce is helping to uncork those bottlenecks by circumventing the traditional wholesale markets.
While the problem may be similar across different countries, the solutions differ because of local conditions. In Indonesia, for instance, last-mile delivery remains a sticking point because of the high costs of logistics. Consumers are reluctant to pay for deliveries to the doorstep because the cost of delivering a 5 kilogram pack of rice may be higher than value of the item itself, said Febri Aditya Sigiro, founder of Aglonera, an online bulk buying platform. A pickup model has evolved where buyers collect their orders from community drop-off points, usually from the local warung, or small shop, he said.
Traffic can also create uncertainty over deliveries. In Kenya, traffic congestion means companies like Twiga have to design deliveries to consumer clusters to make the process more reliable, efficient, and cost-effective.Covid-19 has also resulted in shifts in consumer behaviour that demanded new solutions.
In China, Pinduoduo has been trying out a new community group-buying service called Duo Duo Maicai, which has consumers choosing from a curated list of fresh produce available for pickup the next day from a designated collection point. This was an example of a shift in consumer behavior after Covid-19, when consumers who otherwise would have shopped entirely offline are now open to buying groceries online.
More than half (56%) of the consumers in a survey said they are now grocery shopping online more frequently than before the pandemic. By 2025, nearly half of China’s grocery shopping is expected to take place online, up from 20% currently, according to Goldman Sachs. The online grocery market is projected to reach 7 trillion yuan in five years, the bank said. “We are seeing sustained consumer behavior post-pandemic and expect a further shifting from wet markets to structured retail, together with multiple models and build-out of cold-chain logistics to drive ongoing online share gains in” the fresh and FMCG categories, Goldman Sachs said in a report.