"Value Dilemma" of Fruit: E-commerce, Retail and Vertical Integration

202 1, agriculture quickly became a new big business. This ancient industry and its unique traditional order began to be accelerated by the Internet.

The establishment of a new order needs more time and patience. In this process, stakeholders at all levels in e-commerce, new retail and agricultural supply chain have contributed to the construction of the new order. At the same time, we also need to observe this from both positive and negative aspects.

This paper chooses fruit as the starting point. Its characteristics determine that it is the first to be impacted by the reform of retail channels, and its influence is more far-reaching.

As a cash crop, the price of fruit is mainly determined by market forces. Among many cash crops, it has the most commercial potential, so it has become the main category that e-commerce and retail channels have made the greatest efforts to transform. Among them, apples, pears, oranges and other categories that are first favored by e-commerce have the most obvious changes in the industrial chain. These fruits have a remarkable feature-a wide range of areas suitable for growth, scattered planting and long transportation distance.

E-commerce has brought great opportunities to these categories, but also hidden crises. In the past year's visit, we have constantly heard the bosses of fruit planting bases complain about "upside down prices" and "bad money drives out good money", although these bosses are not worth the loss under the influence of new channels.

From the sales point of view, e-commerce platforms, especially low-cost e-commerce, have opened the national market door for these fruit producing areas, but they have also opened a Pandora's Box.

On the one hand, online channels allow a large number of orders to flood into the producing areas, and the scale of local fruit planting has exploded in a few years, and the relationship between supply and demand has changed; On the other hand, the principle that customers buy fruits online is based on the price, which has triggered a price war between online channels. The oversupply intensified this price war, and the origin was involved in vicious price competition in reverse.

E-commerce is the inducement of fruit value dilemma, and the fundamental reason behind it lies in the problems of agricultural product circulation system itself. The traditional circulation system of agricultural products is mainly based on multi-level wholesale, which leads to the information gap, which leads to the difficulty in unifying the interests of all links in the industrial chain, and further leads to the huge loss of fresh food in circulation, the difficulty in controlling the quality, and the phenomenon of "buying cheap and selling expensive" in trading links.

The longer-term solution needs to go beyond the power of the e-commerce platform and belongs to the direction that traditional retailers and new retailers can exert their strength.

Some changes have taken place. In order to reduce costs, retailers have launched a new round of circulation system reform, trying to explore a set of "vertical integration" programs, so as to open up resources in production, processing, transportation and sales between production and marketing, and achieve the purpose of reducing costs and increasing efficiency.

In this process, the new circulation order will inevitably break the balance of interests that has been formed in the traditional circulation system. From the perspective of development, the dilemma that fruit producing areas are experiencing is also the pain that industry practitioners must experience in advance before trying to solve the circulation ills.

"This year, the turnover in the industry is very fierce. In February, 2002 1,1,Qiu Zengchang lamented to us that he was the president of Yongquan Town E-commerce Association in Taizhou, Zhejiang Province.

At the end of last century, the oranges in Yongquan Town became famous in Jiangsu and Zhejiang provinces. 10 years ago, local farmers keenly grasped the dividend of e-commerce and sold this local product to the whole country through scattered and diversified online channels such as WeChat friends circle and Taobao shop. Nowadays, e-commerce has also brought new industrial problems to the local area. Vicious price competition has become one of the manifestations, especially 202 1.

"Intra-industry involution has kept our profit margin very low. According to Qiu Lengchang's observation, retail investors are most affected by this. " I went to the express street here a while ago. Last year, the 10 picking season ended, and the streets were crowded with people, and the express car was blocked on the road. However, this year's car can be sideways, indicating that retail orders have fallen sharply. 」

This change is related to the industry environment behind it. In the past three years, emerging retailers and fresh food suppliers have gradually gained the advantage of order size. On the sales side, they ate away the market of retail investors in Yongquan town and suppressed the bargaining space of the latter.

The price war is a difficult compromise for the retail investors in Yongquan Town.

The production cost of Yongquan tangerine is not low. Miyagawa is a widely planted tangerine variety in the local area, and the mountainous terrain is just suitable for its growth, so its production management cost is higher than that of flat planting. Especially in Jiangsu and Zhejiang areas where urbanization and industrialization are developing rapidly, land and labor are crucial factors of production.

"Yongquan labor is very expensive. Qiu Zengchang takes picking as an example to calculate the input. Because there are many oranges planted in Yongquan mountain area, it is mainly by porters to carry oranges in this terrain. Therefore, after entering the picking period from June to 10 in 5438 every year, a porter's daily salary will reach 450 yuan, and the actual daily expenses of each porter will be as high as 500 to 600 yuan, including meals, snacks or cigarette subsidies.

Even so, it is difficult to recruit enough people locally. The loss of young labor force has become a prominent problem in Yongquan town of Zhejiang province and even the whole countryside. When picking, their workers often come from other places.

In sharp contrast to the cost, the sales price is getting lower and lower. This is not a good thing. If the contradiction is not alleviated, it will lead to the inversion of the selling price and the cost price, which will directly damage the local brands cultivated by local growers.

The situation of Yongquan tangerine is not an isolated case, but also a new dilemma faced by many fruit producing areas because of e-commerce.

For example, fragrant pears in Korla, Xinjiang. In recent years, with the development of community group buying, local fragrant pears have gone to the national market, but various negative problems in circulation have repeatedly made local industry associations feel the biggest problem.

At the end of 20021September, Changsheng of Korla Xiangli Association criticized some fresh e-commerce platforms and community group purchases in the exchange. "In the past two years, some platforms have done great harm to our fragrant pears. 」

He believes that e-commerce not only helps Korla pears to open the national market, but also disrupts the traditional circulation order in the upper reaches. With the promotion of the brand reputation of Korla fragrant pear, problems such as shoddy and red fragrant pear posing as Korla fragrant pear appear frequently, which ultimately affects production and damages local brands.

Sheng noted that some farmers have switched to autumn pears in some local eugenic areas of Korla fragrant pears. This variety is bigger than Korla fragrant pear, and the corresponding planting income of farmers is also more.

Replanting means that local industries may fall into a new vicious circle-"The less farmers can achieve their expected income, the less they will invest. Without continuous investment, the grading system of commercial fruit of Korla fragrant pear is difficult to perfect, and the long-term construction of local brands is unsustainable.

Sheng used "the most dangerous moment" to describe the current predicament faced by Korla production area. "The brand left by our ancestors cannot be destroyed in the hands of our generation. 」

202 1, it is not uncommon for similar fruit producing areas to get into trouble. Whether it is the tangerine in Yongquan or the fragrant pear in Korla, the performance of its origin dilemma is related to e-commerce. E-commerce has brought them a development dividend, but it has also suffered.

The sudden emergence of fresh e-commerce is like two sides of a coin. Behind the opportunity is the crisis, which will inevitably pull the producing areas into the vicious circle of price war and homogenization competition.

This is determined by the consumption scene of e-commerce.

Because fruit is a non-standard agricultural product, the customer evaluation system is more subjective. In this case, the purchase scenes that cannot be touched and screened online further blur the differences between fruits of the same type, and the price becomes one of the few differences in the e-commerce scene.

Therefore, compared with offline stores, online price wars are more exciting.

In this kind of competition, the production areas with smaller industrial scale are more likely to fall into strange circles. Because it is often a large production area with large output, large-scale sorting and processing capacity and industrial base, the price war can be supported.

For example, we met a kiwifruit orchard owner in Dujiangyan before, and his long-term losses were the result of fierce competition in the producing areas. At present, Dujiangyan is temporarily at a disadvantage in the competition with the surrounding kiwifruit producing areas such as Pujiang and Zhouzhi. The first two have more scale and cost advantages than Dujiangyan production area in terms of output, logistics volume and industrial processing capacity.

Even the characteristic fruit producing areas with the advantage of being the first producer are difficult to form absolute barriers in the fierce competition in producing areas.

Our country is rich in climate and terrain conditions, suitable for planting all kinds of fruits, and there are many varieties. Especially for some large categories, under the stimulation of e-commerce, competition even intensifies, because in the picking season, there may often be horizontal competition between different varieties of the same category.

Yongquan tangerine is now facing such a problem. Its early market, which relied on e-commerce, has now been diluted by the explosion of citrus varieties and new producing areas that have emerged in an endless stream of online celebrities. In particular, China is a big producer of citrus, with rich planting resources and various varieties. For Yongquan tangerine, the competitive pressure of homogenization only increases.

For example, in recent years, a new hybrid citrus variety "Hongmeiren" in Xiangshan, Ningbo has been very popular in the market, which has brought a big blow to the greenhouse tangerine in Yongquan. The latter was planted locally by Yongquan growers in order to extend the sales period of oranges.

According to Qiu Zengchang, before the red beauty in Xiangshan became popular, the greenhouse oranges in Yongquan could be sold at a high price with its anti-seasonal advantages. "Everyone bought a catty for 22 yuan." . Today, this advantage has been suppressed by the beauty of Xiangshan. "Every year 1 1 at the end of the year, the beauty of Xiangshan begins to mature and can always be sold during the New Year. As soon as the beauty of Xiangshan came out, the oranges in Yongquan greenhouse were knocked over at once. " Qiu Lengchang said.

What needs to be clear is that although e-commerce is the reason for making competition more cruel, e-commerce is not the root cause of the crisis of origin. The crux of the problem lies in the current circulation chronic disease and the present situation of agricultural production.

For a long time, domestic fruit circulation depends on multi-level wholesale system. This determines that fruit cultivation often lags behind the ever-changing market. In addition, the return period of fruit tree planting is longer than that of vegetables, which leads to the blindness of farmers' production decision.

For example, a new variety of orange trees usually takes three years or more to bear fruit. The high decision-making cost, coupled with the lagging market information, has led farmers in the producing areas to follow suit. This blindness in production leads to oversupply of domestic fruit industry.

Under the double pressure of overcapacity and price war, farmers in producing areas are easy to fall into long-term difficulties. E-commerce has opened the last veil of industrial ills in its radical way.

The most fundamental way to break the vicious circle is to break the imbalance of information and realize the vertical integration of fruits in circulation. The latter is also a long-term unsolved problem in China's agricultural industrial chain. The difficulty lies in the contradiction of the circulation relationship between growers and markets.

For a long time, China will still focus on small-scale family farms. They are faced with a decentralized, diverse and complex consumer market downstream.

In the circulation relationship between these small farmers and the big market, the supply side and the demand side are in a "many-to-many" state, which shapes the characteristics of many intermediate links and long links in the current domestic agricultural product circulation system. In turn, these historical features become obstacles to vertical integration.

Because multi-level middlemen often cause the interests of all links in the circulation chain to contain each other, which leads to the serious distortion of information in the process of actual consumer demand passing upwards at the end.

A typical case is watermelon. In the origin transaction, the customer of the grower is the dealer, and the two sides trade by the catty. They often inject a lot of water into watermelons a few days before trading to gain more weight and gain more income, and this kind of water injection itself will damage the final quality of watermelons.

The key to vertical integration is to reduce middlemen, concentrate consumer demand and incite the integration of circulation and production resources. But this step is not easy.

In the past 20 years, the demand side has not initiated a bottom-up integration transformation. The most typical is to implement the mode of agricultural super-docking. This is an agricultural reform initiated by the Ministry of Commerce and the Ministry of Agriculture of China in 2009, aiming at shortening the circulation of agricultural products by promoting the large-scale direct selling system.

However, the early agricultural-supermarket docking was not successful. At that time, people mainly bought fresh food through farmers' markets, not Shang Chao, and the social logistics infrastructure was relatively backward, so it was difficult for Shang Chao to form a scale in fresh food categories.

The change of fresh consumption pattern has brought a turn for the better.

Nowadays, the scene of fresh purchase of urban consumers has gradually shifted from farmers' markets to e-commerce platforms, traditional supermarkets and new retail channels integrating online and offline. The increase of order size urges retailers to put forward new purchasing schemes to improve efficiency and reduce losses. The popularity of direct mining mode is the embodiment of this trend.

Nowadays, whether it is a merchant with a certain order size on the e-commerce platform or a traditional supermarket channel such as Yonghui and Wumart, direct production is regarded as an important fresh supply mode. It is a continuation of the docking of agriculture and supermarket, and inherits the unfinished mission of the latter in the early stage.

Based on the direct mining of producing areas, the whole fresh circulation network began to have new rules and order. This is an agricultural product circulation network with relatively few intermediate links, which is closely connected with the terminal retail channels. Compared with the retail terminal more than ten years ago, the latter is more organized and informative.

For example, more than a decade ago, the terminal sales of fruits were mainly hawkers, and the management depended entirely on the personal experience of stall owners. The lack of information management means that it is difficult to make statistics and analysis on the consumption demand of fruits in a wider range. This has led to a high degree of decentralization of demand.

Now, whether it is a fruit chain store, a comprehensive retailer or a scattered fruit e-commerce, it has certain information ability, which can predict demand and summarize trends. The digital upgrade of the whole retail industry provides conditions for this.

With the help of information technology, retail terminals can concentrate orders, launch direct mining to the upstream, and realize shorter circulation links, thus laying the foundation for vertical integration driven by commercial capital.

202 1 China agriculture released some positive signals in the direction of vertical integration.

The first signal is that there are more and more cases of contract farming in the industry.

This is a production mode of fixed output by sales, that is, retailers place orders and put forward harvesting standards before planting, and growers plant, manage, pick and transport according to this standard. In an ideal state, order-based agriculture can unify the demands of agricultural production, circulation and sales, and all stakeholders can participate in the sharing of industrial value.

At present, order-based agriculture is the business practice that is most in line with the ideal state of vertical integration, and retailers with a certain scale are the most capable to try order-based agriculture mode at this stage. Their motivation comes from the needs of differentiated competition, among which there are many chain brands such as Box Horse, Ding Dong Shopping and Guoduomei.

For example, the pearl peach sold well by Guoduomei recently is the fruit of contract agriculture. This peach tastes high in sugar and acid, but it is small, only 150g. It not only meets the taste needs of customers, but also takes care of their health concerns. It is a patented variety purchased by Guoduomei from the National Peach Research Institute according to market insight, and signed a production order with the upstream planting base by adopting the order-based agriculture model. Before planting every year, the planting scale, purchasing acceptance standard and transaction price of the cooperative base are all negotiated in advance.

In a broader sense of vertical integration, the development of contract agriculture is still in the early stage. The broader change comes from the self-iteration within the traditional circulation system, and it is a top-down change in the agricultural industrial chain initiated by retailers from the bottom up.

This is also the second key signal released during the development of vertical integration.

The traditional circulation system and the emerging circulation reform are not mutually exclusive. For a long time, the traditional circulation system is still necessary. Retail channels only concentrate consumer demand at the end, and the concentration of supply resources at the production end also requires the intervention of traditional stakeholders.

Under the current land system, scattered planting will be a long-term status quo, and an intermediate circulation network is needed between the producing area and the consumer market. What the new circulation system needs to do is to speed up the elimination of redundant links in the traditional circulation system and bring key nodes into its own system.

These changes are already taking place. Taking the circulation system of fruit industry as an example, it is increasingly infeasible for traditional wholesalers to make profits by hoarding. On the one hand, the direct harvest of fruit shortens the circulation of fruit and accelerates the survival of the fittest of intermediate wholesalers; On the other hand, the deep penetration of fresh e-commerce into fruit categories makes its price system more transparent.

The wholesalers after the transformation are organically integrated with the new circulation system. Some traditional second-and third-class fruit wholesalers have turned to suppliers who provide services for direct mining mode.

In April, 20021year, Zhu Congchuan's agricultural products wholesale business turned to e-commerce, specializing in selling small agricultural products such as fruit, ginger and garlic on Taote. For the new circulation system, many transformed farmers like Zhu have played a connecting role.

On the one hand, they integrate the traditional circulation resources into the new system. For example, around his own e-commerce orders, Zhu brought the agent into his direct circulation system.

Agency is the most upstream purchasing link of agricultural products. They have rich experience in distinguishing the advantages and disadvantages of agricultural products and first-hand supply information in the fields. Under the background of the general lack of informatization in domestic agricultural production, the role of agency is indispensable. Based on historical development, agents often have close ties with traditional wholesalers, and their cooperation with emerging circulation systems depends on reformers like Zhu.

On the other hand, with the rapid growth of platform orders, Zhu is also laying out production warehouses that meet his own direct mining needs. By renting a warehouse in the producing area or cooperating with a third party, Zhu built his own warehouse distribution network around the fruit category.

The core function of the origin warehouse is to put the post-harvest commercial processing flow of fruit in the origin, that is, after the fruit is picked from the orchard, it can be graded, packaged, retailed and delivered by express delivery in the origin or nearby areas, so as to improve the turnover efficiency of fruit and reduce the loss.

This kind of processing logistics center is also the third positive signal that the domestic fresh food circulation network is moving towards vertical integration.

There are also new retail giants or platform companies that make great efforts to build production warehouses. For example, in 2020, Alibaba's Digital Agriculture Division basically completed the construction of a fresh supply network with the origin warehouse as the core; In 20021year, the rookie also proposed that in the next three years, there will be 100 production warehouses serving agricultural products in the national agricultural production areas; Starting from the second half of 2020, Meituan started the project of "Direct Mining of Fresh Agricultural Products", signed cooperation with various agricultural products producing areas, and built revolving processing centers with production warehouse functions in Zigui and Weishan counties of Dali.

The fruit sorting line built by Ali Agriculture in Xi 'an production warehouse.

At the same time, local governments are also encouraging the construction of logistics centers with processing and pre-cooling capabilities in the producing areas through investment or subsidies.

This means that the warehouse of origin has become one of the important infrastructures under the emerging agricultural circulation system, and it is also a more complex social network, which needs to attract more stakeholders to participate.

From the perspective of fruit vertical integration, the value of the origin warehouse is mainly reflected in two aspects:

First of all, the origin warehouse helps to extend the sales time and sales radius of fruits. Fruit is a commodity with strong natural properties, and its shelf life is limited by its short life cycle. The warehouse in the place of origin adopts cold storage and pre-cooling treatment, so that the picked fruits can enter the low-temperature dormancy state as soon as possible, which is helpful to prolong their life cycle and quality control management in the circulation process. By cooperating with the existing circulation resources, the origin warehouse can bring higher circulation efficiency to the origin and retailers.

Secondly, the warehouse of origin has the opportunity to bring higher added value to local agriculture. In the traditional circulation system, the classification and sorting of fruits are controlled by lower wholesalers and terminal retailers. This means that the downstream of the industrial chain has more say in the value classification and brand building of fruit commodities. The origin warehouse puts the commercial processing flow in front of the origin, which is beneficial to the latter's more industrial value and may provide a solution to the troubled origin.

Some fruit producing areas have realized this. The local government of Yongquan Town is supporting a leading local enterprise to build a large-scale orange sorting and processing center with high mechanization through subsidies.

Qiu Zengchang believes that if the center can be opened for use, it will help the overall quality control ability of citrus in the producing area, alleviate the contradiction between the different grading quality of retail investors and the low right to speak on pricing, and also help the overall local brand building of citrus. But it is uncertain whether the center will be open to all retail tenants in Yongquan Town in the future. There are many games behind.

This is a game that the reformers of agricultural industrial chain in China must face-the more the upstream production areas with low concentration, the more complicated the game relationship. For a long time, the complex interest relationship at all levels is the reason why it is difficult to promote the vertical integration of agriculture.

This round of fruit value dilemma and the change of circulation order have put vertical integration on the table as a business plan. This is a positive signal of the most lasting value conveyed by many negative emotions this year.