Farm Produce Online: Are you willing to pay a premium?

Food safety is no longer a heated topic as we are so used to these problems. What I’m curious is, whether we are willing to pay a premium for de-industrialized food products sold online? Several e-commerce companies already made attempt for this niche market.

Nongren is a farm produce e-commerce corporation based in Shanghai. Unlike other e-commerce companies who paid more attention to selling price and distribution channels, Nongren talks about the concept of “re-establish the close relationship between human and food”. What they really did was simply visiting and interviewing each farmer supplier, expressing stories behind the farm produce to customers, and enabling customers to pay online while having the farm produces delivered home, just the same way they shop other kind of products. We get to know someone by listening to his stories, and Nongren provides us with the stories of everything we buy.

Mufengren is another online shop with the motto of “contrary to the industrial era”. Being a business on Taobao, they achieved 23989 deals and got the sales credit of “Double Crown”. They claimed to sell only 100% natural honey products with no additives. Priced at twice the average similar honey products, Mufengren honey is still always in short supply.

The last online store I noticed is a seasonal shop owned by famous blogger Baibanbao. As a blogger with reputation on twitter and Sina Weibo, he sold out around 5000 kilograms of Jujube within 3 months, finished 1363 deals. Here is a post about this amazing experience.

These three online stores share the similarity in their choice of type of goods and the marketing tool they use. Media, social-media in particular, played an important and interesting role in the marketing campaign. Baibanbao promoted his store by blogs, twitter and Weibo and attracted attention, trust and sales in no time. Mufengren team has a background in media and show skills in social media promotion. Nongren positioned their shop under the flag of “social marketing”. They excelled in the using of social media, to quickly establish customer loyalty in an effective and economical way.

Examples above just demonstrated the idea that social marketing made it possible for farm produce to be accepted by terminal users without old-fashioned industrialization. Back to our original question: will you and me, ordinary consumers, pay a premium high enough to support a company or even an industry? Will this business model actually work?

    1. Will you pay a premium?

The above three cases already answer this question with numbers. This population do exist——who care about food safety, believe in social media, have enough purchase power, accept online shopping.

After all, the inspection authority turns us down so many times, why not trust close friends, people with social reputation, or even the farmer himself?

     2.  Will farmers buy this model?

Producers have the natural need for distribution channel with higher sales price, lower marketing cost and larger demand. Social marketing links producers with ultimate consumers while logistics enables direct-sales. It’s not hard to convince them as long as the potential value is understood.

      3. A platform looks prettier than it really is?

1)       When “de-industrialization” meets “scale”:

Scale becomes an issue when demands exceeds supply and those independent producers may not fulfill the needs instantly (i.e. Mufengren was often in short; Baibanbao shut down the store seasonally due to short supply.)

What Mufengren is trying is to start a network of trustworthy beekeepers and develop honey related products using honey and fruit. While Nongren adopts more product lines by “finding more kinds of farmers”.

What I’m concerned is the quality control after scale. Those online sellers avoid inspection authority and directly offer products to buyers. They replace inspection authority with word of mouth reputation. But in case of food safety issue, the damage to reputation, and therefore, consumer confidence and purchase desire, will be disastrous.

2)       When farmers meet Y-generation:

Logistics and service become another headache. Farm produce usually require more logistics cost and transit time due to their remote origin. Also, suppliers and consumers of farm produce may belong to groups with huge homographic difference. To establish the platform, entrepreneurs need to keep a close relationship with farmers to ensure the stable supply and quality of products, while understand and take care of the needs of e-commerce addicts. It’s harder than we can imagine.

I still remember a professor’s viewpoint about e-commerce: e-commerce is not to post a picture of apple online and tells people it sells at $3, but to sustainably fulfill customers’ orders when 1 million people come to you for apple. “De-industrialization” or “Premium” are just meaningless wording, but health, safety and convenience are something worthwhile of patience. Wish those pioneers good luck!