Report on Operation and Investment Strategy of China’s Fresh Food E-commerce Industry

Part One: Macro Industry Environment of Fresh Food E-commerce 1

I. Global Macro-Economy and Online Shopping Market Environment  1

1. The Weakening and Highly Uncertain Global Economic Prospect 1
2. Rapid Development of Global Online Shopping Market  2

II. Analysis of Agricultural Products Value Chain 3
1. Overview of Agricultural Products Value Chain  3
2. Anlysis of Main Links 5
2.1 Production and Processing 5
2.1 Middle Link 5
2.3 Marketing and Consumption 5

III. Modern Agriculture Pattern of Developed Countries  6

1. The Direct Production-Sales Pattern Repesented by “American Pattern”  6
1.1 Agricultural Production of America 6
1.2 Domestic Agricultural Products Consumption of America  8
1.3 Agricultural Products Trade of America  9
1.4 Ciculation Pattern of Agricultural Products in America  10
2. The Auction Market Represented by “West Europe Pattern”--France 11
2.1 Agricultural Production of France  12
2.2 Domestic Agricultural Products Consumption of France  13
2.3 Agricultural Products Trade of France  13
2.4 Ciculation Pattern of Agricultural Products in France  15
3. The “Japan-South Korea Pattern” of Small-Scale Peasant Economy--- South Korea 16
3.1 Agricultural Production of South Korea  16
3.2 Domestic Agricultural Products Consumption of South Korea  17
3.3 Agricultural Products Trade of South Korea  18
3.4 Pattern of Agricultural Products Produciton and Ciculation in South Korea 19

IV. China’s Agricultural Industry Reform and Development of E-Commerce  21

1. Factors Affecting China’s Agricultural Development  21

1.1 China’s Overal Economic Background  21
1.2 Political Factors Promoting the Rapid Development of China’s Agriculture 22
1.3 Impact of Urbanization   24
1.4 Agricultural Production Factors  27
1.5 Production Standard of Agricultural Products  29
1.6 China’s Agricultural Products Trade  30

2. Outlook of China’s Modern Agiruclture Development  31

2.1 Bulk Commodities Will be Increasinly Dependent on Import   31
2.2 The Development of Agricultural Cooperatives Needs More Policy Support 31
2.3 Centralized Land Operation –The Uprising of Large-Scale Agricultural Enterprises and Family Farm Pattern  32
2.4 The Circulation Pattern Is Faced with a Great Reform 32

3. Development of China’s Online Shopping Market   33

Part Two: Definition of Fresh Food E-commerce and Analysis of Competition Environment 35

I. Analysis of the Fresh Food E-commerce Patterns 35

1. Definiton of Fresh Food E-commerce and Overview of the Market 35
2. E-commerce Platforms: Represented by Store No.1, JD.com, and Tmall 36
3. Self-Owned Base + Online Stores +Home Delivery: Represented by Tony’s Farm and OABC. 37
4. Self-Owned Base + Purchasing +Online Stores + Delivery: Represented by TooToo farm 38
5. Purchasing +Online Stores + Delivery: Represented by SFbest, Benlai.com, Womai.com, Fieldschina.com, and yiguo.com, etc.  39
6. Comprehensive E-commerce under Traditional Supermarkets: Sam’s Club and Loogoo.com 39
7. Single Type Professional Business/Business at E-commerce Platform: Fruitday.com 40

II. Analysis of Main Fresh Food E-commerce Representatives 41

1. TooToo farm –“Online Food Supermarket”  41
2  Resourceful Benlai.com  47
3. SFbest—Collecting Best Food of the Globe 55
4. COFCO Womai.com—State-owned E-commerce  60
5. Fieldschina.com—Caught the Stomach of Foreigners 64
6. OABC—Focusing on Organic Food and back to B2C 67

III. Analysis of Competition Environemnt of Fresh Food E-commerce 72

1. Bargaining Power of Suppliers 72
2. Threat from Alternative Channels  73
2.1 Offline Large-Scale Retail Stores  73
2.2 Innovative Fresh Food Supermarket 74
3. Threat from New Entrants  74
3.1 Online Stores Opened by Traditional Supermarket Giants 74
3.2 Online Stores Possiblly Opened by Large-Scale Enterprises Upstream of the Agricultural Industry Chain  75
4. The Bargaining Power of Customers  75
5. Competition in the Industry 75

Part Three: Analysis of the Operation Strategy of Fresh Food E-commerce 77

I. Logic of Fresh Food E-commerce Pattern  77

1. Target Customers and Orientation of Fresh Food E-commerce 77
2. Business Pattern of Fresh Food E-commerce 78
3. Profit Pattern of Fresh Food E-commerce  80

II. Product Structure Management of Fresh Food E-commerce  80

1. Product Type Choice of Fresh Food E-commerce  81
2. Single Commodity Optimizaiton of Fresh Food E-commerce  82
3. Price Strategy of Fresh Food E-commerce  83

III. Supply Chain Management of Fresh Food E-commerce  83

1. Supplier Management of Fresh Food E-commerce  83
2. Warehouse Management of Fresh Food E-commerce  84
3. Logistics Optimization of Fresh Food E-commerce 84

IV. Slaes Promotion and Market Activities Management of Fresh Food E-commerce  85

1. Sales Promotion Strategies of Fresh Food E-commerce  85
2. Marketing and Promotion Activities of Fresh Food E-commerce  85
3. Advertising Strategies of Fresh Food E-commerce  85

V. Expansion Management of Fresh Food E-commerce  86

1. Products Line Expansion of Fresh Food E-commerce  86
2. Trans-Regional Expansion of Fresh Food E-commerce 87
Part Four: Risks and Challenges for Fresh Food E-commerce 88

I. Macro-economic Environment  88

1. Riska of Economic Downturn and Tightening of Residents’ Shopping Expenses 88
2. Speed of Customers’ Shopping Habit for Online Fresh Food Products  88
3. The Policy for the Tranferring of Production Factors such as Land and Foresty Land Is Unclear 88

II. Upstream Links  88

1. Risks of Products Quality Safety  89
2. Risks of Stable Supply of Fresh Agricultural Products  89

III. Internal Controls   89

1. Bottleneck of Fresh Food E-commerce Talents 90
2. Control of Fresh Food E-commerce Internal Workflow 90
3. Risks from the Capital Application and Asset Liquidity of Fresh Food E-commerce 91

IV. Downstream Links 91

1. The Cold Chain Logistics Industry Still Needs Improvement 92
2. Risks from the Logistics and Delivery of Fresh Food E-commerce 92
3. Brand Building and Maintainence of Customers Loyalty of Fresh Food E-commerce 93
4. Risks from the After-Sale Service to Customers of Fresh Food E-commerce 93

V. Increased Competition in the Industry 93

Part Five: Future Development and Investment Opportunities of Fresh Food E-commerce 94
I. Development Trend of Foreign Fresh Food E-commerce 94
1. Inadequate Popularity of Fresh Food E-commerce and the Fierce Competition Online and Offline 94
2. Diversificaiton of Fresh Food E-commerce Platform Business Pattern and Differentiated Operation  94
3. Stable Operation and Slow Expansion of Fresh Food E-commerce  95

II. Analysis of Leading Fresh Food E-commerce Cases in Developed Countries 95

1. Webvan, a B2C Case Which Failed in the Early Stage 95
2. FreshDirect, Which Conducts Stable Operation and Slow Expansion 96
3. Peapod, an Innovative C2B2B Pattern 97
4. Ocado, the “Store No.1” in Britain 97
5. Amazon Fresh: a Trial of an Industry Giant 97
6. Relay Food, a C2B2F Pattern Connecting Farmers and Customers 98
7. Instacart: a New Financing Case of C2B2B Pattern  98

II. Analysis of China’s Non-Fresh-Food E-commerce Cases and the Inspiration 99

1. dangdang.com ( E-commerce Platform and Department Store & Bookstore) 100
2. Vipshop.com(Platform for Fashion Shopping &Discount Flash Purchases) 102

III. Outlook of China’s Fresh Food E-commerce Market 104

1. Impact of Capital on the Market Status Quo of China’s Fresh Food E-commerce 104
2. Estmate of China’s Future Fresh Food E-commerce Market Scale 106
3. Estmate of China’s Future Fresh Food E-commerce Profitability 107
4. Analysis and Judgment on the Direction of China’s Fresh Food E-commerce Industry Development 110
4.1The Development Speed of China’s Fresh Food E-commerce Will Exceed That of Other Countries 110
4.2 Fresh Food E-commerce Will Overthrow the Traditional Theory of “Demand Determining the Supply”.  110
4.3 Form Determines the Content and the Key is its Orientation   110
4.4 Customer Experience Determines the Success of the Fresh Food E-commerce  110

IV. Evaluation of the Investment Opportunities in China’s Fresh Food E-commerce Market and Upstream & Downstream Markets  111

1. Reasonable Evaluation of a Fresh Food E-commerce Business 111
2. Investement Opportunities in the Upstream Industry of China’s Fresh Food E-commerce （Front-end Resources） 112
3. Investement Opportunities in the Downstream Industry of China’s Fresh Food E-commerce（Distribution of Warehouses and Logistics  ） 113
4. Investement Opportunities in China’s Fresh Food E-commerce Industry （Platform Channels） 114
Appendix 115
Fresh Food E-commerce Namelist 115
 

Figures and Tables
Figure  1 Changes of Annual Global Economic Growth Rate and Estimation 1
Figure  2 Global Online Shopping Market Scale and Estimation 2
Figure  3 Proportion of Global Online Shopping Expenses on Disposable Income 3
Figure  4 Agricultural Industry Value Chain  4
Figure  5 Changes of America GDP and Estimation of the Future  6
Figure  6 Changes of American Agricultural GDP, 2003-2010 7
Figure  7 Distribution of American Farm Land Rights & Interests   7
Figure  8 Contrast Between American Consumer Price Index and Food Commodity Price Index, 1990—2020  8
Figure  9 American Agricultural Products Import & Export Trend  9
Figure  10 Main Ciruclation Patterns of Agricultural Products in America  10
Figure  11 Changes of France GDP and Estimation of the Future 11
Figure  12 Changes of France Agricultural GDP, 2001-2010 12
Figure  13 Consumer Price Index Trend in France and the Estimation 2000—2020 13
Figure  14 Agricultural Products Import & Export in France  14
Figure  15 Main Ciruclation Patterns of Agricultural Products in France  15
Figure  16 Agricultural Production Value of South Korea , 2005-2011 16
Figure  17 Contrast Between Consumer Price Index and Agricultural and Aquatic Products Commodity Price Index in South Korea, 2007—2012  18
Figure  18 Agricultural Products Export in South Korea  18
Figure  19 Agricultural Products Import in South Korea  19
Figure  20 Main Ciruclation Patterns of Agricultural Products in South Korea 20
Figure  21 Chinese Population and Estimation of Per Capita GDP Growth 21
Figure  22 Chinese Food Retail Price Index Agricultural Products Price Index and Nomial GDP Growth Rate 22
Figure  23 Changes of Chinese Government’s Minimum Purchase Price of Various Rice 23
Figure  24 Annual Subsidy of Main Agricultural Subsidy Types in 2008-2012 23
Figure  25 Estimation of China’s Urban Populaiton Growth 24
Figure  26 China’s Population Migration 25
Figure  27Contrast Between China’s Urban Residents and Rural Residents in Terms of Per Capita Annual Food Expenses 26
Figure  28 Contrast Between China Urban Residents and Rural Residents in Terms Per Capita Income 26
Figure  29 Contrast Between China’s Urban and Rural Food Consumption Structure 27
Figure  30 China’s Per Capita Area of Farmland  28
Figure  31 China’s Agrucultural Water Consumption   28
Figure  32 China’s Agricultural Population 29
Figure  33 Global Grain Unit Yield 29
Figure  34Contrast Between China’s Large Agriculture Output Value and Growth of Agricultural Products Import& Export Volume 30
Figure  35 China’s Agricultural Products Trade Volume and Balance Changes  31
Figure  36 Online Shopping Trade Scale and Growth Rate  33
Figure  37 Growth of China’s Netizen and Penetration Rate of Online Shopping 34
Figure  38 Categorized Proportion of Commodities Bought by Chinese Online Shoppers 34
Figure  39 Tradititonal Agricultural Products Supply Chain 36
Figure  40 Supply Chain of Fresh Food E-commerce 36
Figure  41 Fresh Food Supply Chain of E-commerce Platforms 37
Figure  42 E-commerice Supply Chain consisting of Self-Owned Base+ Online Stores +Home Delivery  38
Figure  43 E-commerice Supply Chain consisting of Self-Owned Base+ Purchasing + Home Delivery  38
Figure  44 E-commerice Supply Chain consisting of Purchasing + Online Stores + Home Delivery  39
Figure  45 Online Stores and Home Delivery Supply Chain of Traditional Supermarket  40
Figure  46 Supply Chain of Independent Online Stores /Online Stores at E-commerce Platforms 40
Figure  47 Changes of TooToo Farm’s Operation Income 41
Figure  48 Supply Chain of TooToo Farm  42
Figure  49 Products Types Distribution of TooToo Farm  43
Figure  50 Organic and Imported Goods Distribution of TooToo Farm   44
Figure  51 Main Organic Food Market in the World 45
Figure  52 Main Countries with Organic Agricultural Area Growth, 2010-2011 46
Figure  53 Categorized Proportion of China’s Organic Agricultural Area 46
Figure  54 Supply Chain of Beilai.com  48
Figure  55 Products Types Distribution of Beilai.com  52
Figure  56 Organic and Imported Goods Distribution of Beilai.com  53
Figure  57 China’s Products Origin Certification   54
Figure  58 Supply Chain of SFbest  55
Figure  59 Produts Structure of SFbest  56
Figure  60 Imported Goods Distribution of SFbest  57
Figure  61 Proportion of the Purchasing Channels of Imported Food  58
Figure  62 Categorized Proportion of Imported Food 59
Figure  63 Supply Chain of Womai.com  60
Figure  64 Produts Structure of COFCO Womai.com  61
Figure  65 Organic and Imported Goods of COFCO Womai.com  62
Figure  66 Supply Chain of Fieldschina.com  64
Figure  67 Produts Structure of Fieldschina.com  65
Figure  68 Organic and Imported Goods Distribution of Fieldschina.com  66
Figure  69 Global Top 10 Organic Agricultural Markets 67
Figure  70 Ranking of Global Organic Plantinhg Area 68
Figure  71 Global Top 10 Countries of Per Capita Organic Products Consumption 68
Figure  72 Supply Chain of OABC 70
Figure  73 Sales of Fresh Food E-commerce in Beijing Market  76
Figure  74 Sales of Fresh Food E-commerce in Shanghai Market 76
Figure  75 Analysis of Fresh Food E-commerce’s Market Orientation 77
Figure  76 The Advantges of Fresh Food E-commerce in Comparison with Traditional Channels 79
Figure  77 Number of Main Fresh Food E-commerce SKU 82
Figure  78 Average Growth of In-Service Employee’s Salary 90
Figure  79 Marketing Time of Different Goods in China 99
Figure  80 Trend of dangdang.com’s Operation Income 100
Figure  81 Trend of dangdang.com’s Net Profit 101
Figure  82 Trend of dangdang.com’s Stock Price in the Past Year 101
Figure  83 Sales Growth of Vipshop.com  103
Figure  84 Changes of the Net Profit and Gross Profit of Vipshop.com  103
Figure  85 Changes of Vipshop.com’s Stock Price in the Past Year 104
Figure  86 Estimation on the Sales of Fresh Food E-commerce in 2013 106
Figure  87 Market Capacity of Fresh Food E-commerce in Future 107
Figure  88 Changes of Amazon.com’s Operation Income, Net Profit, and Gross Profit  108
Figure  89 Changes of Amazon.com’s Net Profit Rate 108
Figure  90 Changes of Ocado’s Operation Income, Net Profit, and Gross Profit 109
Figure  91 Net Profit, and Gross Profit of Ocado 109
 
Table  1 Value Chain of Agricultural Products 3
Table  2 Top 15 of Agricultural Products Output Value in America  8
Table  3 Top 10 Types of Agricultural Products Exported by America  9
Table  4Top 10 Types of Agricultural Products Imported by America  10
Table  5 Top 15 Goods of Agricultural Products Production in France  13
Table  6 Top 10 Types of Agricultural Products Exported by France  14
Table  7 Top 10 Types of Agricultural Products Imported by France  15
Table  8 Top 10 Agricultural Products in Terms of Output Value in South Korea  17
Table  9 Main Agricultural Products Imported by South Korea  19
Table 10 No.1 Document by the Central Committee of the Chinese Communist Party and the State Council 2003-2013  22
Table  11 Output of China’s Main Agricultural Products 30
Table  12 Categorization of Fresh Food E-commerce Patterns 35
Table  13 SKU Statistics of TooToo Farm  43
Table  14 SKU Statistics of Benlai.com 52
Table  15 SKU Statistics of SFbest  57
Table  16 SKU Statistics of COFCOWomai.com  62
Table  17 SKU Statistics of Fieldschina.com  65
Table  18 Some Production Bases of OABC  69
Table  19 Circulation Channels of Fresh Food 73
Table  20 Analysis of the Orientation of Main E-commerce Enterprises 78
Table  21Analysis of the Main Business Patterns of Fresh Food E-commerce  80
Table  22 Categorized Statistics of the Sales of Main Fresh Food E-commerce 81
Table  23 Puchasing Principles of Benlai.com and TooToo Farm  84
Table  24 Statistics of Fresh Food Delivery Temperature   86
Table  25 Constrast of Cold Chain Logistics Between China and Foreign Countries 92
Table  26 Fresh Food E-commerce Patterns in Foreign Countries  95
Table  27 Establishment Time and Covered Cities of Fresh Food E-commerce in Foreign Countries 95
Table  28 Contrast Between Flow Rate of Main Fresh Food E-commerce Online Stores and Ranking of Websites 105
Table  29 Disclosure of Investment Cases in Fresh Food E-commerce 105
Table  30 Composition of the Cost of Fresh Food E-commerce Enterprises 111
Table  31 Analysis of Investment Opportunities in the Upstream Industry of Fresh Food E-commerce 112
Table  32 Analysis of Investment Opportunities in the Downstream Industry Fresh Food E-commerce 113