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E-commerce eyeing China's agricultural products market
Last Updated: 2014-05-12 10:30 | CE.cn/Agencies
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A latest report showed that e-commerce in agriculture is emerging as a lucrative area in the online shopping sector, which has penetrated the markets of traditional industries.

A Zero2IPO Group survey revealed that demand for refrigerated food was expected to double from 200 million tons to 450 million tons between 2012 and 2025, with the compound annual growth rate pegged at 18.8%, according to the China Business News.

The report also showed that the gross margin for fresh foods, such as fruits, stood at 40% and buyers would return to purchase, so the sector is likely to become the next growth catalyst for the e-commerce sector during the next three to five years.

ChinaVenture sees the same trend in the company's investment report. Its venture capital investment in the agriculture area was worth US$16.1 million in 2013, a new high in five years.

The development of e-commerce in the agricultural sector has lagged far behind home appliances, clothing and baby supplies because of insufficient logistics services and concerns surrounding quality control.

Also, the delivery cost for e-commerce of agricultural products is high. Data showed that logistics costs account for 25% to 40% of fresh food products, while the same cost only took up 5% in sales of electronic products and clothing online.

In addition, the quality of fresh food cannot be guaranteed during delivery. Some trucks are not equipped with refrigeration, and in other cases drivers turn refrigeration off in order to save costs, which damaged the food products that required low storing temperatures.

As logistics companies such as SF Express build a network for shipping refrigerated products, e-commerce in agriculture will likely grow.

Other than that, organic food, which is considered a high-end product in the fresh food sector, is ideal for development and most of the companies have begun by offering online-to-offline services.

One of the difficulties that organic food suppliers face is building trust among consumers towards organic food.

Liu Wanlan, founder of pintu360.com, an online media site focusing on online-to-offline marketing, stated that the marketing scheme would allow consumers to acquire knowledge of organic food before making purchases and they could even taste samples at physical stores.

Once they enjoy a positive experience, the consumers can share their experience and help the companies build a good reputation, Liu said.

In addition, opening physical stores would also strengthen confidence among consumers as they do not have to worry about low quality food products.

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