Removing middle men key to profitability

Ecommerce can provide access to marketing tools and customers that were previously out of reach for family farms.   

Most Australian farm businesses sell their product at 'farm gate'  price to firms which market agricultural goods.  Farm gate price is typically a small fraction of the end value.  Today ecommerce and digital logistics are making it possible to remove steps from supply chains and to sell farm goods directly to end buyers.   This process of 'disintermediation'  - the removal of intermediaries or middle men - is a global trend across all sectors of industry and is coming to agriculture.   

The barriers to disintermediation in agriculture are higher than in many other sectors of industry but they are falling.   Step by step, digital solutions are stripping time, cost and waste from agricultural supply chains.  Key innovation areas include automated collection of quality assurance data, digitised transactional systems to streamline financial, contractual and export access requirements, and multi-party logistics systems for efficient aggregation, transport and distribution of goods.  Connected technology makes end-to-end traceability and two way feed back between producer and consumer possible; not too far away, a consumer will be able to scan a retail pack and learn all about the quality, source and farmer on their smart phone, submit reviews and place tailored orders. 

Whether farmers themselves can benefit from this innovation may depend the kind of goods they produce and their business model.   Direct, provenance-based marketing suits relatively low volume, high value goods, and relatively non perishable goods.  The more demanding the goods the more capital is required to establish a sustainable and profitable supply chain.  Chilled beef, for example, is much harder to supply direct to a consumer than dried organic herbs or a fine wine.  

Australian beef marketed by a Chinese importer on Alibaba's T.Mall Fresh platform.
Alibaba

Developing  ''paddock to plate 'marketing solutions for premium food and fibre demands effective collaboration between producers and ecommerce companies. Farmers can provide high-credibility provenance stories to back the quality of their goods adn brand;  ecommerce platforms can offer cost-effective marketing and logistics services including the all important last mile distribution.  There is also an essential role for government bodies such as Austrade and National ICT Australia in electronic service delivery, for example, streamlining and digitising permits and other aspects of trade administration. 

Farmers keen to break the farm gate price barrier may find that working with ecommerce firms is an attractive alternative to their existing sales channels.  

Promising ecommerce platforms are being developed for the domestic market and export markets, including China, already have integrated sales and logistics platforms keen to source goods directly from Australia. A good starting point to learn about ecommerce in agriculture is to research the food marketing arms of Alibaba (T.Mall Fresh)  and JD.com. 

 

 

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