Online sales bear early fruit for fresh food brands

E-commerce offers fertile ground for China's agriculture enterprises

A brand of oranges bearing the name of famed Chinese tobacco entrepreneur Chu Shijian garnered much attention at a fresh food conference held Saturday in Shanghai. Launched in 2012, Chu Oranges has been a smash success not only for their namesake but for benlai.com, the online grocery purveyor which helped successfully market the fruit. Indeed, in late 2013, it was reported that benlai.com expected to sell some 2,000 tons of Chu Oranges that year - including some 200 tons sold on last year's Singles' Day alone.

To many, the pairing of a technology company with a fruit brand may seem like an odd match. In China though, several of the country's biggest Internet and consumer technology firms have already plowed into agriculture. In 2009, Internet portal operator NetEase invested tens of millions of yuan into the pig farming industry. In June, reports broke that e-commerce goliath Alibaba Group had invested in a cattle enterprise.

Across China, rising income levels, changing lifestyles and heightened consumer expectations are creating a growing demand for fresh, high-quality meat and produce. And with advancements in mobile technology, e-commerce and online companies are clamoring to cash in on the country's craving for fresh farm products.

Modern, sustainable agriculture is a flourishing industry in China, and the potential for future growth is enormous. The value of China's fruit industry, for example, has grown by an average of 13.6 percent over the past decade and exceeded 500 billion yuan ($81.48 billion) last year, according to media reports.

Meanwhile, e-commerce turnover in China has grown by 30 to 40 percent annually over recent years, with overall sales set to reach a staggering 18 trillion yuan in 2015. With so much retail activity happening online, it seems only natural that China's Internet should play host to an ever-growing volume of fresh food sales.

Yet, data show that while some 2.45 trillion yuan worth of fresh agricultural products and by-products are circulating throughout the Chinese market at any given time, only 1 percent of this total is available for online purchase. This implies that sales of fresh agricultural goods still have plenty of room to grow online.

To date though, most of the early online agriculture success stories are, like Chu Oranges, largely the result of celebrity-entrepreneur endorsements. Pan Shiyi, the chairman of leading property development firm SOHO China, has lent his name to a brand of apples, which are said to be selling well on taobao.com, an online platform owned by Alibaba. Meanwhile, Liu Chuanzhi, the founder of Lenovo Group, is marketing Liu-brand kiwis on tmall.com and benlai.com.

But while e-commerce is opening new channels for the sale of high-quality agricultural products, concerns nevertheless remain for brands and merchants looking to expand online. Perhaps the biggest source of worry is the prevalence of fake products being sold online. Chu Oranges, for instance, is exclusively licensed for sale through benlai.com, yet on several other platforms - including taobao.com, womai.com and Yihaodian - one can purchase oranges bearing the Chu brand. As in so many other industries, the availability of low-quality counterfeits weakens the reputation of genuine branded fruits; not to mention the credibility of China's e-commerce industry as a whole.

Another concern is pricing, particularly for products bearing well-known brand names. A 5-kilogram bag of Chu Oranges, for example, can sell for as much as 148 yuan. This, of course, represents a steep premium over what one would expect to pay for non-branded oranges at a supermarket. Despite their reputation for high-quality, the prices for Chu Oranges and other celebrity-branded fruits may limit their sale to only affluent middle class consumers.

Such problems aside, forming strong connections to the world of e-commerce can help breath fresh life into agricultural product and fresh produce sales. As concerns over counterfeits, pricing and other issues get resolved with the retail market's gradual maturation, all sides stand to reap substantial rewards from the online sale of healthy, high-quality agricultural items.