E-commerce in

Agriculture:
New Business
Model in making
unorganised to
organised

Presented By:
Dr. Dibyendu Choudhury
Faculty Member- SEM
ni-msme
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 Agri e-commerce can disrupt
traditional agricultural value chains
•Traditional agricultural value chains involve multiple
intermediaries between farmers and consumers.
•Typically, farmers sell their produce at the farm gates to
middlemen. Produce then passes through multiple
intermediaries before reaching the end customer. As a result,
farmers receive only a small proportion of the price paid by the
end consumer as each intermediary in the value chain earns a
margin.
•Agri e-commerce provides an opportunity to streamline the
agricultural value chain and reduce inefficiencies in the
distribution of farm produce.
•It represents a new way for farmers to sell their produce to an
array of buyers, including agri businesses, retailers, restaurants
and consumers. Agri e-commerce also increases farmers’ access
to new markets and adds transparency to the value chain.
•It enables farmers to bypass several intermediaries, resulting in
higher income for the farmers, reduced wastage, and the
potential to deliver fresher produce to customers. Such benefits
are especially significant in developing regions, where more
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than 97% of people employed in agriculture live and where the 4
Dr. Dibyendu Choudhury, ni-msme
sector’s contribution to GDP is in double digits.
Business models must fit local
market conditions
To maximise the emerging opportunity, agri e-commerce
businesses require scalable and sustainable business models. A
sustainable business model balances these considerations to
build trust and increase user loyalty. The business models of agri
e-commerce businesses in developing regions can be grouped
into five levels.

• the operational functions and capital intensity of the business

model, with businesses that perform the least functions level 1
• and those with the most integrated approach at level 5. Asset-
light business models are less capital intensive but – in the
context of developing markets – have a higher potential for
farmer and customer churn.
• Conversely, asset-heavy business models are more capital
intensive but enable the agri e-commerce business to have
greater control over key elements of the service, including
customer experience, product quality and packaging, and
farmer education.
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 Mobile operators can add value to agri e-commerce businesses
in several ways

At a foundational level, mobile operators provide the connectivity that enables

online services and, increasingly, facilitates digital payments through mobile
money.

Beyond connectivity and payments, there is scope for mobile operators to

leverage other key assets, such as APIs, investment capital and distribution
channels, to increase their footprint in agri e-commerce.

As mobile operators are increasingly by launching their own products and working
in partnerships – the emerging opportunity in agri e-commerce is a key strategic
consideration.

The integration of operator-led mobile money services into agri e-commerce

platforms can increase mobile money adoption and usage by meeting the demand
for digital payments.

Mobile operators’ scale and existing relationships with customers could serve as a
platform to expand services more quickly for agri e-commerce businesses.

Agri e-commerce can deliver benefits to operators’ core services in rural areas
through improved customer acquisition and retention, as well as increasing
network usage and ARPU.
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Stakeholders must align to fulfil the agri e-
commerce opportunity
Governments The development of the agri e-commerce ecosystem
and investors
can tap into
requires government ministries and regulators to
this establish an enabling regulatory environment.
opportunity
to drive
growth in the
agricultural Government ministries can further support agri e-
sector and commerce businesses by supplying information on local
improve the farming regions and holding events to raise farmer
livelihoods of
farmers.
awareness of agri e-commerce opportunities.

Donors and investors also have an important role to

play –for example, through investing in agri e-commerce
businesses that have a sustainable competitive
advantage and potential to scale.

This means understanding local market dynamics and

the level of development of the key agri e-commerce
enablers.

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E-commerce and the impending disruption of
the agricultural value chain
The last two decades have seen significant growth in e-commerce. Global retail e-commerce sales are now
valued at around $3 trillion and continue to grow rapidly.
E-commerce sales accounted for 11.9% of all retail sales worldwide in 2018, a figure expected to reach 17.5% in
2021.

This growth is underpinned by several factors.

• These include shifting consumer preferences, growing

internet adoption and ever-improving delivery options.

• For buyers, e-commerce offers a more convenient way to

purchase goods and services, while also providing more
choice and better deals.

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 Agri e-commerce market entry strategies in developed markets
Type Description

Major e-commerce platforms are expanding their online offerings to include grocery products. Amazon has launched its
Established e- online grocery delivery service, AmazonFresh, in select regions of the US, UK and Germany. Other major e-commerce
commerce platforms, including Alibaba, Flipkart and MercadoLibre, also sell groceries online.
platforms
Some e-commerce platforms have added bricks and mortar stores to complement their online assets. Amazon acquired
expanding into
Whole Foods, which operates 400+ retail stores in the US, while Alibaba plans to open 100 Hema-branded supermarkets in
the grocery
China. Bricks and mortar stores can support online transactions and act as a network of mini distribution centres or
segment
collection hubs for fresh produce, to shorten customer lead times.

In response to moves by major e-commerce platforms, traditional bricks-and-mortar retailers have launched multichannel
Offline grocery strategies. As well as investment in digital platforms, offline grocery stores have made investments to develop logistics
stores opening networks suitable for e-commerce. Many supermarkets have launched their own delivery services, such as Waitrose’s
online channels partnership with Ocado in the UK, while smaller retailers have formed partnerships with specialist delivery companies,
including HappyFresh in the US and Instacart in Southeast Asia. Offline grocery retailers also use their store footprints to
offer click-and-collect services.

The internet has enabled the emergence of online-only services that connect farmers to consumers. This includes
enterprises such as Farmstead, Good Eggs, GrubMarket and Imperfect Produce in the US. These services remain in the
start-up phase but are expanding into more US locations having received significant venture capital. In the UK, sales
Pure-play Agri
e-commerce between producers and buyers via the likes of Abel & Cole, Farmdrop and Riverford have also grown but still represent a
businesses fraction of the total market. For instance, Riverford generated almost £60 million in 2018, selling around 50,000 vegetable
boxes per week.
Agricultural producers can also sell produce to third-party merchants who, in turn, sell through e-commerce platforms to
end users. This is common in China where major e-commerce companies, such as JD, Pinduoduo and Tmall, benefit from
the highly advanced logistics infrastructure in the country to reach consumers with fresh produce. Pinduoduo uses an
innovative purchase model whereby users invite their contacts to form a shopping team to get a lower price for their
purchase.

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 The Agri supply value chain and
potential for e-commerce
disruption

•Agri e-commerce – the buying and selling of agricultural

produce online – can address notable challenges and
inefficiencies in the agriculture supply chain by
streamlining farmers’ access to the customer and
creating new links between steps in the value chain.

•This is especially true in developing countries where

online platforms can enable farmers to bypass
intermediaries and sell directly to agri -businesses,
retailers, consumers and other customer groups, leading
to increased efficiency of the supply chain and
generating fairer incomes, as well as a transaction history
for farmers.

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 e-commerce disruption & market readiness

Value Chain Customer Description Potential for e-commerce disruption

Vertically Agri business Farmers, particularly cooperatives and large-scale farmers, Low: Although payments through this value chain are increasingly being
integrated have contracts to sell directly to agri businesses. This is digitised, agri businesses often have well established relationships and
most common for cash crops, such as sugar, tea leaves, engagement channels with farmers, reducing the scope for agri e-commerce
cocoa and beans, which often serve as raw materials to be businesses. That said, agri e-commerce can link agri businesses to new
processed into edible food. suppliers, which may be essential to their growth plans.

Cooperative- Cooperative Farmers are part of a group owned and operated by farmers Medium: Cooperatives can perform many of the functions often
based that produce similar produce. Through working together, undertaken by agri e-commerce businesses. For instance, cooperatives
farmers attract new buyers and increase the price they carry out sales and marketing, quality control and even distribution if the
receive for their produce. It also enables them to obtain cooperative owns transport. However, there is an opportunity for agri e-
cheaper agricultural inputs. commerce businesses to introduce cooperatives to new buyers that
cannot be reached otherwise.
Middleman- Broker/ Farmers sell their produce at farm gates to middlemen, High: Agri e-commerce businesses can streamline farmers’ access to buyers,
based Middleman who then incur the costs and risks associated with creating new links between stages of the value chain. Agri e-commerce
moving the product to buyers in other geographical businesses can also help farmers overcome problems with transport and
areas. This accounts for the largest proportion of sales post-harvest wastage through arranging delivery, storing produce and
by farmers, but it is also the most inefficient way for generating demand through sales and marketing.
farmers to sell their produce. This is because the value
chain involves several A s a result, agri e-commerce has the potential to increase value chain
efficiency and transparency, boost farmers’ incomes and improve
middlemen between the farmer and consumer, who each
take a margin, meaning farmers receive only a small productivity levels over time.
proportion of the final price paid by consumers. However, faced with problems of aggregating smallholders’ produce,
agri e-commerce providers may turn to
Prohibitive transport costs, and lack of infrastructure and
storage results in a high risk of post-harvest wastage and middlemen (local aggregators) to satisfy demand. This reduces agri e-
commerce’s impact on the initial stages of the value chain between the
deters most farmers from bypassing middlemen and selling
farmer and middleman.
directly to the market or consumers.

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Agri e-commerce enablers
Mobile
Logistics
internet
Networks
penetration

Digital Agriculture
Payments Readiness

E-Commerce Rapid
Familiarity Urbanisation

Income
Structure

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 Benefits of agri e-commerce

REDUCE WASTE

IMPROVE INCOMES

FINANCIAL INCLUSION

INCREASE PRODUCTIVITY

IMPACT ON ADJACENT SERVICES

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 Segmentation
Farmers Buyers Produce

Small Holders Individual Perishable

Non-
Co-operatives Business
Perishable

Agri Raw
Large Scale Export Materials

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 Agri e-commerce operational functions

Farmer Buyer
– Acquisition – Marketing
– Education – Customer
– Pre-financing E-commerce platform service
– Returns

Corporate
– Logistics
– Warehousing
– Quality control
– Platform
– Payment
facilitation
– Regulation
Source: GSMA
Intelligence

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 Business model analysis
The operational functions of an agri e-commerce business underpin
the business model. Specifically, they drive the cost structure and the
amount of control the agri e-commerce business has over the value
chain, as well as the user experience of farmers and buyers on the
platform.

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Agri-tech Social Enterprises in India

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 Agri-tech Landscape 2019: 1,600+ startups innovating on the farm side businesses

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 Upcoming Market in India in Food Waste
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International markets Recommendations
• Provide more than a platform
•The majority of agri e-commerce businesses
sell domestically, but agri e-commerce also • Balance online and offline assets
enables farmers to reach international buyers. • Build reliable partnerships
• Replace middlemen services
•An agri e-commerce business can target a • Adopt Mobile money services
limited number of international markets, or • Use partnerships to leverage assets
open their business to buyers globally.
and minimize liabilities
• Support farmer operational functions
•Opening an agri e-commerce service to the
global markets creates opportunities to reach • Create an enabling regulatory
more buyers, though it requires a greater environment
amount of internal organisation and •Invest in viable services
considerations as highlighted below. • Recognize local market conditions

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 Thanks

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