Internet Business Thinking

Chapter 25 Early Entry, Early Profit - Internet Awareness in Traditional Industries (1)
(Part [-]) Take advantage of now!The First Year of Internet Agriculture

The era of Internet agriculture has come, and it is "blossoming everywhere" in China, but in essence, there are currently only two mainstream models: one is the whole industry chain coverage model represented by Lenovo, LeTV and other giants, and the other is fresh electricity The characteristic e-commerce model of agricultural products represented by merchants.

If 2013 is the first year of Internet finance, then there is reason to believe that 2014 will be the first year of Internet agriculture.

The Internet has changed one traditional industry after another, and now it is the turn of agriculture.

For Internet companies, the high profit margins of agricultural products have always been fatally attractive.Ma Wenfeng, a special economic analyst at Xinhua News Agency, told the reporter: "The profit rate of rice reaches 80.00-[-]%, and the profit rate of cotton reaches [-]%. In comparison, the profit rate of IT products is definitely not so high."

Although Internet companies have been sharpening their knives on agriculture, agriculture is different from other industries. It is related to the food problem of China's 14 billion people, so it involves the supervision of national policies.If the country's policies are not let go, the so-called Internet agriculture can only be a flower in the mirror, a moon in the water, which can be seen but not touched.

However, this situation has improved in the past two years, especially since 2013, when the policy finally released the "gap".

Opportunities in 2014
From the end of 2013 to the beginning of 2014, several major events occurred in the agricultural industry:
1.2013. At the end of [-], the Third Plenary Session of the Eighteenth Central Committee of the Party passed the "Resolution". In the communiqué, "the integration of urban and rural construction land, giving farmers more property rights, and guaranteeing property income", mentioned the issue of rural land transfer.

2.2014. In [-], the key word of the central "No. [-] Document" was "comprehensively deepening rural reform", and it was proposed for the first time to give farmers the right to mortgage and guarantee the contracted management rights of contracted land.

3.2014. On February 2, 7, at the executive meeting of the State Council chaired by Premier Li Keqiang, it was decided to merge the new rural social endowment insurance and the urban resident social endowment insurance to establish a unified national basic endowment insurance system for urban and rural residents.

The above three policies directly point to the biggest bottleneck for industrial and commercial capital, including Internet companies, to enter agriculture - the issue of land transfer.

For agriculture, nothing is possible without land.However, China’s land is in the hands of farmers. Although the Ministry of Agriculture’s data shows that by the end of 2012, the proportion of family contracted cultivated land in the country has reached 21.2%, but Ma Wenfeng told reporters: “There is a lot of moisture in this data. Currently, about The real amount of domestic cultivated land is still debated, but no matter whether the amount is 18 billion mu or not, the land that has been transferred must be less than 1 million mu.”

The Third Plenary Session of the [-]th CPC Central Committee proposed to "establish a unified urban and rural construction land market", which means that rural collective organizations can sell their own collective construction land just like the land bureaus and land centers of urban governments. Land is expropriated from farmers at a low price and sold to developers at a high price.But at the same time, when collective organizations sell land, they must accept the constraints of urban and rural planning and land use planning.

In 2014, the "No. [-] Document" was proposed for the first time, giving farmers the right to mortgage and guarantee the contracted management rights of contracted land.The document emphasizes the implementation of ownership, the stabilization of contracting rights, and the release of management rights. The management right of the land is mortgaged to the financial institution for financing.

Regarding the significance of the "No. [-] Document", Zheng Fengtian, a professor at the School of Agriculture and Rural Development at Renmin University of China, said: "Since the reform and opening up, contracting rights and management rights have been combined into one for most of the time. Now it seems that combining contracting rights and The separation of management rights will be a major breakthrough in land reform. This means that farmers can transfer their contracted land for management, and if they need to use it themselves, they can get it back. In the past, farmers did not dare to give up their land to others. But now that the contracting rights and management rights are clarified, such worries are much less.”

Compared with the spirit of the Third Plenary Session of the [-]th CPC Central Committee and the No. [-] document, the country’s decision to merge the new rural social endowment insurance and urban residents’ social endowment insurance can be described as a real “final decision”, clearing away the last and most fundamental issue of land transfer. problem.

Only by giving pensions to farmers can the land be transferred.The current situation in China is that there is less land and more people, especially in rural areas. Zhou Wenquan, an agricultural analyst at Aiger, said: "After the implementation of the household contract responsibility system, the contracting rights for farmland are all in the hands of individual retail investors." Enterprises want to form a scale Commercial planting requires a lot of land, but it is very difficult to obtain land from these retail investors.

"For farmers over 60 years old who cannot go out to work, they can only rely on land for retirement. And now there are nearly 1 million farmers over 65 years old in China." Ma Wenfeng said, "Most of the land in China is owned by these farmers over 65 years old. In the hands of farmers, if they do not have social pension security, they can only rely on the land to maintain their lives, so if they want to transfer their land, they must solve their worries.”

Ma Wenfeng said that farmers' income from land is actually very small. The annual income of one mu of land is [-] yuan. If labor costs and other costs are deducted, the net income is [-] to [-] yuan.With other pension income, farmers are naturally willing to transfer their land.

At this point, the door to land transfer has officially opened, and the road for industrial and commercial capital, including Internet companies, to enter the countryside is imminent.

In 2009, while Ding Lei was exploring the "third-generation pig raising model", Jiucheng Network Technology Co., Ltd. also established Tianshi Ecological Agriculture Co., Ltd.; then, in 2011, Liu Qiangdong began to grow rice; in 2012, Lenovo formally established Joyvio Group; in 2013, "Chucheng Liutao" went public together; in 2014, LeTV settled in Shanxi Ecological Agriculture Base...Internet agriculture is "blossoming everywhere" in China.But in essence, at present, there are only two mainstream models of Internet agriculture: one is the whole industry chain coverage model represented by Lenovo, LeTV and other giants, and the business almost covers the whole industry chain from production, processing, logistics to sales ; The second is the characteristic e-commerce of agricultural products represented by fresh food e-commerce. This model only involves the sales link of the e-commerce platform, and entrusts other links to third parties. Strict control of upstream and downstream.

Lenovo's full industry chain coverage model

In 2013, following the listing of Joyvio blueberries in May of that year, Joyvio Group, the agricultural sector under Legend Holdings, announced on November 5 the launch of its second flagship fruit product—Joyvio Jinyanguo kiwifruit.It is very special that the kiwi launched by Lenovo this time and the "inspirational orange" planted by the former "tobacco king" Chu Shijian were combined into "Chu Orange and Liutao" for the first launch, which immediately aroused heated discussions in the market, and caused Pan Shiyi to endorse his hometown Apple, Ren Zhiqiang spoke for Xiaomi in his hometown... For a while, Chucheng, Liutao, Pan Apple, etc. became a good story in the marketing of agricultural product brands.

Lenovo's entry into agriculture is itself of benchmarking significance: it marks that Internet agriculture has entered a new level of deep industrial integration, and it also marks that capital going to the countryside has entered a new stage of cross-border operations.Lenovo's transformation of agriculture is all-round. It uses Internet technology to transform production links, improve production levels, control the entire production and operation process, ensure product quality, and carry out innovative designs for product marketing.In the end, the isolated industrial links in traditional agriculture were opened up to form a complete industrial chain.At the same time, relying on Lenovo's global vision, it can carry out industrial layout on a global scale and realize the "three complete" solutions proposed by itself, that is, the whole process can be traced, the whole industry chain operation, and global layout.

The value of Lenovo Agriculture lies in: in-depth research on agriculture and peaceful expectations.First of all, Lenovo did not choose conventional industries such as grain, oil, and vegetables, nor did it engage in aquaculture like NetEase did. Instead, it chose blueberries and kiwis, which have relatively high-end products and relatively large room for profit improvement. This provides a reliable industrial foundation for operations. , forming profit expectations.Secondly, the capital operation was fully carried out, instead of starting from scratch, the method of acquisition was adopted, and a large-scale production base was quickly formed, which shortened the investment period.Again, Lenovo realizes that agriculture is a long-term industry, so Liu Chuanzhi specifically reminded Chen Shaopeng, who is in charge of the agricultural sector: "We are not in a hurry to make money. We can afford to invest 10 billion or 20 billion. We will do it step by step." Of course. , Lenovo's abundant capital strength also gave them the confidence to speak like this.

Fresh food e-commerce strives to break out of the quagmire
The reason why putting agricultural products on the e-commerce platform is favored is because it contains huge commercial potential. In 2013, China's GDP was 52 trillion yuan, of which the output value of agriculture, forestry, animal husbandry and fishery was 11 trillion yuan, but the online shopping penetration rate of agricultural products was only about 2%. E-commerce still has a lot of room for development: 3 trillion times 20%, and the market in it will undoubtedly make everyone crazy.

But agriculture is not industry, and agricultural product e-commerce is not industrial product e-commerce.Although fresh food e-commerce is hailed as the last blue ocean of e-commerce, based on the degree of understanding of the special laws of the industry and the gap in practice, those companies that simply copy the ordinary e-commerce model and dare to be the pioneers of fresh food e-commerce will inevitably end up from The pioneer turned into a martyr, and encountered a sad ending that made people sigh. At the beginning of 2013, Beijing's "Youcai.com" sought to transfer, and Shanghai's "Tianxianpei" was resold as a symbol.By the end of 2013, an article titled "Almost None of the 3000 Agricultural Product E-commerce Companies in China Are Profitable" once again sparked heated discussions on fresh food e-commerce.Although there are data to prove that there are no profit-makers, the overall bleakness of the industry cannot be denied.

In fact, agricultural product e-commerce, especially fresh food e-commerce, just looks beautiful.Few people doubt the bright future of e-commerce of agricultural products, but they don't know enough about its special difficulties.Fresh food e-commerce has three major difficulties: First, the logistics system is very weak, and the cost remains high. Other things may be cheaper to sell online, but agricultural products are expensive, because agricultural products have to be eaten every day, but the storage time is very short. The amount of a single purchase is small, and the problem of logistics and distribution costs is very prominent.Some fresh food e-commerce companies initially naively wanted to compete with ordinary vegetable markets, but they could only return home in failure.Second, product quality control is very difficult.Agricultural products are not industrial products. Standardized products can be produced with one machine tool and one mold. The natural production of animals and plants will inevitably cause obstacles to standardization. They are more susceptible to natural risks that industries do not have. Sustained supply of production is also very problematic.The geographical characteristics of agricultural products are prominent, which has formed a contradiction between the extremely rich varieties on the surface and the extremely monotonous products that can actually be supplied.The third is that the operating model and positioning are quite difficult. For organic products, trust is difficult to pass; for pure B2C, logistics costs can overwhelm the enterprise; for white-collar wealthy groups, source procurement is difficult to guarantee.

However, after a series of successive explorations, the e-commerce model of agricultural products has gradually changed from chaos to clarity, and three major outlets have been basically explored.One is branding, in-depth development of the connotation of agricultural products, greatly increasing the added value, and avoiding the misunderstanding of low-price competition; the second is communityization, shortening the logistics chain of agricultural products, reducing logistics costs, and improving freshness; the third is the integration of online and offline, O2O+B2C, using Weibo and WeChat marketing as auxiliary means, using big data for precise positioning, and gradually finding a profit model.

In the final analysis, fresh food e-commerce is a matter of positioning and routing. Is it for the Internet or for better sales through the Internet?In the end, it needs to be integrated with the traditional path and work hard on the convenience of the community. The current logistics system is not suitable for agricultural products.In the future, when ordinary agricultural products can conveniently realize the seamless connection between online transactions and local delivery in the community, the problem may really be solved.The high-end e-commerce of agricultural products will eventually transform into "flying into the homes of ordinary people".

The Internet and agriculture, one modern and one traditional, one Yangchun Baixue, one Xialiba people, seem to have nothing to do with each other, but they have begun to penetrate each other.With the relaxation of policy bottlenecks, a vigorous Internet agricultural feast is being staged. (Section 2) See also C[-]B: The Agricultural "Ambition" of "Great" Internet

LeEco has achieved agricultural branding with a full traceability system and customized services, and then ensured long-term and sustainable profit growth through brand premiums and various additional formats, and achieved scale through reasonable land cooperation models and diversified product systems operation, and finally outlines its own Internet agriculture map with the C2B sales model as the core.

In recent years, Internet people who have always claimed to be "tall and tall" have lowered their stature and entered the bitter and tiring agricultural industry.From Ding Lei who first raised pigs, to Liu Qiangdong who grew rice, to Liu Chuanzhi who sold fruit.The integration of technology and tradition, the collision of openness and closure, what kind of sparks will be created between the two seemingly diametrically opposed industries of the Internet and agriculture, everyone is looking forward to.

But the result disappointed everyone.Ding Lei has raised pigs for nearly 5 years, but there are only a mere 25; It is sold in major supermarkets, but compared with the cumulative investment of more than [-] billion across the major industries of breeding, planting, aquatic products, and processing, Lenovo has gained too little in terms of brand and sales.

Is Internet + agriculture another marketing gimmick created by Internet companies?Or is it just a slogan for Internet companies to "cheat land" and "cheat subsidies" from the government?If Internet + agriculture really represents an industry with great potential, how can we tap its value?

Previously, LeTV's move to enter the agricultural market gave us some ideas.This time, LeEco once again presented its C2B model, which has made great contributions to the TV industry, which shows its ambition for the agricultural market.

Agricultural layout started 7 years ago
LeTV was established in 2004. At that time, China’s video website industry structure was far from as clear as it is now, and the long-form video model has not yet emerged, and the UGC model is the mainstream.Since 2006, LeEco withdrew from the fierce UGC competition and started copyright distribution.In that year, no one understood LeEco’s practice of “not focusing on user experience, but switching to a second-hand businessman”, and all kinds of abuse were rampant.It wasn't until 2011, when the copyright price of TV dramas soared from more than 3000 yuan per episode to 180 million yuan per episode, that all kinds of accusations quietly disappeared.

Now, the entire LeTV Group already has 30 billion copyrighted content, which is also based on this.The market value of LeTV has reached 417 billion.Based on abundant funds, LeEco has begun to cross-border, from video to LeEco TV, and now to LeEco Internet ecological agriculture, LeEco has shown a different vision.

On January 2014, 1, LeEco Ecological Agriculture Industrial Park Linfen Base was officially unveiled in Yaowangtai Modern Agriculture Demonstration Zone, Yaodu District, Linfen City, Shanxi Province, covering a total area of ​​about 16 mu. Together with the "Wine Wine Industry Base".

At present, Linfen Letv Ecological Agriculture Industrial Park has built 12 intelligent multi-span greenhouses covering an area of ​​235 mu, 43 solar greenhouses, and a nursery stock center covering an area of ​​more than 2000 mu.LeTV Agriculture uses new technologies such as energy-saving photovoltaics and three-dimensional planting, as well as pure water irrigation, to cultivate nearly 20 kinds of organic products in three series: seedlings, fruits and vegetables, and flowers.Among them, there are more than 200 kinds of hydroponic vegetables alone, including bitter chrysanthemum, colored pepper, red beet, apricot, purple leaf geranium, andrographis paniculata, etc.Different from the e-commerce agriculture of other Internet companies, in addition to cultivating organic products such as fruits and vegetables, LeTV Agriculture also focuses on the ornamental flowers and trees market. The number of seedlings and flowers has exceeded 39 million.The first batch of 12 "Anthurium" plants were sold out within [-] minutes at a unit price of [-] yuan.

In a sense, LeEco's layout for agriculture started seven years ago.

When it comes to LeEco Group’s interest in the agricultural industry, one person has to be mentioned—Li Rui, the current vice chairman of LeEco Holdings and CEO of Wangjiu.com, a subsidiary of LeEco Holdings.

As early as 2007, Li Rui personally funded and contracted a 3000-acre mountain land in Shanxi, and began to set up a site for LeEco's ecological agriculture layout. "At that time, there were attempts at breeding and planting. I had grown vegetables, raised pigs, and raised chickens, but they all failed in the end." Li Rui recalled.The seemingly bottomless pit of capital investment in the agricultural industry is unbearable for any individual. Without continuous capital investment, there is no way to form a large scale.

But this failed investment is not meaningless. Li Rui said: "Although it failed in the end, it also allowed me to re-understand the essence of agriculture. Eating truly green and pollution-free vegetables tastes completely different from the vegetables sold in the market. Now there are 4 yuan a catty of eggs on the market, but if there are really healthy, unripe ecological eggs, even if they cost 10 yuan a catty, the supply will be in short supply.”

Although this attempt failed, Li Rui's "ambition" for agriculture has not been extinguished. In June 2013, LeTV Group began to put agricultural projects on the agenda.Under the operation of Li Rui, in just half a year, LeEco's Wangjiu.com, as the main body of operation of LeEco's Internet ecological agriculture, signed a contract with the local government of Linfen, Shanxi, and LeEco's ecological agriculture was officially launched.

The era of branded agriculture born of the food safety crisis

(End of this chapter)