Traditional agriculture practices consist of complex and inefficient value chains. Typically, a farmer’s produce goes through several intermediaries before it reaches the end consumer.
As each intermediary in this chain is entitled to its share of margin, so the farmer’s proportion of the dollar earned from the consumer is very small. This is where agri e-commerce can be very helpful.
Digitisation of the agriculture supply chain is more important
The digitised platform can drive efficiency within the current value chain, with the potential to benefit both farmers and consumers. While at one hand, e-commerce can enable farmers with increased access to new markets such as retailers, restaurants, and consumers; on the other hand, it benefits consumers by providing them with fresh and nutritious produce.
In developed countries, many studies have shown that a direct market place between farmers and consumers, help the farmers to retain between 40 to 75 per cent of a food dollar, as opposed to a mere 15.6 per cent in a corporate chain.
In developing countries, where agriculture contribution to GDP is in double digits, e-commerce will be of significant benefit to the lives of farmers.
Pivoting to agri e-business happened at a large scale in the current COVID-19 pandemic. In Malaysia, during MCO (Movement Control Order), established e-commerce player Lazada connected farmers from Cameroon Highland to consumers directly.
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The company reached out to farmers immediately, who otherwise were going to throw away their produce due to logistic issues and helped them go online.
Agri e-commerce is finally here. However, it is still in infancy, especially in Southeast Asia. SMEs who want to tap into this space should keep some key business considerations in mind while engaging the farmers to adopt the online platform.
The level of engagement can vary from basic to advance stage, depending on the business model and services provided. However, businesses that are still in the nascent stage, or just beginning their operations in agri e-commerce space should keep the below-mentioned golden rules in the farmer engagement model in-view.
5 golden rules for an effective farmer engagement model
Acquiring the farmers:
The first step is to build a robust base of farmers who can serve customers. A commitment from the farmers to engage with technology, which is new and uncertain to them, will require businesses to invest time in building a relationship with their target pool of farmers.
One way is to employ field agents who can organise small communities in the rural areas to explain the business model and its benefits to the farmers. Another way is to partner with farmers’ societies, co-operatives, and government.
eKutir (India), a social enterprise group that offers sustainable technology solutions in agriculture, has established decentralised local kiosks for collaborating with farmers. Each of these kiosks is run by a trained local entrepreneur, who would then work closely with farmers on a project, thus leveraging ICT tools for agricultural services.
Startups can follow this model of collaboration with local entrepreneurs; or partner with social enterprises that can help them to utilise an already built network of farmers, and save cost.
Peer group dialogue and referral programme, where acquired farmers tell their digital journeys to others, is also an effective way to utilise word of mouth to drive farmer’s use of the platform.
Building trust between farmers and consumers:
During the startup stage of e-commerce service, where both demand and supply elements are uncertain, a legally secure off-take arrangement can play a pivotal role in building trust between both parties. To safeguard the interests of both sides, agribusiness should try to secure a minimum guaranteed off-take agreement between the farmers and the buyers (if the buyer is retail, restaurant, etc).
One on hand, this reduces the risk of servicing the requests raised by the consumers. And on the other hand, it ensures farmers about the guaranteed income from the e-commerce platform. An example of the implementation of this approach comes from the Kenyan Agri e-commerce business, Tulaa, where the farmers sign a short-term contract with Tulaa agents, enabling a legal guarantee with a minimum off-take.
Providing continuous education and training:
Ad hoc training by local field agents, where they teach the farmers about key tasks such as grading, packaging, entering the details of the products, and eventually using the e-platform, needs to be coupled with continuous learning and engagement channels.
Communication channels such as hotline number; WhatsApp, Facebook messenger groups, and the chatbot are needed to keep the conversation going between farmers and the agribusinesses’ employees. Another way to facilitate continuous learning is to educate and train local farm leaders on new insights so that they can drive local communities to discuss and exchange ideas.
Today, farmers want conversational technology, which answers their questions continuously. An agri e-commerce startup that meets this expectation will speed up the adoption of its platform. One such successful conversational technology company is 8villages (Indonesia).
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They started their journey by launching educational and communication applications for agriculture matters. But now they also provide a platform to rural people, where the farmers can ask questions and seek information about agriculture matter from agriculture practitioners and experts.
Enabling pre-finance options:
The success of this business model depends on making farmers less dependent on the middlemen. Securing finance for farmers to enable them to start their e-commerce journey, would lower their dependency on the middlemen who otherwise charge high-interest rates.
Agri e-commerce businesses can partner with potential lenders to provide easy finance to farmers. Jai Kisan (India) is an agri-fintech company that provides low cost and timely financing options to farmers. Partnering with such fintech companies would allow agri e-commerce companies to support farmers without committing any significant resources.
Another agri e-commerce business, such as Indonesian startup Tani Group, provides both a platform and the necessary funds to the farmers. They make use of a crowdfunding platform, where individuals or enterprises can choose to invest in a project of their preference.
Agri startups can also use such models to provide funding options within their e-commerce platforms.
Integrating e-commerce platform with value-added services:
Truly growing the farmers’ community and speeding up the adoption of e-commerce platform, would require an integrated solution that not only connects the farmers to their customers but also helps them to manage the quality of their produce.
An e-commerce platform can offer various kinds of features to enable farmers to manage their crops. It can be frequent crop reminder notification, which informs the farmers about the right dosage and time of inputs, depending on their crop requirement. Or it can be about providing consultation on where to source various machinery and agriculture equipment at a lower price.
To give an example, DeHatt (India), an end to end tech-enabled platform, offers a distinctive feature in its app. The app provides various services to the farmer community and has recently included a feature that offers customised advisory services through automation and voice calls in the local language. This feature is innovative in the sense that it makes the solutions available to farmers in an easily digestible manner.
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With the supply chain disruption this year, it is a good time to pivot for agri e-commerce startups. But there will be stiff competition from already established e-commerce players and large companies planning to enter this sector.
However, startups can benefit from establishing a strong farmer engagement model, that develops a close network between the farmers and the consumers.
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