Demand-led production is the future of agriculture.
The agriculture sector in China is undergoing a digital transformation that will bring benefits to farmers and consumers, according to Pinduoduo Chairman and CEO Chen Lei. Chen shares his views on the practice of digital agriculture on three levels: sales, supply and production. He says that changes in the agricultural business chain are triggering a profound transformation from a supply-push model to one driven by demand.
“At present, the modernization of agricultural production is not yet high. But with the trend of urbanization, demographic shift and digitalization, many farmers will quit agricultural production in the next decade,” Chen says. “This trend will put Chinese agriculture on a path to become standardized, scaled, branded and intelligent.”
Pinduoduo will commit itself to transforming agriculture “from 'production, supply and sales' to 'sales, supply and production' through digitalization and Internet technology.”
Pinduoduo recorded more than 270 billion yuan ($42 billion) in agriculture-related GMV in 2020, up from 136 billion yuan in 2019. which is the highest in the e-commerce industry. Chen has said agriculture will remain a strategic focus for the company and that Pinduoduo will build the world's largest agricultural and grocery platform.
"In the past six years, Pinduoduo has employed digital technologies to create a virtual national market by connecting scattered agricultural capacity with dispersed demand,” said Chen. This has “turned the once hard-to-sell agricultural products into the new favorites on people's tables, enriching consumers 'vegetable baskets' and boosting farmers’ income."
Even so, Chen pointed out that the supply chain of agricultural products remains a constraint on China's agricultural sales. About 20-30% of fruits and vegetables are lost in distribution in China, compared with 11% in the U.S. At present, the existing supply chain for general goods can accommodate a limited number of types of fresh fruits and vegetables thanks to the modernization of packaging technology. But the vast majority of non-standard, perishable fresh agricultural products require a new, digitized supply chain system. Pinduoduo is working to reduce food loss by investing in upgrading the state of agriculture logistics in China. Globally, food loss and waste generates about 8% of total greenhouse gas emissions, almost equivalent to emissions from road transport.
Cold-chain logistics is a vital part of maintaining the quality of perishables, especially in the summer months when heat and humidity can lead to higher-than-average spoilage.
Pinduoduo applied late last year to patent a proprietary cold-chain logistics network system with the aim of minimizing loss and quality degradation. It is working with partners to expand cold-chain logistics so that consumers can buy a wider range of perishables.
Its Duo Duo Grocery service allows consumers to order and pick up their groceries within 24 hours. By matching local demand with local farm supply, the company shortens the time for the produce to get from farm to fork. It also provides another channel for farmers to sell their produce, reducing the likelihood that unsold crops are left to rot in the fields. Pinduoduo will also seek to optimize and standardize the nutritional quality of agricultural products through technology to add value for health-conscious consumers.
“At present, the modernization of agricultural production is not yet high. But with the trend of urbanization, demographic shift and digitalization, many farmers will quit agricultural production in the next decade. This trend will put Chinese agriculture on a path to become standardized, scaled, branded and intelligent.”
The road ahead for e-commerce in China after COVID-19
Pinduoduo (PDD) will strive to bring the benefits of the digital economy to more people while staying relevant to changes brought about by the coronavirus pandemic.
Agriculture is one area where the interactive e-commerce pioneer will study how to make better use of technology to transform the industry and improve its efficiency, says Chen.
“We hope that through building up PDD, we can offer even more experiences that can bring the best of the digital economy to everyone,” Chen said in his first remarks to media since becoming CEO. “We hope that this can help provide equal opportunities to both our users and sellers.”
PDD is the fastest-growing e-commerce platform in China, attracting more than 600 million users in less than five years with its interactive team purchases and social commerce model. The company, which started out selling fruits and fresh produce, is also the largest online marketplace for agricultural products in the country.
“In the future, there won’t be a distinction between online and offline as no business can do without technology. So how do we become a pioneer and leader in this new world is something that we ponder a lot on.”
Founded by ex-Google engineer Colin Huang and his team in 2015, Huang stepped down as CEO in mid 2021 while remaining Chairman of the board of directors. Huang said in a letter to staff that he plans to spend more time with the board to formulate mid- to long-term strategy and further develop the corporate structure to strengthen and promote the company’s culture.
Chen, a trained data scientist and prolific publisher on data mining, attributed PDD’s growth to it providing consumers with interactive and value-for-money user experience made possible by the mobile internet.
At the time of PDD’s founding, online user behavior was undergoing a “paradigm shift” from the desktop internet to the mobile internet because of the smartphone, Chen said. The desktop era produced search companies like Amazon and Google that emphasized efficiency because people would allocate time during their day to browse the internet.
The popularity of the smartphone and mobile internet “freed people from that paradigm,” Chen says, but consumers were “still stuck with the utility-driven e-commerce model born of the desktop era” even though mobile payments and logistics were well-established.
Rising living standards also meant that more and more consumers were looking to meet not just their basic needs but were also seeking new enjoyable experiences both online and offline, Chen says. "We didn’t see the virtual as separate from the physical world, and we felt that the virtual world could also offer fun, engaging experiences,”
On the road ahead, Chen says that PDD will keep its signature fun and engaging, interactive experience, while value for money would remain its cornerstone.
Pinduoduo group | www.pinduoduo.com