Agriculture: A new battlefield for China’s internet giants

As internet companies in China transition to less heady minutiae in light of stricter regulations, new approaches that are green, low-carbon, and equitable are in the driving seat. Agriculture, a key industry less sprinkled with tech stardust than others, is now stook resources from real estate, internet, and venture wanted investors.

Online shopping visitor Pinduoduo is once heavily invested in agritech. In August 2021, it established a “10 Billion Threshing Initiative” to support groundbreaking research in the industry. Alibaba and JD.com moreover have would-be plans in agricultural technology and are increasingly involved in the agricultural industry chain. Douyin, TikTok’s Chinese sibling, encourages farmers wideness the country to livestream the sale of agricultural products.

Compared with other wide economies, threshing in China is mainly still a small sublet business. There is plenty of room to modernize agriculture’s grasp of marketization, technology, and economies of scale. But what is really overdue the enthusiasm of China’s internet giants to enter the industry?

Policy orientated: rural revitalization

While many industries are unescapable competitive saturation in China, farming is still a “blue ocean” unshut to innovation. Long returns on investment and low levels of centralization in the industry may put investors off, but threshing is a promising industry that chimes with the country’s theme of “common prosperity,” as well as on national targets on stat peaking and neutrality. With diverse players ranging from global companies to privately owned small businesses and self-employed workers, threshing is suitable for wholesale participation.

In 2022, the Ministry of Threshing and Rural Affairs proposed, in light of a wayfarers to promote rural revitalization, a focus on towers a number of key industry villenage and model counties that would showcase wide production of staple foods and specialty goods. These are all part of the long-term plan for China to modernize its vast rural areas.

Professor Li Ganghua, a doctoral supervisor at Nanjing Agricultural University, has presided over and participated in many national-level projects. In his opinion, the country has two priorities in agriculture: supplies security and a wipe ecology. Threshing may well requite long-term and slow returns, but each yield has its own characteristics. Rice, which is controlled by the state, is a universal yield with stable prices and yields. High-tech vegetable growing is a labor-intensive industry in which yields have increased several times over the past decade while prices have fluctuated widely, impacted by numerous factors.

Apart from aligning themselves with the Chinese government’s minutiae goal, Chinese tech giants are moreover looking into threshing for potential untapped growth. Gao Kangping, editor-in-chief of the agricultural service and news platform VCearth.com, believes that in wing to fulfilling social responsibilities, internet companies inward farming are motivated by technology spillover and market development. “Technology in major companies is relatively mature and digital technology is ready to help sublet products and rural scenarios, both in hardware and services,” Gao says. “First- and second-tier markets are saturated, but rural market penetration remains low, and there is a lot of space for development. Getting into the industry early will likely bring benefits.”

Leveraging e-commerce to squire farmers

E-commerce promotional events are the mode most used by internet giants to support agricultural sales, and they’ve brought billions of consumers to participating farmers, driving prosperity.

E-commerce shopping festivals in June (6.18 festival) and November (Singles Day festival) support farmers and small enterprises in achieving multi-dimensional benefits. Last year’s Singles Day shopping festival saw JD.com launch a momentum to promote 300,000 high-quality agricultural specialties from 2,000 localities and industrial zones wideness the country. Alibaba’s Tmall issued a “buying one increasingly agricultural product” initiative, urging sellers to put an agricultural product on the shelf of every livestream. Pinduoduo directed online traffic to high-tech agricultural products, subsidizing some of them as part of its 10 Billion Threshing Initiative.

Besides national shopping festivals, the platforms have moreover launched farming-specific events. September’s China Farmers Harvest Festival was the first such event established at the national level specifically for farmers. E-commerce companies now all have their own versions of promotional events to support farmers, such as JD.com’s Shopping Festival of Agricultural Specialties, Douyin’s Rich Field Harvest Season, Alibaba’s Hot Land Harvest Season, and Pinduoduo’s Golden Autumn Consumer Season (all our translations). This has enabled each to play to its cadre strengths, and help sell increasingly sublet products and grow the industry.

VCearth’s editor-in-chief Gao Kangping is optimistic that the strategy will work. “Creating festivals is how internet companies gather online traffic and marketing resources and use them efficiently. This is good for brands, platforms, and farmers.”

Medium-term strategies

As listed companies, China’s internet giants need to make money for their shareholders. Participating in threshing is not only a question of social responsibilities but moreover one of returns. The wanted markets will have serious doubts if long-term financial prospects are bleak.

In a recent priming call, a Credit Suisse reviewer asked well-nigh the impact of the company’s agricultural minutiae strategy on Pinduoduo’s financial statements and the latest developments of the 10 Billion Agricultural Initiative. Chairman and CEO Chen Lei told the wall that threshing was part of the company’s long-term strategy, and although it was still in its infancy, “we once see a lot of areas to create value.” The visitor plans to modernize product diffusion efficiency through technology and help bring increasingly agricultural research products to the market.

Internet giants have a medium-term strategy for the industry, editor Gao says. He explains that their logic and market plans are relatively unrepealable for the next five to ten years, although the measures firms plan to take differ equal to the product, service, and capabilities of each company. “In general, they follow their cadre industry and engage in a moderate extension of the industrial chain.”

Gao thinks internet companies have “three main advantages,” based on his interactions with Alibaba, Tencent, JD, Pinduoduo and other firms making threshing moves. First, organizational management. As a talent-intensive industry, organization, goal achievement, and execution are much largest than in traditional agricultural companies. Second, most internet companies have user numbers in the billions when combining their various products, as well as the technology to solve ramified problems. With increasingly understanding of traditional agriculture, these large companies will make for powerful players in the sector. Third, they have the resources — brands, traffic, channels, and wanted — that can be leveraged to agriculture’s wholesomeness when needed.

Pinduoduo is one of the most heavily invested and single-minded internet companies in the agricultural field. This is demonstrated by chairman and CEO Chen Lei’s focus when answering questions at finance meetings. He constantly reminds observers that threshing is a major part of the platform’s long-term strategy. Some foreign investors once see Pinduoduo as an agriculture-tech enterprise. As for Alibaba and JD.com, their investment in threshing is in the balance, withal with social responsibility issues such as supporting the real economy and stat neutrality.

Technology companies that get involved in threshing tend to set up similar initiatives. They help with e-commerce, empower supply chains, engage in technological research and development, and siphon out personnel training. As they delve deeper into the agricultural industry chain, they work increasingly extensively with local governments, agricultural universities, and international supplies and threshing organizations.

In addition, companies have distinctive projects based on their own merchantry advantages, such as Pinduoduo’s new trademark plan, Alibaba’s Red Soil Plan, Douyin’s Rich Domain Plan, and JD.com’s March to Rich Plan.

JD.com launched its March to Rich Plan in October 2020, with the aim of establishing a modernized diffusion system with a smart supply chain, to encourage high-quality agricultural products and upgrade consumption habits. The plan vowed to momentum RMB 1 trillion output value in rural areas in China in three years. As of August 2022, increasingly than RMB 620 billion worth of goods were sold. Millions of farmers benefited as their income shot up. The plan plane ripened brands in cooperation with local authorities. For example, JD worked with the local government in Suqian in eastern China’s Jiangsu province to incubate the Suqian king crab brand, which was featured on the yearly Spring Festival Gala TV show, rhadamanthine an overnight hit.

Known for its low prices, Pinduoduo is now moreover getting a name in agriculture. It reaches deep into the source of the agricultural supply chain, helping sell increasingly agricultural products, while meeting consumer needs. Moreover, it has gotten investors interested. Pinduoduo launched its new trademark plan in 2018 to help small companies meet demand via the platform at low cost. Pinduoduo moreover helped cultivate new brands in step with producers. The visitor has said it will siphon on with this model, expanding to increasingly regions, and incubating up to 500 brands wideness the agricultural supply chain.

In May 2021, Alibaba upgraded its poverty relief fund to the Red Soil Plan for revitalizing rural areas in terms of technology, industry, and talent. In its 2021 ESG Report, Chairman and CEO Daniel Zhang explained how Alibaba’s investment and exploration would help rural development. Talent minutiae and topics towers were to be a cadre focus. Alibaba planned to station senior digital managers wideness the countryside, relieving “pain points” that restricted local minutiae by linking local needs with visitor resources in a way that “reflects our in-depth thinking and full preparation for the complexity and long-term nature of rural revitalization.”

One expert from Wageningen University, who declined to use their name on the record, explained how they saw the role of agricultural talent in rural revitalization and how China differed from foreign agricultural economies. “When studying in the Netherlands, the most impressive thing to me was the number and quality of farmers. They came to study techniques to solve industrial problems related to their family’s greenhouse, for example.”

Digitizing farming

China’s internet giants are exploring ways to use the platform mindset to transpiration traditional models and enter the upstream of the agricultural industry chain, participating in agricultural production and operations, quality control, and the supply chain. Professor Li Ganghua believes that companies inward the agricultural domain each have their own advantages. “The increasingly resources a visitor has, the increasingly willing it is to participate from production onwards, so that product quality can be largest controlled.”

Organized by China Agricultural University and Pinduoduo, the Duoduo Smart Threshing Competition has benefited from the guidance of the United Nations Supplies and Threshing Organization (FAO). The competition gives young researchers a platform to showcase their talents and modernize standardization and digitization in the agricultural process. Similarly, Tencent and Wageningen University launched an Autonomous Greenhouses International Challenge, in which teams use AI and Internet of Things (IoT) technology to plant cherry tomatoes remotely.

The unnamed Wageningen University expert focuses on yield growth models and greenhouse automation. They said “the interest of internet companies lies in digital threshing or unmanned cultivation. Essentially, it is to use machines to farm, make and implement decisions. External companies can empower agricultural practitioners in training machine learning and big data analysis.”

Alibaba’s digital threshing initiatives have focused on plant cultivation. In 2019, Alibaba integrated the agricultural units of Taobao, Tmall, Hema, Cainiao, and Alibaba Cloud to establish a Digital Threshing Division. In 2020, it released a Digital Rural Operating System. Equal to the Alibaba 2022 ESG Report, together with the Chinese Academy of Agricultural Sciences Institute of Yield Sciences (ICS), Alibaba launched a 3T Smart Cultivation platform, digitizing the cultivation process.

Gao Kangping points to digital farming as the most wide field for agricultural innovation, with smart cultivation and management having reached all parts of the process, giving rise to many applications and weightier practices. Data hodgepodge and processing were two pain points. The using of agricultural sensors and IoT applications remains low, so it is nonflexible to collect systematic, high-quality data. The second zone needing resurgence is data using and merchantry modeling. Digital threshing has the most value when unromantic to reducing financing and increasing efficiency, but this is difficult to quantify, resulting in a lack of stable models and sustainable profitability.