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Farmer's Agro-product E-commerce and Governmental Supports in Korea
Junghoon MoonInformation and Communications University
Department of IT Business
Consumers’ concerns in Food Business
• What are consumer concerned in shopping food?
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Freshness
Safety
Price
Others
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Heterogeneous Attribute of Food• Heterogeneous Attribute of Food
– Although online consumers always want to get sufficient information of the product from the internet, they cannot in most cases since information asymmetry still exists online.
– This asymmetry is considered the consumer’s perceived risk– If the product is heterogeneous, consumers feel stronger
uncertainty
Food Supply Chain
• Some of the latest trends in the fresh food supply chain– Increased focus on freshness. – Proliferation in fruit and vegetable product
variety. – Increased attention to maintaining the
"cold chain".– Combined with IT (e.g. e-commerce, RFID,
USN, mobile etc.)
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Fresh Food E-commerce in Korea2002 2003 2004 2005 2006
Total Amount of E-commerce Transaction
6,029 7,054 7,668 10,675 13,459
Fresh Agro-product E-commerce
307 294 280 284 312
Rate 5.1% 4.2% 3.6% 2.7% 2.3%
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1=1,000,000 USD
Fresh agro-product e-commerce in Korea has been increased slowly, Where E-commerce has been sharply increased About 10 agro-product ecommerce sites have been founded and supported by Korean central/local government.
Case: KGfarm (1)• In 2001, KGfarm was founded by KyongKi province
government to facilitate sales of agro-products grown and cultivated in KyongKi province
• Basic assumptions– By eliminating middlemen, the price of agro-products
can be dramatically reduced.– Farmers do not have good knowledge of computer,
internet. So, let them focus on cultivation. Local government permanently provides all technologies and manage the online shopping mall.
– Local government provides technology education for farmers over and over so that they will be able to manage their own malls on the KGfarm site in the future.
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Case: KGfarm (2)
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FarmersFarmers e-Mall Management Centere-Mall Management Center
Manage bulletin board of
his mall on the kgfarm site Manage Customers relationshipQuality Control of the product Manage shipping and delivery
Frequent update requests
towards his mall on the site
System maintenance Mass marketing
Membership management Mall management
Technology education for farmers Quick response to farmers' requests
Case: KGfarm (3)
• Initial online shopping mall construction in 2001: $ 175,000
• Extended construction in 2002: $ 350,000
• Shopping mall manage and maintenance in 2003 (for 7mon): $ 120,000
• Kept providing intensive technology education for farmers
• Some e-malls are managed by farmer him/herself on KGfarm
• These farmers manage their own e-malls on KGfarm
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Farmer
KGfarm
www.KGfarm.co.kr
(300 e-malls on the site)
Social Infrastructure: logistics, transportation, credit card, security, etc
Consumer
Case: KGfarm (4)
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Case: KGfarm (5)
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Case: KGfarm (6)
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Case: KGfarm (7)
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Case: KGfarm (8)
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Case: KGfarm (9)
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Case: KGfarm (10)• Strategies
– Trust, Trust, and Trust– Provide “Green Tour” program for customers– No commission or fee from farmers or customers– Maximize benefit for farmers– Cost reduction through technology education for
farmers, • High Information Quality for customers• Customer Relationship Management• Involvement of farmers psychological ownership “This
site is mine!”• Could reduce operational cost
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Case: KGfarm (11)
• In 2006 and 2007, many farmers of KGfarm mange their own e-malls hosted by KGfarm
• Annual net sales on the KGfarm web site is now about $1,200,000
• Total annual net sales on each e-mall managed by farmers (hosted by Kgfarm) is up to $ 6,000,000
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2001 2002 2003 (by Oct.)
# of visitors470,000( 38,000 monthly)
690,000(57,000 monthly)
800,000(80,000 monthly)
# of membership
17,332 30,612 42,835
Net sales$ 320,000($ 26,000 monthly)
$ 685,000($ 57,000 monthly)
$ 900,000($ 90,000 monthly)
# of e-malls 130 300 320
Summary and Discussion
• Food E-commerce is inevitable
• Food Business is totally different
• Infrastructure is very important
• Role of government is critical
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