E-commerce gives a Boost to the Local or Global Business of Grape Industry
March 17, 2021
Many owners of small- and medium-sized farms across the world have begun to explore the potential of grapes online selling to increase the profitability and stability of their farming operations. Grapes are unique in that they are not only well-suited for marketing through traditional commercial channels but also are popular in direct marketing venues such as produce stands, farmers markets, community-sponsored agricultural ventures, pick-your-own operations, or e-commerce.
Finding a Market Niche through E-commerce
Regardless of the market outlet being served, grape has certainly developed and pursued some form of niche marketing strategy. Niche marketing consists of identifying and serving a unique market segment or filling a unique market need that is not currently being served or met by larger or mainstream market participants. Niche marketing generally requires producing a specialty product or service for a limited segment of the market. These markets are often less price-sensitive than bulk commodity markets and reward farm product suppliers with a price premium for their ability to meet the stringent requirements of the buyers. Small and mid-size suppliers that can meet the volume requirements and precise specifications of niche markets can often find a good fit for their limited production capacity. Where e-commerce comes into action? E-commerce can help in launching of a specialty product through ads, offers, deals, bulk-buying, etc.
Niches can be found in any of three dimensions that are used to characterize the market. These dimensions consist of the product or service in question, the timeframe in which the product or service is available, and the geographic area where the product is delivered or the service is performed. Product or service niches arise from the ability to assemble a product or service that contains characteristics valuable to customers but that is unique in some way from that which is being provided by mainstream market participants.
Advantages of E-commerce marketing for the Grape Selling
With relatively small acreage, it is sometimes difficult to meet the volume of production, or standards for size, color, and uniformity required by processors or wholesalers. E-commerce markets offer an alternative way of selling product.
- Enter the digital world: While the technology is advancing, it is always profitable to follow the trends in technology which always proves to be profitable in business.
- Reach out to more customers online: E-commerce offers a wider customer base. The more the customers, the more the leads, the more the selling and the more the profits.
- Get connected to the customers directly: An e-marketing initiative is to deliver grapes cultivated in the farms directly to the doorsteps of buyers across the country.
- Direct income: Even when other marketing options are viable, many growers with small- and medium-size farms have found that e-commerce marketing offers a means of increasing cash flow through direct online payment options and supplementing income.
- Sell on retail price: Growers receive retail prices for their grapes on e-commerce platforms. Moreover, consumers buying directly from the grower are often willing to pay higher prices for product because they value the opportunity to get high-quality, fresh grapes directly from the grower’s farm
- Location advantage: A produce location may be operated from a year-round permanent structure or movable from a truck, trailer, or tent during harvest periods. If the produce stand is on a farm in a remote area, it may be necessary to use agricultural tourism activities and/or intensive advertising to draw customers to the stand.
- Opportunity to meet the farmer: A new strategy adopted by e-commerce platforms is for consumers to meet and interact with the people who actually grow the produce. This instils a sense of trust among the customers and indirectly gains their loyalty.
- Community Supported Agriculture (CSA) Farm: CSA refers to a situation in which customers (called members) purchase shares of a farm’s produce, usually in advance, and receive deliveries of fresh produce throughout the growing season. For this reason, CSA farms are sometimes called “subscription agriculture.” This is one advantage of e-commerce who help in indulging their customers in this business.
- Educating the customers: E-commerce marketing provides growers with the opportunity to educate customers about these unique physical characteristics of grape which can help develop customer relationships and may improve the customer’s overall shopping experience.
E-commerce Market Trend for Grocery
When it comes to e-commerce, it is generally said that India will mirror China in growth. Internet penetration in India in 2019-20 will be similar to China’s in 2012. India’s population is comparable with China’s but only in total size and not by income level segments. While China’s e-commerce began growing in 2007, a similar trend in India might not be obvious, given a much smaller middle-income population. E-commerce companies are concentrating on growing as fast as possible rather than being profitable. This is aided by capital availability, leading to aggressive discounting, which is driving up GMV.
India’s middle class in 2020 of around 66 million will be smaller than what China had in 2008, which was 75 million. Further, Chinese companies like Alibaba benefited from a relatively closed economy in China. India, however, will benefit from technological advances and more powerful analytical tools, which was present in China’s e-commerce growth years. There is another differentiator in India. Indian consumer wallet spend is different from consumers in China and the US. Grocery forms a significant proportion – 65 per cent of the retail market in India.
E-commerce is basically replicating the role of distributor/wholesaler and the retailer. If margins of these two components of the supply chain currently in offline is adequate to cover the operating costs of e-commerce (including logistics), then e-commerce is definitely a viable business. E-commerce operating costs (ex-discounting) range from 10 per cent to 15 per cent of GMV in various categories and its viable categories are those that have low handling and logistics costs but higher margins for distributors and retailers, such as apparel, footwear and personal products.
Global Grape Production from 2013-20
The annual rate of growth of grape exports have increased from Rs 431 crore in the fiscal 2009-10 to Rs 2,176 crore in 2019-20, which is the highest of the decade recorded in 2018-19 at Rs 2,335 crore, data from Agricultural and Processed Foods Export Development Authority (Apeda) showed.
The margins of farmers and exporters are set to be squeezed as their production costs have climbed, while the foreign buyers are bargaining hard to slash prices by about 20%-30% over the previous year. Shipping companies are quoting high sea freight rates, while packaging companies too are quoting higher rates citing increase in paper prices, exporters said.
“The situation is challenging for grape business this year. Grape export to Europe in the 2020 grape season had declined by about 25% over the previous year. This year, exports can fall further by about 10%-15% over 2020 as we do not see any aggressive demand from the European buyers. The demand from hotel, restaurant and other out-of-home consumption segments has not recovered yet,” said Vilas Shinde, chairman, Sahyadri Agro, the largest farmer producer company and the grape exporter from India. Exporters are planning to focus on the domestic market to make up for the loss of export business. “We have not exported any grapes in December and instead sold the December harvest in India through e-commerce and expect to increase the domestic market for premium fruits,” said Shinde. This only proves that e-commerce is backing up for the losses already.