Fresh Produce Market
Digitalization has created great convenience to end consumers when eCommerce platforms connect millions of consumers to hundreds of thousands of individual businesses. However, major players in eCommerce such as Amazon and Newegg have been focused primarily on non-perishable products. With short shelf-life, fresh vegetables and fruits are difficult to be supplied via traditional supply chain. Vegetables and fruits are subject to damage easily and require specific environment to keep fresh. Also, because anyone with internet access can place an order instantly, high fluctuation of demand applies stress to supply chain system especially during bad weather or holiday seasons. However, digitized transaction platforms connect consumers and producers together to form a virtual farmer’s market and pose huge opportunities. While some companies found this type of eCommerce challenging, others saw business potentials.
In China, fresh produce poses a market of 153 billion dollars. Online transactions grows at a 50% annual rate. By 2018, it’s estimated that the online fresh produce market will reach 10 billion dollars. It’s too large of a pie to be ignored. Multiple players in China have already jumped into actions. YiGuo, a company founded in Shanghai in 2005, is one of them. YiGuo is now offering next-day delivery of fresh produce in a kit to metropolitan apartment dwellers. It utilizes digitalization to connect farmers and consumers while optimize its supply chain to deliver quality products to consumers.
YiGuo offers online platform for fresh produce transactions. Source: YiGuo 
In solving problems that comes naturally with fresh produce business and eCommerce, YiGuo’s management is fighting the battle with specially designed supplied chain services and resource allocation strategies.
From 2005, YiGuo has developed from offering only a few fruit and vegetable categories to now offering more than 3200 SKU products ranging from grains, water produce, meat, eggs, and etc. A specialized supply chain structure that controls temperature has become the most challenging part of the business. The cold chain structure has developed from a single uniform temperature environment when YiGuo first started to 3 temperature spaces ranging as low as -60 degrees Celsius. However, the full length of the supply chain system has to be upgraded to accommodate this change so that products can stay in its desired environment under every step in transit. In the long run, YiGuo is planning on opening more warehouses to cover in land cities such as Wuhan, Chendu, and Jinan. With more warehouses in major populous hub cities, the cold chain can better serve consumers with assured quality products.
YiGuo’s Cold Chain. Source YiGuo 
With digitalization, modern marketplace can minimize inventory holdings. Because demands are filled on per order basis, fresh vegetable or fresh fish don’t have to be harvested until an order is placed. This reduces inventory holding cost for the company and, at the same time, helps to keep produce almost as fresh as the traditional farmer’s market. The company also uses big data to predict near future order quantity. When the system sees potential in rising demand, the company can be proactive early and allocate its cold chain resources to accommodate demand surges.
The construction and upgrade of cold chain is an ongoing challenge to companies in fresh produce business like YiGuo. A complete set of cold chain delivery standards has not been established. The cold chain system is mostly invisible to end consumers. With low visibility on the process, barrier to entry is low. Businesses and competitors with disconnected cold chain could steal market share from established companies. To improve YiGuo’s competitiveness, it can first publish its standards on cold chain delivery and join-force with regulatory agencies to legalize related standards. This reinforces YiGuo’s own cold chain dominance and competitive advantage but also keeps barrier to entry high since high quality cold chain tends to be capital investment intensive. YiGuo itself could utilized cloud-based data analytics to monitor, in real time, how well each step of its cold chain equipment is fulfilling its own function.
Another challenge in the future is on the “last mile” delivery. Currently, company uses self-pickup lockers, partnering with retailers, and door-to-door delivery. However, this landscape will likely change as initial investment and operating costs associated with each is quite different. In the long run, I would recommend the company to explore new ways of delivery by investing in drone deliveries, smart home lock systems, and peer delivery systems. With daily delivery quantity exceeding 100,000 orders, there is significant cost saving and efficiency improvements to be made. 
Consumer demands on delivery has become more stringent and demanding. They desire delivery at specific time of the day. How should YiGuo address this?
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- YiGuo, “Company Overview,” http://www.yiguo.com/help/introduction.html, accessed November, 2017.
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- Xiaopei Zhu, “Ecommerce battle on fresh produce retail,” Business and Life, September 29, 2017, http://news.pedaily.cn/201709/420682.shtml, accessed November 2017.