Farmer's Agro-product E-commerce and
Governmental Supports in Korea
Junghoon Moon
Information and Communications University
Department of IT Business
1
Consumers’ concerns in Food Business
• What are consumer concerned in
shopping food?
Freshness
Safety
Price
Others
2
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
3
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.)
4
Fresh Food E-commerce in Korea
2002
2003
2004
2005
10,675 13,459
Total Amount of Ecommerce Transaction
6,029
7,054
7,668
Fresh Agro-product Ecommerce
307
294
280
5.1%
4.2%
3.6%
Rate
2006
284
2.7%
312
2.3%
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.
5
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.
6
Case: KGfarm (2)
Farmers
 Manage bulletin board of
his mall on the kgfarm site
 Manage Customers relationship
Quality Control of the product
 Manage shipping and delivery
 Frequent update requests
towards his mall on the site
e-Mall Management Center
 System maintenance
 Mass marketing
Membership management
 Mall management
 Technology education for farmers
 Quick response to farmers' requests
7
Case: KGfarm (3)
Farmer
Consumer
KGfarm
www.KGfarm.co.kr
(300 e-malls on the site)
Social Infrastructure: logistics, transportation, credit card, security, etc
•
•
•
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
8
Case: KGfarm (4)
9
Case: KGfarm (5)
10
Case: KGfarm (6)
11
Case: KGfarm (7)
12
Case: KGfarm (8)
13
Case: KGfarm (9)
14
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
15
Case: KGfarm (11)
2001
2002
2003 (by Oct.)
# of visitors
470,000
( 38,000 monthly)
690,000
(57,000 monthly)
800,000
(80,000 monthly)
# of membership
17,332
30,612
42,835
Net sales
# of e-malls
$ 320,000
$ 685,000
$ 900,000
($ 26,000 monthly) ($ 57,000 monthly) ($ 90,000 monthly)
130
300
320
• 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
16
Summary and Discussion
• Food E-commerce is inevitable
• Food Business is totally different
• Infrastructure is very important
• Role of government is critical
17