The rise of agri e-commerce during COVID-19: Opportunities for smallholder impact

The COVID-19 pandemic has accelerated the transition to a digital future globally. Companies have had to adapt quickly, implementing solutions to adjust to “the new normal”. Many businesses around the world are investing in digital tools to respond to the challenges and changes in their sectors. For agri e-commerce businesses, the COVID-19 pandemic may ease one of challenges faced by the sector: a reluctant customer base. The advice and circumstances of the pandemic has resulted in a boost to online shopping with people turning to e-commerce platforms out of necessity and safety concerns regarding physical stores. In our previous blog, we discussed some general agritech trends that emerged during the early stages of the pandemic. This blog will explore the growth of agri e-commerce in more detail, one of the early trends we witnessed globally and across low- and middle-income countries (LMICs), and highlight challenges and future market opportunities. When writing this blog, we spoke with Twiga Foods (Kenya), TaniHub (Indonesia), Farm to Home (Pakistan) and reviewed available articles around the uptake of e-commerce globally as well progress of few specific players: e.g. FarmCrowdy (Nigeria) and Waruwa (Colombia).

A shift from business-to-business (B2B) to business-to-consumer (B2C) models

Across the globe in LMICs, agri e-commerce businesses we interviewed reported drastic reductions in their business-to-business (B2B) demand due to restaurant and hospitality closures. However, while businesses were closed during lockdown, agri e-commerce services have experienced a surge in home deliveries (business to consumer demand or B2C). Farm to Home, an agri e-commerce in Pakistan (launched in 2017 by Bakhabar Kissan, an agritech partner of Pakistan’s largest telco operator, Jazz), lost 90 per cent of institutional customers when the pandemic hit. However, they have since seen an eight-fold spike for home deliveries compared to pre-pandemic levels. Waruwa, a B2B platform that delivers fruits and vegetables to restaurants and retailers in Latin America, reported an 80 per cent overnight drop in sales due to restaurant closures. With no access to its’ normal customer segment, Waruwa completely overhauled its’ business model from B2B to B2C, largely targeting consumers staying at home. Through this effort, Waruwa Colombia supported their network of smallholder farmers and single-handedly distributed fifteen tonnes of produce daily.

Increasing use of digital payments

Interviews with these e-commerce platforms highlighted how invaluable digital payments have become. Restrictions on meetings and social distancing measures have accelerated smallholder farmers’ openness to digital payments, as well as consumer use of online payments. In Kenya, the Central Bank announced the use of mobile money as a measure to curb the spread of the COVID-19. This was implemented on March 16th 2020.The circular required mobile money providers to waive fees for transaction of up to $10 in which about 80 percent of Kenyans transact. The regulator also waived on bank to wallet and wallet to bank transaction fees and increased mobile wallet maximum limit from $1000 to $3000. By June 2020, the regulator extended these measures having observed an increase in the use of mobile money both in value and volume of transactions. Waiving charges for these transactions has helped the most vulnerable populations make the most of peer-to-peer transfers, and digitise their household and business-related expenses during these difficult times. Between March 2020 and June 2020, more than 1.6 million additional customers used mobile money in Kenya.

E-commerce models improved the business performance during the pandemic

To quote Charles Dickens: “It was the best of times, it was the worst of times…”. Whilst this year has seen the worst of times with uncertainty, anxiety and economic failings, the pandemic has also provided opportunities for change and progress. For instance, Farm to Home in Pakistan, have been able to increase sales as well as overall business profitability, building on existing capacity that was previously under-utilised. Tanihub, an Indonesian agri -e-commerce player, saw an increase in sales in April by 90% (compared to February) and they also improved their applications by making it simple to use for farmers.

New partnerships and expansion

Twiga Foods in Kenya, Sub-Saharan Africa’s largest agri e-commerce player, signed a partnership agreement with Jumia, an e-commerce platform. This new venture has allowed consumers to buy fresh produce as well as processed foods distributed by Twiga Foods on Jumia’s platform. Similarly, in Nigeria, FarmCrowdy, a crowdfunding platform for farmers, has leveraged its brand and digital tools to launch a new agri e-commerce service in response to COVID-19. FarmCrowdy started developing the marketplace model in 2019, but fast-tracked its launch to enable farmers to sell produce during the lockdown. The platform enables FarmCrowdy to collect produce from its network of more than 25,000 rural farmers, and store and sell produce in Lagos – where consumer demand is high. The marketplace received organic orders via digital channels during its pilot phase, without any significant marketing campaigns.

Challenges faced by agri e-commerce during the pandemic

Insufficient robust warehousing and storage

Most smallholder farmers do not have access to secure warehousing facilities and are unable to store their produce, leaving perishable products at risk of spoilage. This problem is also relevant for agri e-commerce businesses, some of whom reported maintaining produce shelf-life as one of the biggest challenges that they face. Farm to Home in Pakistan highlighted a need for a specialised warehousing. To maintain and improve shelf-life, Farm to Home is looking to introduce a cold-chain system with a temperature-controlled environment and compartmentalisation to scale their operations further.

Lack of investment to reach farmers and consumers

Transporting fresh produce from the farmers or collection centres to warehouses and finally to consumers’ homes, while maintaining quality, is crucial. COVID-19 lockdown measures have restricted transport systems, which led to major disruption to food supply chains. Most agri e-commerce services responded to this situation by deploying more field agents to reach farmers. Twiga Foods in Kenya and Farm to Home in Pakistan had to further expand their distribution capacities to meet the surge in demand from consumers for on-time deliveries. Farm to Homes’ sister company, Bakhabar Kissan, is partnering with Jazz Pakistan, to digitize the agri value chain to enable digital procurement and payments for farmers.

Lack of automated sorting and packaging for operational efficiency

In response to the increase in demand for home deliveries, agri e-commerce businesses have had to increase their efficiency and capacity in sorting and packaging – especially for fruits and vegetables. Currently, the process is mostly manual – particularly for early-stage agri e-commerce platforms like Farm to Home. There is a need to leverage digital tools for sorting and packaging, so as to automate the process and improve capacity. Farm to Home usually has to fulfill 300-400 orders daily manually, hindering the company’s ability to scale further.

Future market opportunities

The COVID-19 pandemic has created a challenging environment for many businesses. The pandemic has accelerated changes in consumer behaviour and opened up new markets for agri e-commerce platforms that are agile enough to take advantage of these shifts. E-commerce has increased the resilience of the supply chains, with further growth of e-commerce models predicted even post pandemic. Agri e-commerce players are looking to retain these new customers by developing consumer trust, ensuring seamless and hassle-free online experiences and delivering on their promise of quality produce. Investors have an opportunity to help businesses take advantage of these shifts and growth in demand by providing investment that will allow them to address the challenges they are currently facing. These include: logistics, warehousing and developing more consumer facing platforms to ensure consumer stickiness post-COVID.

If you’d like to talk to us about these trends or opportunities, please get in touch at agritech@gsma.com

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