1 Farmer's Agro-product E-commerce and Governmental Supports in Korea Junghoon Moon Information and Communications University Department of IT Business

Consumers’ concerns in Food Business What are consumer concerned in shopping food? 2 Freshness Safety Price Others

3 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.) 4

Fresh Food E-commerce in Korea Total Amount of E- commerce Transaction 6,0297,0547,66810,67513,459 Fresh Agro-product E- commerce Rate5.1%4.2%3.6%2.7%2.3% 5 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. 6

Case: KGfarm (2) 7 Farmerse-Mall Management Center  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  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 8 Farmer KGfarm (300 e-malls on the site) Social Infrastructure: logistics, transportation, credit card, security, etc Consumer

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) 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, (by Oct.) # of visitors 470,000 ( 38,000 monthly) 690,000 (57,000 monthly) 800,000 (80,000 monthly) # of membership17,33230,61242,835 Net sales $ 320,000 ($ 26,000 monthly) $ 685,000 ($ 57,000 monthly) $ 900,000 ($ 90,000 monthly) # of e-malls

Summary and Discussion Food E-commerce is inevitable Food Business is totally different Infrastructure is very important Role of government is critical 17