For agricultural e-commerce platforms to be scaled up and sustainable, they must overcome a range of challenges related to system design, revenue traction and usage. Here, Samwel Rutto, Regional Manager of Structured Trading Systems at the East African Grains Council (EAGC), highlights common pitfalls and key considerations for agribusiness when it comes to to develop its customer base online.
Investment in digital agribusiness related solutions for the East African region has increased dramatically over the past decade. However, few of them have proven to be sustainable beyond the pilot phase or have had a lasting impact. Many continue to face major obstacles that hamper growth. My experience in designing and managing an electronic grain trading system – GSoko, which is owned by EAGC – has taught me a lot about the pitfalls that can be encountered in attempts to maintain and expand markets. online marketing platforms in the food industry.
“The cereal hub [part of the GSoko system] supports the farmer through increased service delivery. For example, for a farmer to enter a market, he must understand what the requirements are. So we work with the grain buyers to figure out what they want in terms of crop variety, how much they want to buy, and then we communicate with the farmer, telling them that’s what the market wants ” , explains Rutto. “So farmers can now prepare to buy the right seeds, knowing that they are going to supply a certain market,” Rutto sums up.
Pitfalls of expanding online marketing platforms
Initially, the software design and development phase is often long, and funding must therefore be spread over a period of approximately 5 years. For example, the development of GSoko took 4 years, mainly due to the need for continuous consultation with end users, ensuring that the solution was user-friendly and met their marketing needs. Time and time again the system has had to be redesigned and upgraded and, unsurprisingly, this process ends up getting expensive – affecting the scaling of platforms.
Participation and adoption rate
The adoption of digital solutions in the agro-industry plays a crucial role in determining scalability and sustainability. But, adoption rates are negatively affected by unintended and unwanted technical difficulties, which include ICT illiteracy, especially at the farmer level. When deploying GSoko, I discovered that some small farmers had never used an Android mobile phone, so they are confused as to how to use the system. In addition, poor internet access affects the functioning of web-based systems. For example, the Katine Farmers’ Cooperative in Uganda exports grain to Kenya through the GSoko platform, but limited internet connectivity has prevented its members from participating in some online trading sessions.
Climate, environment and government
By operating the GSoko platform, I learned that regional online marketing platforms must be commercially viable and sustainable. It requires a bankable business model that generates revenue to meet cost obligations. On the other hand, revenue generation is determined by the throughput / value of the system and the volumes of commodities traded in the system for each season. Based on my experience and a review of other platforms in the region, the volumes traded are sometimes too low and irregular, while the costs of developing and maintaining systems are extremely high, often outweighing their benefits. Some of the main causes of the low volumes traded on online platforms that I have witnessed firsthand include bad weather and drought causing low returns; a lack of warehouses linked to farmers for aggregation; and quality issues, such as high aflatoxin levels, mixed varieties and rotten, diseased and broken crops, etc. I have also observed that crop seasonality affects the throughput of systems, especially those that process annual crops, such as corn. In addition, governments and bureaucracies in East African countries often hamper online platforms by imposing regulations, tariffs and taxes on imports.
Promotion and marketing are playing an increasingly critical role in scaling up online marketing platforms as they help increase customer base and volume of products traded. I think the range of services offered and the fees charged to users should be affordable, as most users are unable or unwilling to pay large sums. For this reason, it is important to do a business case with extensive stakeholder consultation to arrive at a reasonable cost. The challenge is that farmers have become accustomed to the free services offered by NGOs and donors and are therefore reluctant to put their hands in their pockets. Farmers and traders may also resist using an online platform if they feel it is too sophisticated to use. Finally, the existence of different competing platforms targeting the same users – in particular farmers – can affect the adoption of digital solutions.
The path to follow
There is no doubt in my mind that online marketing platforms can make a valuable contribution to improving the performance, competitiveness and profitability of agribusiness companies. However, challenges in system design, revenue traction and adoption negatively affect their scalability and sustainability. For this reason, it is essential, when investing in digital solutions related to agriculture, to consider creating business models that demonstrate value to users. Likewise, it is crucial to involve potential users in the process of designing user-friendly solutions and to diversify the range of agricultural products covered by the platform. Failure to take into account any of these aspects risks jeopardizing the long term future of the online marketing platform itself and the potential benefits to anyone who might use it.