Jack Ma's Alibaba 'enters' agriculture

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With its recently announced ‘participation’ in agriculture, Jack Ma and his company Alibaba have probably closed the loop the way few companies can imagine. Just when you thought Alibaba couldn’t grow any bigger.

As things stand today, Alibaba’s business interests comprise online retails sales (B2B, B2C and C2C), financial services, credit rating services, electronic payment services, shopping search engine and cloud computing. And now agriculture.

Alibaba, in the first week of June, announced its plans to play a critical role in agriculture – by leveraging its technology platform. With the help of artificial intelligence, Alibaba’s proprietary ET Agricultural Brain will help pig farming as well as growing fruit and vegetables. Using the technology, the company hopes, will raise farm productivity and cut costs.

AI, Machine Learning and farming

The technology, developed by Alibaba Cloud, involves voice recognition, visual recognition and also real-time environmental parameter monitoring. These factors help track the growth, health, daily activities and other critical factors of crops as well as livestock.

Its multiple meters will collect data. The data gathered will be fed into machine learning algorithms. These algorithms, in turn, will provide critical insights to farmers. It will recommend a set of activities that can improve the health and yield of livestock and crop. Swiftly, best practices will evolve to cut down costs, increase output and minimize human errors. Farmers will receive information real time.

For instance, farmers will receive instant notifications whenever their fruit trees are attacked by pests. They will get to know the best time to pick a particular variety of fruit. The system will better connect farms and enterprises – and even governments – so farmers can get the best prices for their produce.

Teaming up for farm equipments

About three years back, Alibaba had partnered with the US-based AGCO with the long-term of objective of modernizing farming in China. The partnership also seeks to make modern farming techniques more accessible in rural China.

This will be made possible by – you guessed it – an Alibaba ecommerce enterprise Taobao.

AGCO will focus on Central China to sell its heavy-duty agriculture equipments that include tractors and baling equipments. This region has more market-driven farms as compared to the north-east and north-west China where more farms are state-owned, Alibaba’s own news website Alizila reported.

This arrangement will suit both partners quite well. AGCO looks forward to receiving sales leads from Taobao reps, who will also help promote more information of AGCO’s products. Taobao Rural Service Centers sell computer hardware, offer e-commerce training and technical support and provide information (and thereby promote) about Alibaba throughout China’s rural areas.

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Taobao seems to be omnipresent. Source: https://www.alibabagroup.com/en/ir/pdf/160614/09.pdf

It’s easy to see from the above illustration that Taobao’s spread in China can likely be rivaled only by one entity – the Chinese government.

But that’s not all. Exchange of information between Taobao and AGCO will also help the latter understand the local markets better and build better farm equipments. Analytics from Taobao will help AGCO target specific locations with specific products.

Small business lending and credit scores

A major issue farming equipment sellers must combat in rural China is the financing needs of farmers. Small farmers have extremely limited access to affordable credit, an issue that could be further complicated by near absence of formalized credit history of borrowers.

Fortunately, Ant Financial Services, one of world’s most highly valued fintech company in the world, with a valuation of US $150 billion, is present to cater to this community.

Again, no prizes for guessing: Ant Financial Services is an affiliate of the Alibaba group.

It was founded as Alipay in 2004 and was re-branded as Ant Financial Services. It operates Alipay, the world’s leading mobile and online payment platform and operates Yu’e Bao, the world's largest money-market fund.

A private credit scoring system has been developed by Sesame Credit to make Ant Financial’s lending safe, efficient and swift. From the data received from Alibaba’s services, Sesame builds a score that’s based on purchases made on Alibaba group websites, payments made through Alipay mobile wallet and other online interactions. 

Better credit scores means faster access from Ant Financial as well as more trustworthy profiles on Alibaba group ecommerce sites. (An aside: a matchmaking site, Baihe.com, uses Sesame credit data to make its own data more reliable.)

Sesame Credit too is a part of the Alibaba group (you knew this was coming, didn’t you?).

The platform model

But that’s not the only way Alibaba is spreading its reach and impacting rural China. Jack Ma shared a unique strategy with World Bank President Jim Kim some time back, a strategy that aims to bring prosperity to Chinese villages that have no internet connection.

Alibaba goes to such villages and identifies a handful of men or women who have some understanding of computers. They are given computers and they begin placing orders online, to make purchases on behalf of the people of the village.

The village gets a chance to order online and enjoy the pricing advantage that often only ecommerce can offer. The handful of men and women can build a small business of placing orders for others. And when the delivery truck comes down to deliver the items ordered, it will return to the city carrying various products from the village.

All this is in line with what has been Alibaba’s approach from the beginning: avoid getting into production and offer a technology platform instead.

The world’s largest retailer, Alibaba’s online sales and profits have surpassed those of all major US retailers WalMart, Amazon and Ebay combined since 2015 uninterrupted. It is currently estimated to be worth US$200 billion. 

Each company is developing newer models of engagement and delivery, like Amazon's In-car delivery option, but the way Alibaba is trying to bring the entire socio-economic spectrum of is home country under its fold is truly impressive.

Further reference: TechAsia