HiveXchange CEO Antonio Palanca on why central markets must evolve into digital sales and marketing hubs
Rising operating and compliance costs, coupled with shrinking revenue and profit margins, are common challenges facing tenants at central markets across Australia. However, Antonio Palanca, ceo of digital fresh produce marketplace HiveXchange, believes the market system has the power to reinvent itself through the widespread adoption of e-commerce. Palanca shares his thoughts in this exclusive interview with Produce Plus.
In your opinion, is the central market system currently adding value to the fresh produce supply chain in Australia, and if so, how?
Antonio Palanca: Most definitely. As intermediaries in the supply chain the central markets add value in many way. In addition to their industry and product knowledge, they provide important services such as brokerage, financial services, breaking down bulk orders, administration, representation and marketing of growers’ interests, to name a few.
Picture 01: Antonio Palanca, CEO of digital fresh produce marketplace HiveXchange
Conversely, what are the limitations to the way central markets are set up in Australia? Has their function changed over the last decade and have they got the capabilities to evolve in the future?
AP: The role of central markets must evolve into becoming digital sales and marketing hubs, complemented by their natural strengths as physical distribution and service hubs. You see, every smartphone on the planet is a sales-marketing-operational distribution point. This provides opportunities to take costs out of contracting and administration, increase sales coverage, and to use digital marketing to generate more margins and greater market intelligence.
Consider that today in central markets, opening hours are restricted. It means there are limitations on transparency on both buyers and producers. There is no single contracting infrastructure and much of it is still paper based. There is no national market view, and there are limited marketing services available.
All of these limitations can be overcome through e-commerce: always open, automated contracts and administration, and access to more information and digitised marketing material.
Picture 02: Central market costs are rising
When you mention e-commerce in a central markets context I assume you’re talking about B2B trade. Apart from the administrative and marketing benefits mentioned above, how can B2B e-commerce strengthen business models for market traders and the central market system more broadly?
AP: B2B e-commerce is an important opportunity for the central market system for a few key reasons.
Firstly, central market costs are rising as energy, transport and personnel costs increase. Costs of compliance and regulation are also presenting a significant challenge.
Meanwhile, revenues and margins are under pressure. Increasingly, business is being conducted parallel to the market system, as large companies and producers trade direct and organisations scale up through vertical integration.
B2B e-commerce will address these emerging challenges for the markets by taking costs out of the supply chain and using digital platforms to expand their market reach and potential. In the first half of this year, over US$300m was invested in new B2B e-commerce businesses worldwide. Digital supply chains are a worldwide phenomenon and the way of the future.
At HiveXchange, you’ve coined the term T-ecommerce (trust-based e-commerce). Can you explain the concept behind this?
AP: T-ecommerce is the digital foundation for transparency, provenance, quality assurance and compliance – this foundation can be used to build trust between stakeholders in a supply chain.
In perishable products, trust-based relationships are key to minimising risk. Our experience has shown that you must facilitate a relational marketplace, and focus in on risk management. Do that and you can build trust in a digital environment.
This then means you can scale trust-based relationships – both in volume and in reach. That is a massive opportunity for central market stakeholders, simply because you can sell more without investing in more infrastructure.
How then does this differ from a standard B2B e-commerce model?
AP: A standard B2B e-commerce solution can increase efficiency in administration, improve market access and trade management. While useful, its benefits are limited to those that come from bringing existing transaction behaviour online.
The real challenge is all about finding ways to grow markets and margin. T-ecommerce enables the markets to identify and engage with high value opportunities at a national and international level, without compromising the integrity of trade relationships, risk management and operational efficiency. By removing the cost and risk barriers of engaging these markets, T-ecommcerce supports a more agile system poised to capitalise on emerging trade opportunities.
We’ve also built the HiveXchange to further marketing and demand creation, by complementing the physical market with a virtual market that is open 24 hours a day. It offers greater transparency up and down the supply chain, and makes it easy for central market agents to be value creators – promoting their business, product provenance and quality assurance in the digital world.
Picture 03: The HiveXchange has been built to further marketing and demand creation
Change is constant in any food supply chain but we’re currently seeing some significant new forces in the Australian market. One of these is the digital delivery of produce to the home. As this force grows stronger, is there a place for central markets in this digital influenced supply chain? If so, what do you think this space could look like?
AP: In every digital transaction with the consumer, businesses need and want a digital relationship further up the supply chain. That is where the markets have a logical contribution to make.
In our view there are three broad opportunity areas.
Firstly, there are companies that offer consumers a menu and fulfil to that menu. These companies typically buy in units rather than pallets, and therefore need someone in the supply chain to provide that as a service. Central markets could support these needs by providing a digital interface to those buyers, and provide services (as a digital add on) to convert bulk orders into unit orders.
Secondly, there are many businesses now that simply deliver produce to the home. Central markets could offer a programming interface into a central market e-commerce platform to allow these businesses to synchronise order taking at the consumer end, with order fulfilment via the markets.
The real challenge is all about finding ways to grow markets and margin
Thirdly, using e-commerce to provide electronic procurement is a business model in itself which can open up many new business models for other innovative service providers – for example neighbourhood buying groups could find it much easier to coordinate direct buying from the markets.
Can you see this going a step further, with market traders venturing into the B2C e-commerce space?
AP: I would be surprised if they did that directly, because it has the potential to introduce a lot of conflict into the distribution channels that use the central market to support their business. I would imagine that the B2B opportunity will take primacy.
We’re also seeing a renewed emphasis on exports in Australia, particularly to the Asian region. Are central markets in danger of being bypassed in this process or are there opportunities to position them as hubs for this sort of activity? How can e-commerce play a role in this?
AP: The combination of market infrastructure and know-how with digital expertise is a phenomenal opportunity for the central markets.
The product knowledge and sales skills of market traders makes the central markets tick. Digital selling and marketing are a natural extension and key driver of potential export growth for central markets. The HiveXchange will help central markets not only become export hubs, but digital marketing hubs for Australian produce locally and in export markets.
International markets are digital and Asia is the largest e-commerce market in the world. Being one of our closest neighbours, this provides digital ready Australian suppliers with direct access to high value buyers. Based on our experience in Asia and engagement with exporters and importers alike, there is a clear opportunity for the Australian primary industry and central markets to use HiveXchange technology to establish shorter, fresher digital supply chains into these lucrative markets.