Time to streamline the distribution route

PARK SU-RYEON
The author is head of the industry news department at the JoongAng Ilbo.

Temu is the most threatening arm of China’s e-commerce sweeping the world. Founded in 1980 by a former Google engineer, Temu redefined China as the “marketplace of the world,” rather than the “factory of the world.”

Temu’s identity is “cheap prices.” It sells Chinese-manufactured goods at one-tenth of the prices on Korean online shopping platforms. It completely eliminated the middleman between factories and consumers.

Consumers whose lives have become tougher due to high prices are also the winners of the deal. But the status of Chinese factories, which had been subcontracted manufacturers of the wholesalers around the world, has elevated thanks to Temu. The factories are making bigger profits after turning into sellers. Temu’s shadow — such as counterfeits, harmful substances, and suspicions of labor exploitation — is concealed by the strong sunlight of “cheap prices.”

Therein lies the essence of distribution: managing resources and risks to narrow the distance between producers and consumers so that good products can be supplied at lower prices. The solution to the soaring prices of green onions and apples also should be found in the essence of distribution.

In Korea, the system for distributing agricultural products through wholesale market auctions has been in place for more than 40 years. Aside from some direct transactions at select marts and consumer cooperatives, most agricultural produce goes through the “black box” of 33 public wholesale markets nationwide to be marked up significantly. There are multiple layers between the producers and consumers: from farmers to local merchants, wholesale markets, middle wholesalers, retail merchants and finally to consumers.

As a result, farmers’ income could not grow even when the price of an apple tripled to 6,000 won ($4.40) from 2,000 won at a retailer in Seoul last month. The government spent 150 billion won to stabilize agricultural and livestock produce, but the money disappears somewhere in the distribution pipeline.

A senior official at the National Apple Producers Association, who has been growing apples in Uiseong, North Gyeongsang, for 15 years, says, “Instead of spending tax money to lower the market price artificially and temporarily, the money should be spent on building a streamlined distribution system.”

As the supply of fresh produce depends on weather conditions and requires more money for logistics and storage than industrial products, the role of the middle distributor is not small. But without changing the multi-layered intermediate stages, it is a distant dream to offer “quality produce at affordable prices.”

In an era when crop prices fluctuate due to abnormal temperatures from climate change and reduced productivity from aging farmers, makeshift measures cannot rein in the soaring prices of fresh produce.