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Fierce competition in the fertilizer market leaves retailers overwhelmed

2009-03-16View Original

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Although the weather is currently unpredictable, with regard to the current fertilizer market, this term is quite appropriate to describe it. Although the fertilizer market in 2009 had just begun to develop, agricultural supply wholesalers in Wulian County, Shandong Province, launched a fierce competition in promotions in an effort to boost sales of compound fertilizers. Especially for some customers who make group purchases, if they buy more compound fertilizers, plastic mulch that normally costs 50 yuan per bundle can be obtained at 40 yuan per bundle, and in some cases even at 35 yuan per bundle. Once the county-level agricultural supplies wholesalers did this, the town-level ones followed suit. The general agent for Sinochem fertilizers in Jietou Town of this county is quite helpless; although he opposes such practices, all the businesses in the area do it, and if you don’t do the same, it will be difficult to retain customers in front of your shop. There’s not even a single person coming into your store to take a look; then who are you going to sell your fertilizers to? Many dealers are pessimistic about the prospects for fertilizer business this year: firstly, the pressure from high-priced inventory is already considerable. Secondly, farmers’ purchasing power has declined significantly; even a slight increase in fertilizer prices that exceeds people’s expectations can result in a loss of market share. So the profits from fertilizers this year will be very low. If there is fierce competition in the fertilizer industry, it only adds to the difficulties for end distributors.      If compound fertilizers are promoted by selling low-cost plastic film, wholesalers can offset the losses from selling the plastic film through increased sales of fertilizers. However, distributors do not have such an advantage; they deal with individual customers, and it is naturally difficult for them to make up for this loss in terms of the quantity of compound fertilizers sold. In the village where I live, each person has an average of 0.8 mu of arable land; typical families plant more than one mu of peanuts per year, with some even planting over two mu. Many households purchase only one roll of plastic mulch and one bag of compound fertilizer. If the cost of each roll of plastic film results in a loss of 10–15 yuan, how much profit can be earned from one bag of compound fertilizer? An inversion can only occur. If farmers buy two or more bags of compound fertilizer at once, they can still basically break even, but such customers are very rare. How can agricultural input retailers afford this? If the retailers do not sell in this way, the customers around them will naturally go to the towns or counties to join group purchases, and as a result the retailers will lose some of their customers. If distributors want to survive, they have no choice but to take risks by cutting corners when it comes to the quality of agricultural supplies: either by using low-quality plastic films or substandard fertilizers. In this way, although they face the risk of being accused of fraud, when survival truly becomes difficult, such a sense of luck often drives people to take desperate measures, and it are ultimately the farmers who suffer as a result.      Only by strengthening cooperation and communication among agricultural input suppliers, and by guiding farmers to consume rationally, can a healthy agricultural input market be gradually developed, and only in this way can these suppliers enhance their ability to withstand risks – and this is the direction for long-term development.

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