According
to CCM’s latest
monthly newsletter, China Crop Protection
Monthly Report issued in June. Credit sales have been
prevailing in the domestic pesticide industry in the past decade. As the
competition has grown fiercer, credit sales become much more popular nowadays,
from pesticide production enterprises, the upper stream of the distribution
system for agricultural means of production, to pesticide dealers and pesticide
retailers in China, the middle link and end of the system, most are involved in
this kind of transaction mode.
As
so many pesticide producers, dealers and retailers follow this kind of
transaction mode, there must be reasons for its existence. Generally speaking,
the apparent reasons for the trend of credit sales can be easily concluded as
the following: the test marketing of new products, gloomy market, unsalable
products, fierce competition, etc. However, the essential reasons lie in the
highly homogeneous market with an oversupply of goods and weak purchasing power
in the whole industry. Taking the domestic pesticide industry as an example,
most of the products traded through credit sales are old products with high
homogenization and competition, but not new products with differentiation, of
good quality and reliable brands.
Although
most of the pesticide dealers and retailers in China can't do business without
credit sales, they share a strong hatred of this kind of transaction mode due
to the negative effects it brings, especially the large liquidity pressure that
credit sales cause.
Early
in Feb. 2011, Zhanjiang Crop Protection Industry Association mobilized large
pesticide dealers in Zhanjiang City to sign a cash transaction agreement on
agricultural means of production aiming to boycott credit sales in the local
pesticide market. The agreement required pesticide dealers who have signed the
agreement to select 10 products in the first year and promise to perform the
transactions for these products in cash. Those who violated the agreement should
be punished. The amount of products selected should be enlarged year by year
and the final aim is to wholly boycott credit sales and realize cash
transactions among all the pesticide products in Zhanjiang City.
However,
after more than two years, the agreement seemed to fall apart because most
pesticide dealers continued doing business by credit sales. Some insiders
believe that the selfish idea of expanding the sales amount and seizing more
market share through credit sales of most pesticide dealers is the main reason
for the failure of the agreement.
It
has been calculated by Zhanjiang Crop Protection Industry Association that
there were more than 80 pesticide dealers in Zhanjiang City in 2012 and most of
them haven't actually implemented the agreement in the past two years. Adding
to the general low price of agricultural produces in 2012, the whole credit
sales value in Zhanjiang reached USD24.31 million (Exchange rate:
USD100=RMB616.98), up over 50% of that in 2011.
Actually,
the trend of credit sales in China has not only been caused by pesticide
dealers, but also by the chaotic market competition environment, rampant
counterfeit and shoddy pesticide products, small scale growers, purchasing
habits, etc. Considering the national condition, all these factors contribute
to the difficulty of eliminating credit sales and affect how long it will
continue to exist in the domestic pesticide market
Table Contents of China
Crop Protection Monthly Report 1306:
Development
history of credit sales in domestic pesticide industry
Negative
effect and benefit of credit sales towards different practitioners in pesticide
industry
Opinions
that most practitioners hold towards credit sales
Typical
measures took to avoid or ease the loss caused by credit sales
Pesticide
enterprises that insist on doing business in cash
Differences
of credit sales in China and developed countries
Credit
sales' future in domestic pesticide industry
China
Crop Protection Monthly Report, a
monthly publication issued by CCM, will keep an eye on the most important or
the latest occurrences or the hottest topics in China’s crop protection
industry, and select one or two topics out of these news and information to
compose an in-depth feature article. You can obtain professional and insightful
intelligence, covering market dynamic, industry development, government
policies and more by going through the features articles every month.
CCM is dedicated to market research in China
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