Online retail sales in China’s rural areas in the first half of 2017 achieved 538 billion yuan,which is about US$80 billion. Whilst not long ago we were talking about a gold mine that has not yet been paid enough attention to, today ambitious minds are beginning to anticipate by filling the gap.
As we know, China’s market is never a highly-unified one, so is the E-Commerce market. Chinese rural area is a completely different target market and ambitious ideas may cower in the face of digital divide, and more specifically, the limitations in logistics, payment systems and product diversity.
Disposable incomes and basic infrastructure, these are two main elements when it comes to evaluation of the potential of e-commerce.
The following chart shows the consumption expenditure per capita growth in the past 3 years confronting the data of the whole country, that of the rural areas and urban areas. Obviously the rural areas is leading the pace. (Source: BBVA Research, China National Bureau of Statistics)
This chart shows that in the past 2 years, the turnover of online shopping in rural areas has grown from 180 billion Yuan to 482 billion Yuan. in 2016, the year-over-year growth rate is 36,6% and by the end of 2017, the turnover is estimated to reach 600 billion Yuan.
Alibaba and the Taobao Villages
Alibaba is investing in rural infrastructure:
This internet giant is going to invest 10 billion yuan to build 100,000 Taobao service centers in remote areas, especially in less developed areas such as the center and the west, as well as expanding logistics and training to bring villages up to speed. Alibaba is also in collaboration with the central government for the alleviation of rural poverty.
In July, 2017, The United Nations announced to join hands with Chinese e-commerce giant Alibaba to increase spending on China’s rural e-commerce infrastructure. “A total of $200 million will be allocated by the UN for construction of rural e-commerce infrastructure in China, ” said Lakshmi Puri, UN Assistant Secretary-General and deputy executive director of UN Women.
JD and Jingdong Bang
Another giant-always mentioned together with Alibaba-JingDong, is also spurring e-commerce in the rural market:
It is now focusing on opening self-operated service centers and Jingdong Bang, a home appliance delivery and maintenance team in partnership with local shops. With its 1,000 service centers and more than 1,300 outlets, JD plans to have 1,500 of them by the end of 2017.
Just like Alibaba, in the name of poverty reduction, JD has also signed the agreements with the government.