China e-commerce firms tapping rural dollar

THE STRAIT TIMES

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(THE STRAIT TIMES)Mr Wang Deyou used to have to pick up his online purchases at a nearby township, about 40 minutes away from his village of Zhuting in eastern Shandong province.

This year, for the first time, his Singles Day purchases of a water heater, a television set and a portable car-wash machine, which came up to more than 4,000 yuan (S$884), were all delivered right to his doorstep.

"It feels good to finally enjoy the services and convenience of cities. After all, more than half of China's population live in villages," Mr Wang, 32, told The Straits Times.

"Ma Yun has finally recognised the purchasing power of the common people," he added, referring to Mr Jack Ma, founder of China's largest e-commerce firm Alibaba.

While the world of online shopping might seem dominated by young and well-educated urbanites, industry giants like Alibaba and rival JD.com are turning increasingly to the country's immense interior in search of fresh profits.

The plan is to start by selling popular items such as washing machines, televisions and clothing, while gradually building up an online platform for farmers to sell vegetables and fruit to the cities, the company's executives had previously said.

Due to high commission fees and transportation costs, rural consumers often pay more for these household appliances than their urban counterparts.

Rural service centres, often located in villages' main convenience stores, are at the heart of Alibaba's new strategy.

As China's rural residents tend to be older and less familiar with technology, the centres provide computers for browsing and buying, help to ensure timely delivery of goods, and have trained Alibaba representatives on hand to provide assistance.

Mr Chen Xiaolong, 28, is one of the firm's young, Internet-savvy recruits. He assists some five villages in Shandong's Yanzhuang township, and said that while villagers were initially sceptical about online shopping, doubting the quality of the products they might receive, the idea has gradually caught on as positive experiences spread through word-of -mouth.

In fact, it was so busy on Singles Day that he had only two hours of sleep as villagers flocked to the service centre in droves.

"Even the elderly are getting more comfortable with the idea. I helped a 75-year-old grandmother buy a mobile phone on Singles Day," he told The Straits Times.

"But for those who are unsure, we tell them to buy known brands, such as Haier for home appliances, so they can be assured of a certain quality and can also compare the discount they are getting at physical stores," Mr Chen added.

E-commerce growth in the countryside now outpaces that in the cities, although less than a tenth of online purchases made on Alibaba platforms - which have an 80 per cent share of China's online market - were shipped to rural areas in the first quarter of this year.

The rural online market is estimated to be worth 460 billion yuan by next year, more than doubling from 180 billion yuan last year, according to Alibaba's research division.

The figures are even more staggering when taken in their entirety. China's e-commerce market recorded 2.79 trillion yuan in revenues last year, a jump of 50 per cent from the year before. This is equal to the entire economy of Austria last year.

As Beijing attempts to shift from investment-led growth to consumption-driven growth in the light of a slowing economy, e-commerce firms are finding that their strategies are dovetailing with government policies.

The Commerce Ministry said recently that it will encourage more e-commerce and logistics firms to expand into rural areas in a bid to create more jobs and provide better information access.

Said ministry official Kong Lingyu in May: "Building information sharing, financing and credit systems will be priorities to facilitate the development of e-commerce in rural areas, along with cheaper mobile Internet and logistics services."

Analyst Philix Liu of market research firm Mintel told The Straits Times that China is likely to see a rising number of rural entrepreneurs, with more graduates and migrants returning to start online businesses.

"But e-commerce firms are still in the early stage of developing the rural market so I don't expect a prominent national economic lift in the short term," he said.

"In the long run though, I would speculate that rural market growth would have a stronger and more positive impact on China's growth."

Until then, Mr Wang is more than happy to play his part. "This is just the beginning.

"After a good first experience, I will definitely be buying more things online now," he said.