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Will the development of E-commerce in Rural China be the next biggest challenge for the Middle Kingdom?

The development of e-commerce in rural China will be the next biggest challenge facing the nation in the upcoming years. As e-commerce has been successfully implemented in urban areas in the past, main service providers Alibaba (阿里巴巴) and Taobao (淘宝网) began expanding to the countryside in 2014. As a matter of fact, the growth of e-commerce in rural China will be the main reason for the future increase in the nation’s rural GDP. Chinese consumer behavior in these areas has been gradually evolving, catching up to mimic those of their urban counterparts. However, online shopping in the Chinese countryside is directly linked to the availability of Internet access, which is still limited in some areas.

Internet access as a prerequisite for the development of E-Commerce in Rural China

At the moment, there is still a huge gap between Internet access in urban and rural areas where average Chinese household wealth differs greatly. According to the China Network Information Center (中国互联网络信息中心), about 67% of the rural population did not have any access to the Internet in 2016. This constitutes a real hindrance to the development of e-commerce in rural China. However, one may point out that half of the rural netizens are already engaged in online shopping, and that the booming development of “Taobao Villages”(淘宝村) is a testament to this trend. Alizila News (Alizila 新闻), the news hub for Alibaba Group, reported on this movement and defined a Taobao village as a group of rural retailers gathered in the same administrative village where:

• Residents demonstrated a sharp, spontaneous increase in Taobao usage.
• Annual Taobao sales revenue is at least 10 million RMB (=$1.6 million)
• Either 10% of households actively engage in the e-commerce business, or villagers opened at least 100 active online shops.

The boom of E-Commerce in Rural China: “Taobao Villages” increase by 10,490% in 4 Years

E-commerce in rural China is booming as the number of Taobao villages started to increase exponentially during the past 4 years, along with the rise of mobile APP market in rural China. In 2017, there were more than 2,000-Taobao villages spread throughout China. Most of these Taobao villages are located in Eastern Chinese provinces, such as Zhejiang (浙江省), Guangdong (广东), or Jiangsu (江苏), but a growing number of Taobao villages are emerging in Western provinces as well. The apparition of Taobao villages presents opportunities to retailers as well as consumers, who live in areas where acquiring everyday consumer goods is not necessarily convenient.

The Daxue advantage: Rural market opportunity assessments

At Daxue Consulting, we pay specific attention to the evolution of e-commerce in rural ,China as well as Taobao villages. For this reason, Daxue is offering a market opportunity assessment in rural China and market research in rural China for companies seeking to enter these markets. At Daxue, we design and execute in-depth research that delivers insights about the market potential of your product or service in rural areas, investment strategy, competitive analysis, and pricing strategy.

For example, one of our previous clients was a European retailer that already had 150 shops opened in China. He wanted to adapt its already existing mobile application to the Chinese market as part of its expansion, and prepared a list of functionalities for the application aimed to be used before, during, and after the purchase. It included a service helping consumers to define a product they are interested in by answering to a series of questions, a scan to get access to detailed sheets of the products, or an online chat intended to customers. The retailer requested the services of Daxue Consulting to define the characteristics that its mobile application should have to meet with Chinese consumers expectations.

For additional information or inquiry about the opportunities of e-commerce in rural China, you can contact us at dx@daxueconsulting.com.

Main visual caption: “Taobao villages” are all over China. Source: Slides from the Alibaba Group, 2016