Three Prongs Needed for Internet Plus Rural Development

Recently, Premier Li Keqiang of the State Council convened an executive meeting of the State Council to specifically discuss how to accelerate the development of rural e-commerce. The meeting produced three resolutions: to improve the compensation mechanism for universal broadband and telecommunications services in rural and remote areas to narrow the urban-rural digital divide; to deploy accelerated development of rural e-commerce, boosting new business forms to spur consumption and benefit the people; and to determine measures to promote the development of the express delivery industry and cultivate new growth points in modern services.

This is not the first time the central government has issued an important policy to promote rural internet development. From the "No. 1 Document" at the beginning of the year, to the "Internet Plus" boom after the Two Sessions, to central leaders' visits to the "Taobao Villages" in Zhejiang and Jiangsu, and now to this recent State Council executive meeting specifically discussing rural e-commerce development, "Internet Plus rural" is not only moving at a tight pace but also taking one solid step at a time, focusing on practical results. Taking this State Council executive meeting as an example, it distills the economic transformation and upgrading of rural areas in the internet era into three key points: broadband, rural e-commerce and express delivery. It should be said that these three "prescriptions" all hit the mark.

The first is the level of broadband. According to statistics from the China Internet Network Information Center, as of December 2014, China's rural internet users reached 178 million, accounting for 27.5% of China's internet users, down 1.1 percentage points from the previous year. In 2014, the internet penetration rate in urban areas exceeded that in rural areas by 34 percentage points. This shows that although both the scale of rural internet users and the internet penetration rate in rural areas are constantly growing, the gap in internet penetration between urban and rural areas remains stark and risks widening.

Second, once the internet reaches the villages, if farmers mainly use it to chat, play games and binge-watch shows, then the value of the internet is greatly underestimated. Only by developing rural e-commerce can its value be realized. Rural e-commerce should be viewed from two angles: consumption and sales. In terms of consumption, e-commerce is an excellent channel for upgrading farmers' consumption and improving their lives. By boosting rural consumption to achieve the goal of stimulating domestic demand, it will be an important driver of the transformation of the country's economic growth driver from export and investment to consumption. In terms of sales, it has already become a common trend for farmers to achieve entrepreneurship and employment through the internet. For example, the number of "Taobao Villages" had already reached as many as 212 by the end of last year. Developing rural e-commerce and enabling farmers to transform into online sellers is an important way for farmers to increase their incomes and become prosperous.

Third, although the prospects are infinitely bright, it must be admitted that engaging in e-commerce in rural areas is often more difficult than in cities, and one of the biggest shackles is rural express delivery. For logistics and express delivery companies, rural express delivery is hard to make money from, which is the fundamental reason they have been unable to commit heavy resources to the rural market for so long. Therefore, how to increase rural express delivery business volume, including downward delivery volume and upward shipment volume, is the fundamental solution for rural logistics.

These three points can be said to be closely linked and mutually reinforcing. Only when rural areas have broadband internet access is it possible to develop e-commerce; and express delivery is both a necessary condition for developing rural e-commerce and an inevitable result of rural e-commerce development. Rural express delivery without the internet is a "river without a source," while rural internet without express delivery is a "bird without wings." Rural e-commerce is precisely the most important link in this "tripod." With the internal drive of rural e-commerce, the difficulties of both broadband and express delivery will be readily solved.

Under such circumstances, the "e-commerce goes to the countryside" movement is ushering in its "golden age." For example, the "Thousand Counties and Ten Thousand Villages" plan led by Alibaba currently covers more than 5,000 administrative villages, and the O2O "Internet Plus rural" model has been welcomed by grassroots farmers. JD.com's rural agents are reportedly also 100,000 strong. In addition to e-commerce giants such as Alibaba, JD.com and Suning, rural e-commerce platforms of all sizes across the country have also sprung up like bamboo shoots after a spring rain. The golden age of "e-commerce goes to the countryside" is, on the other side, also the golden age of rural economic transformation and upgrading. But for local governments, which route is most suitable for them is a question that requires hard thinking and discernment.

Local governments have two paths to choose from in developing e-commerce: one is to build their own e-commerce platforms, and the other is to cooperate with existing e-commerce giants. Building one's own e-commerce platform can fully realize local autonomy, but it should also be noted that self-built platforms are not only hugely expensive but also very costly in terms of later maintenance and traffic acquisition. Therefore, local self-built e-commerce platforms generally do more harm than good. Cooperation between local governments and e-commerce giants is a relatively good choice. It should be said that the e-commerce giants have each formed their own characteristics and possess different advantages. Taking Alibaba and JD.com as examples, Alibaba's advantage lies in its powerful ecosystem. For instance, its "Thousand Counties and Ten Thousand Villages" plan integrates e-commerce, finance, logistics and other businesses, and it has also accumulated more than 700,000 sellers in rural areas. JD.com's advantage lies in its self-operated business. In rural areas, it mainly adopts a development model centered on natural persons, expanding relatively quickly, while its upward shipments are mainly carried out through centralized procurement. It can be said that the major e-commerce giants, including Alibaba and JD.com, have each formed their own characteristics and models. Local governments should cooperate according to local realities, their own characteristics and needs, in order to better implement the requirements of the State Council meeting, accelerate the development of rural e-commerce, and let ordinary people truly benefit.