Three forces in rural e-commerce that cannot be ignored, Alibaba Research Institute speaks out
Today, speaking here about the e-commerce transformation of supply and marketing cooperatives, facing leaders of provincial-level supply and marketing cooperatives from across the country, I particularly want to point out one thing: Is the reform of supply and marketing cooperatives and their e-commerce transformation a new task? Five and a half years ago, the State Council issued the "Several Opinions on Accelerating the Reform and Development of Supply and Marketing Cooperatives." Four years ago, I made a special trip to the rural areas of Loudi, Hunan, to research the then "Loudi Model" of the online supply and marketing cooperative. Now, several years have passed. How is the supply and marketing cooperative's e-commerce doing? Today, as we once again discuss the supply and marketing cooperative's e-commerce, can we really walk the same road of the past 5 years all over again?
Over the past 5 years, e-commerce has developed rapidly in China, and one of the most prominent changes is the accelerating trend of e-commerce going mainstream. In 2008, China's online retail, after several years of building momentum, had just reached the scale of 100 billion. Then e-commerce went full force, and in just 5 short years, by 2013 China's online retail scale had surpassed that of the United States, becoming the country with the world's largest transaction volume. Last year, China's e-commerce continued to grow against the trend by more than 50%, reaching 2.8 trillion. Also last year, among the world's 10 largest internet companies by market value, China occupied 4 places, the United States occupied the other 6, while Europe and Japan ranked outside the top 10. Therefore, we can proudly say that China has already stood at the forefront of the e-commerce field.
In recent years, the trend of e-commerce going mainstream has continued to accelerate, most notably expressed in county-level e-commerce beginning to enter a phase of full-scale ignition: in July 2014, Alibaba Group held the "First China County Economy and E-commerce Summit" in Hangzhou, bringing together party secretaries and county heads from 176 counties and districts across 26 provinces, autonomous regions and municipalities directly under the central government (this year's second summit had even more than 1,600 leaders from over 400 counties and cities attending). Such a booming scene fully demonstrates one thing: the spring of county-level e-commerce has arrived! Why do county and city party and government leaders attach such importance to e-commerce? If e-commerce were still just a new transaction channel, merely selling a few more products through the internet, it fundamentally could not make it onto the main agenda of party secretaries and county heads. Nowadays, in the era of e-commerce going mainstream, e-commerce already concerns "agriculture, rural areas and farmers," employment, people's livelihoods, poverty alleviation, regional pillar industries, urbanization, and even social stability, and many other issues, and has already entered the agendas of leaders at all levels. E-commerce is no longer a tactical issue, but a strategic one.
⟦NL> Today, 5 years later, at this very moment, if supply and marketing cooperatives are still absent in terms of e-commerce concepts and methods, then what everyone will lose will be a strategic opportunity. Regarding this, there must be a sense of urgency and new thinking.
The forces of rural e-commerce
At present, rural areas have already become a strategic battleground for e-commerce, and among them there are three forces that cannot be ignored. Right now, it is these three forces working together.
1 Government
In May last year, the Ministry of Agriculture launched the deployment of the information-into-villages-and-households work, selecting 22 counties in 10 provinces nationwide to begin pilot work on bringing information into households. Not long ago, the Ministry of Agriculture went to Suichang again to hold an on-site meeting on information entering villages and households; and the Ministry of Finance and the Ministry of Commerce also decided that starting from 2014, they would select some regions nationwide to carry out e-commerce into rural areas work, and provide fiscal subsidies to selected provinces. This year they continued to intensify efforts to carry out the second batch of demonstration projects for e-commerce entering rural areas, expanding coverage to 200 counties. At the beginning of this year, the Ministry of Transport, the Ministry of Agriculture, the All China Federation of Supply and Marketing Cooperatives, and the State Post Bureau jointly issued several opinions on promoting the development of rural logistics, aiming to raise the level of China's rural logistics development. In addition, the State Council Leading Group Office of Poverty Alleviation and Development has already incorporated e-commerce poverty alleviation into the poverty alleviation policy system, all of which will greatly promote the development of rural e-commerce.
2 E-commerce companies
Alibaba listed in the United States last September and announced its three major strategies thereafter: including the rural strategy, the cross-border strategy, and the cloud computing and big data strategy. Alibaba's rural strategy plans to invest 10 billion yuan in rural areas to implement the "Thousand Counties, Ten Thousand Villages" plan. Subsequently, JD.com also announced the "Spark Pilot, Thousand Counties Prairie Fire" plan, and said JD.com's county-level service centers would be rolled out nationwide, with the number expected to exceed 500 openings within the year. In addition, e-commerce giants such as Dangdang, Suning, and Yihaodian have also taken action.
3 Local e-commerce service providers
Why can the Ministry of Commerce and the Ministry of Agriculture successively go to Suichang to hold on-site meetings on rural e-commerce? Ganje.com is the fundamental reason. Whether it is Zhejiang's Ganje.com, Fujian's Century Village, or Shanxi's Lecuntao, they have all begun to step out of their respective provinces and move toward the whole country. This fully demonstrates that rural e-commerce needs service providers that can implement on the ground, and the extent to which local e-commerce service providers promote rural e-commerce development, and the speed of their actions, also exceed imagination.
According to the current deployments of agriculture, commerce and other departments, promoting rural e-commerce generally follows the path of first piloting and demonstrating, then promoting nationwide, and the pilot demonstrations originally mostly came from counties and rural areas with relatively good development conditions in all respects. E-commerce enterprises will also choose regions with relatively good market conditions to advance first. Then, according to such a gradual deployment, when can e-commerce cover poor areas? Also, can the e-commerce poverty alleviation experience formed in rural areas with relatively good conditions be applicable to poor areas? It is precisely out of such considerations that the government, which bears responsibility for social fairness, especially government institutions such as the poverty alleviation office, needs to lose no time in launching new strategic deployments, namely, to base itself on the main battlefield of poverty alleviation, especially in nationally designated poverty-stricken counties and contiguous poverty-stricken areas, intensify efforts to carry out e-commerce poverty alleviation, obtain experience as quickly as possible and spread it, thereby accelerating the pace of poverty-stricken areas and impoverished people escaping poverty and becoming prosperous.
What supply and marketing cooperatives should do
First, it should be made clear that because the development levels of rural e-commerce vary greatly from place to place, one could even say they differ enormously and are extremely uneven. Developed areas have already seen "Taobao villages" and "Taobao towns" where every household opens an online shop, while e-commerce in western regions has only just begun to enter the introductory period. Therefore, if supply and marketing cooperatives want to develop e-commerce across rural China, neither in strategy nor in model can they adopt a one-size-fits-all approach.
Second, at present multiple entities are building support-point systems for e-commerce oriented toward rural areas. Their mainstream approach is: establish downward channels to help farmers buy industrial goods, build e-commerce service stations in villages, and solve the difficulties of left-behind farmers not knowing how to place orders online and express delivery not reaching households; at the county level (and some also at the township level) build a support system oriented toward local village and township service stations; then open up branch-line logistics from county to village.
Based on the current development situation of rural e-commerce and according to the characteristics of supply and marketing cooperatives themselves, regarding the rural e-commerce layout of supply and marketing cooperatives, I suggest that supply and marketing cooperatives must adopt an open and cooperative approach and jointly build and share the support-point system for rural e-commerce. In the process of "vertical alliance and horizontal connection," it is not that you can play the role of leader just because you want to; the key is whether you can truly play the role of leader. Only by making contributions can one gain a position.
Regarding the business support for supply and marketing cooperatives in developing rural e-commerce, I have three suggestions: namely, hold firm to agricultural inputs, open up daily necessities, and seize the agricultural chain. The reasons are as follows:
Agricultural input commodities have their particularities, and their sales model differs from that of general consumer goods. This is also an important reason why many e-commerce giants, although interested in entering the field, have long refrained from major moves because of a lack of service resources (recently, Alibaba's and JD.com's agricultural input businesses have both gone online). Supply and marketing cooperatives have long accumulated experience in this field, and combining services with e-commerce operations in agricultural input products will offer great prospects. As for the sale of ordinary daily necessities, both the threshold and technical difficulty are relatively low, and moreover the major e-commerce platforms are all competing for this piece of the market pie, so the difficulty of competition is considerable. If a new operating model can be explored so that supply and marketing e-commerce can provide users with better differentiated services and a better shopping experience than industry giants such as Alibaba and JD.com, then it is worth a try; otherwise there is no need to start another stove and disperse resources. In addition, in terms of agricultural products entering the cities, this is the field most worthy of deep cultivation by supply and marketing cooperatives. Because the upward movement of agricultural products is not something that can be solved simply by competing on funds; it requires a complete and efficient industrial chain and supply chain, and the cooperative resources most needed by this industrial chain are precisely where the advantages of supply and marketing cooperatives lie.
In summary, for supply and marketing cooperatives to realize e-commerce transformation, challenges and opportunities coexist. I suggest that supply and marketing cooperatives must assess the situation, grasp the changes, and change according to the situation. Supply and marketing cooperatives may not be able to play a leading role in the rural markets of all places; moreover, in some places they may even need to seek a foothold. However, if supply and marketing cooperatives can base themselves on their own advantages and find a point of sustained effort, they should be able to accomplish something in the great tide of rural e-commerce. At all times, they should keep in mind the mission of supply and marketing cooperatives: to provide farmers with better services!