How the Internet Can Deeply Tap the Rural Blue Ocean Market
In recent years, the consumption potential of the rural market has been unleashed. The nominal growth rate of total rural consumer goods retail sales has exceeded that of urban areas for three consecutive years, and the share of rural consumption in total consumption continues to rise. At the same time, e-commerce built on the Internet is transforming rural consumption and distribution models. Under the spotlight of "Internet Plus," how can the enormous rural blue ocean be opened up and expanded?
1. Rural Logistics: Seamless Connection with E-commerce
[Case Study]
"Selling lychees on WeChat Moments, local lychees that go for seven or eight yuan per jin can sell for 15 yuan. The highest-grade lychees shipped to East China fetch 130 yuan per jin with free shipping." In Baiqiao Village, Genzi Town, Gaozhou City, Guangdong Province, villager He Guobiao ships through the village-level express collection point, selling the region's most famous Gongyuan lychees across the country. "In the past, we relied on wholesalers to buy them, and when prices hit rock bottom they were pushed down to just a few mao per jin." He Guobiao told reporters that now, by delivering to the nearby express outlet, they can sell directly to e-commerce platforms and get paid in cash on the spot.
Maoming lychees have a long history. The famous "Feizixiao" variety originates from here, and Genzi Town in Gaozhou is known as "China's No. 1 Lychee Town." "Based on the development goal of 'e-shops in every township, express delivery in every village,' we encourage express delivery companies to first set up outlets in townships to provide express services, with priority given to towns and villages with abundant production of famous, high-quality local agricultural products." Chen Changyong, Director of the Maoming Postal Administration, told reporters that "express delivery to the countryside" has changed the way lychee farmers sell their products. Some fruit growers have shifted from selling through middlemen to self-production and self-marketing, escaping the predicament of "cheap fruit hurting farmers."
According to statistics, from January to April this year, Guangdong completed nearly 2.1 billion express deliveries and collections. Calculated at 160 yuan per express shipment, Guangdong's express delivery industry handled the shipping of goods worth 336 billion yuan. "Guangdong has established more than 1,700 rural express service outlets, covering over 800 townships, with a township coverage rate exceeding 70%. The express delivery industry has become a 'thermometer' and 'barometer' of local economic and social development. We need to increase the depth of the express delivery 'downward' process and actively upgrade the consumption engine." Jiang Mingfa, Director of the Guangdong Postal Administration, said.
Place a few ice packs on top of the lychees, first pack them in foam boxes, then pack them in blue cardboard boxes labeled "Fresh Fruit Cold Chain Express" -- this is SF Express's "secret weapon" for freshness preservation this year. Chen Peihua, SF's Maoming area manager, said: "We use cold chain logistics and air logistics throughout the entire process to shorten fruit transportation time. This year, consumers everywhere can enjoy fresh lychees with their original flavor within 24-48 hours."
The State Post Bureau revealed that by 2020, China aims to achieve the goal of having outlets in every township and express delivery in every village. This year, Maoming City has set up more than 150 village and township convenient express collection points to make it easier for villagers to send lychees nearby. From late May to now, express delivery companies in Maoming City have collected and sent over 50,000 lychee express shipments, totaling more than 300 tons.
For some time, due to issues such as long delivery routes and low market concentration, the development of rural logistics and express delivery has been relatively slow, greatly constraining the development of rural e-commerce. Even if rural consumers have online shopping needs, considering the inconvenience of express delivery, such needs are often suppressed.
"China's rural market has enormous consumption potential, yet rural basic distribution infrastructure is quite backward, which constrains the release of rural consumption potential. Therefore, improving rural basic distribution infrastructure and transforming backward distribution methods is urgent." Zhao Ping, Deputy Director of the Consumption Economy Research Department at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, stated that currently, agricultural product e-commerce is doing well mostly with specialty grain products, which are relatively simple to preserve and distribute and can be sent through ordinary express and post offices. However, fresh agricultural product e-commerce is relatively underdeveloped, mainly due to incomplete cold chain logistics infrastructure in rural areas.
Recently, the Ministry of Commerce released the "Internet Plus Distribution" Action Plan. The action plan proposes striving to create 200 comprehensive demonstration counties for e-commerce entering rural areas nationwide within 1-2 years, with the e-commerce transaction volume of demonstration counties growing at an average annual rate of no less than 30% on the existing basis. Currently, the Ministry of Commerce, together with the Ministry of Finance, has launched "E-commerce Entering Rural Areas" in 56 counties across 8 provinces including Hebei, Henan, and Hubei.
2. Internet Plus Rural: Industrial Onlineization, Localized Employment
[Policy]
On May 7, the State Council officially issued the "Opinions on Vigorously Developing E-commerce and Accelerating the Cultivation of New Economic Momentum," emphasizing the need to actively develop rural e-commerce and encouraging agricultural production material enterprises to develop e-commerce. The "Opinions" propose strengthening the integrated development of the Internet with agriculture and rural areas, introducing modern management concepts and methods such as industrial chains, value chains, and supply chains, researching and formulating opinions on promoting rural e-commerce development, and introducing supportive policies and measures.
Experts believe that the blue ocean of rural e-commerce and local services lies not only in farmers' shopping needs but also in farmers' selling needs. In other words, rural areas are both the downstream of the demand industry chain for rural e-commerce and the upstream of the most primitive supply industry chain. This is a two-way commercial supply and demand model. Compared to the rural consumption stimulated by the Internet, the Internet is also, through the development of e-commerce, making the status of rural and urban areas in the circulation of resources and products increasingly balanced.
Since "express delivery to the countryside," fruit growers in Maoming, Guangdong have begun to "take a different path." Qiu Yongqin, who has a 20-30 mu orchard at home, is also a Taobao seller. "Distributors buy at just over one yuan, but I can sell for five or six yuan on Taobao. Of course I'm willing to produce and sell on my own." Qiu Yongqin said that he is currently selling Guiwei lychees online at 118 yuan for 6 jin with free shipping, and has already sold more than 800 boxes, with a projected target of 1,500 boxes per month.
According to Liang Luoyue, Deputy Mayor of Maoming City, Baiqiao Village in Genzi Town, Gaozhou City has more than 4,700 villagers. In previous years, income from selling lychees was five to six million yuan. With express delivery reaching the countryside and seamless connection with e-commerce, new sales channels are gradually emerging in rural areas, and this year the village's lychee income is expected to reach seven to eight million yuan.
The "2014 Alibaba Agricultural Product E-commerce Research Report" by the Ali Research Institute shows that as of the end of 2014, the number of sellers operating agricultural products on Alibaba's retail platforms was 750,000, a 61% increase compared to 2013. At the same time, the number of rural sellers with registered addresses in townships on Alibaba's retail platforms reached 660,000. Correspondingly, the scale of agricultural product e-commerce transactions also reached a new high. In 2014, agricultural product sales completed on Alibaba's platforms reached 48.3 billion yuan, a 70% increase compared to 2013. From 2010 to now, the average annual growth rate of agricultural product sales on Alibaba's platforms has been 112.15%.
"The Internet is making rural consumption urbanized, industries online, and employment localized." The "China Taobao Village Research Report (2014)" by the Ali Research Institute points out that the development of rural e-commerce has made the entrepreneurial atmosphere and industrial radiation stronger, creating a powerful pull for rural entrepreneurship and employment. At the same time, e-commerce has a stronger penetration rate and transforming capacity for local traditional industries.
Shen Danyang, spokesperson for the Ministry of Commerce, recently revealed that currently, there are more than 3,000 agriculture-related websites nationwide, and online retail sales of agricultural products have reached over 100 billion yuan. Shen Danyang stated that the Ministry of Commerce is currently working with relevant departments to research and formulate guiding opinions on accelerating the development of rural e-commerce. The guiding opinions will focus on four aspects: information-based transformation of rural traditional distribution networks, building e-commerce platforms for agricultural production materials, developing agricultural product e-commerce, and expanding rural e-commerce service areas.
3. Rural Consumption: Blue Ocean Potential Emerging
[Data]
National Bureau of Statistics data shows that in 2014, China's total retail sales of social consumer goods grew by 12.0% over the previous year, or 10.9% in real terms after deducting price factors. By operating location, urban consumer goods retail sales were 22,636.8 billion yuan, up 11.8%; rural consumer goods retail sales were 3,602.7 billion yuan, up 12.9%.
From the above data, although there is still a large gap in absolute terms compared to urban consumption, in terms of nominal growth rate, this is the third consecutive year that rural consumption has exceeded urban consumption.
"Looking at the monthly data of rural consumption growth last year, in months with higher rural consumption growth, the growth rate of total retail sales of social consumer goods showed an upward trend. The pulling effect of rural consumption on total consumption is very obvious." Zhao Ping stated that against the backdrop of stabilizing growth, to leverage the "three carriages," especially consumption's pulling effect on economic growth, stabilizing rural consumption is essentially stabilizing the growth of total consumption.
Currently, rural areas have become the fastest-growing region for consumption in China. National Bureau of Statistics data shows that in 2014, China's per capita net income of farmers reached 9,892 yuan, with income growth exceeding that of GDP and urban residents' income for the fifth consecutive year. The urban-rural income ratio dropped from 3.33:1 in 2009 to 2.92:1.
Analysts believe that with the explosive growth of China's e-commerce consumption market in recent years, rural areas with lower e-commerce coverage will, with the deepening of e-commerce penetration, enter an era of superimposed growth in "Internet Plus Rural" consumption.
From January to April 2015, national online retail sales of goods grew by 40.3% year-on-year, 29.9 percentage points higher than the growth rate of total retail sales of social consumer goods. In the previous 2014 Tmall Double Eleven transaction volume, rural consumption accounted for 10%, and its share of the total continues to expand. The "China Taobao Village Research Report (2014)" predicts that rural online shopping consumption has enormous market growth space, reaching over 180 billion yuan in 2014, and by 2016, this figure will rapidly expand to 460 billion yuan.
According to the latest report from the China Internet Network Information Center, as of December 2014, the scale of rural internet users reached 178 million, accounting for 27.5% of the national total. Compared to rural online consumption accounting for only about 10% of national online consumption, this proportion also indicates the enormous potential for rural e-commerce development.
Zhao Ping believes that young rural consumers' willingness to accept new things and new products is far stronger than that of urban consumers, and rural willingness to accept e-commerce is also stronger than that of urban areas. In fact, the potential of rural e-commerce has already emerged. In large-scale e-commerce promotional activities over the past two years, the rural market has demonstrated strong online shopping capacity. Therefore, major domestic e-commerce companies such as Alibaba and JD.com have begun to seize the rural market to further tap rural consumption potential.