Rural e-commerce is extending into the production sector

Recently, the "2014 County and Rural E-Commerce Data" released by Alibaba shows that in 2014, sales by online stores in poor counties across China on Alibaba's retail platform exceeded 12 billion yuan, up 58% year on year. The number of poor counties with online store sales exceeding 100 million yuan rose from 11 in 2013 to 21 in 2014. The effect of "e-commerce poverty alleviation" is beginning to show.

According to Alibaba, in 2014 there were more than 300 Taobao counties with sales of over 100 million yuan nationwide, spanning 25 provinces (autonomous regions and municipalities), among which more than 100 were in the central and western regions, and 21 were national-level poor counties. Examples include Pi County in Sichuan, Wugong in Shaanxi, Korla in Xinjiang, and so on.

Previously, JD.com had also planned to open 500 county-level service centers within the year to accelerate its market layout in tier-3 to tier-6 cities, districts and counties, and down to villages. Its recently released "Spark Pilot" plan for going to the countryside and into villages will gradually improve the rural delivery system, recruit rural cooperative points, support e-commerce platforms and traditional commercial enterprises, and establish "JD Help" service stores for major home appliances, among other arrangements. Suning Commerce also expects to build 10,000 Suning Tesco service stations within 5 years, covering 1/4 of the country's townships.

Not long ago, e-commerce giants were still racking their brains to open up the rural "last mile," yet now rural e-commerce is developing in a "blowout" manner. What are the reasons behind this?

First, the internet is penetrating rural areas at an accelerating pace. According to statistics from the Ministry of Industry and Information Technology, as of March 2015, 93.5% of China's administrative villages had broadband access. The guiding opinions on speeding up broadband and lowering fees issued by the State Council proposed that within this year, 14,000 additional administrative villages will be connected to broadband, and broadband will cover more than 95% of administrative villages nationwide.

With infrastructure in place, farmers also have money in their pockets. Data from the National Bureau of Statistics show that in 2014, the per capita disposable income of urban residents was 28,844 yuan, a real increase of 6.8% over the previous year; the per capita disposable income of rural residents was 10,489 yuan, a real increase of 9.2% over the previous year, 2.4 percentage points higher than that of urban residents. According to China News Service, in the first half of 2015, the per capita disposable income of rural residents in 12 provinces including Shanghai, Anhui and Hebei had exceeded the national level.

The increase in farmers' income has driven up consumption levels. According to data from the China Internet Network Information Center (CNNIC), in 2014 the number of rural internet users reached 178 million, and the total national rural online shopping market was estimated at more than 180 billion yuan. As of December 2014, the number of rural online shopping users was 77.14 million, an increase of 22.29 million over the previous year, with an annual growth rate of 40.6%, the fastest-growing application among all internet applications for rural internet users.

It is worth noting that the development of e-commerce in rural areas is gradually expanding and extending from the consumption sector to the production sector.

Tao Chuanjin, director of the Social Public Welfare Research Center at Beijing Normal University, once said, "The essence of poverty is insufficient ability to enter the market, and the essence of poverty alleviation is enhancing people's ability to enter the market." "E-commerce poverty alleviation" brings these farmers valuable opportunities to enter the market.

Since last year, the Ministry of Finance and the Ministry of Commerce have begun promoting the demonstration plan of "e-commerce into rural areas." In 2015, the scope of the comprehensive demonstration of e-commerce into rural areas expanded from 56 demonstration counties in 2014 to 200 demonstration counties. Among them, counties and districts in the central and western regions accounted for 82.5%, and poor counties accounted for more than 43.5%. The central government plans to arrange 2 billion yuan in special funds for targeted support, especially for the development of rural e-commerce in old revolutionary base areas such as southern Jiangxi, eastern Guizhou and northern Shaanxi. The use of funds focuses on building a three-tier logistics distribution system at the county, township and village levels, so as to foster the local rural e-commerce ecosystem. The promotion of national policies has become a strong guarantee for the development of rural e-commerce.

Liu Xifu, head of Alibaba Group's rural Taobao strategy, said that rural e-commerce has made considerable progress in the consumption sector. However, for many years, farmers still face major difficulties in getting rich, such as expensive agricultural input products, difficulty selling agricultural and sideline products, few entrepreneurial channels for farmers, financing difficulties, and no guarantees for online consumption. In response, Alibaba has now launched the Thousand Counties and Ten Thousand Villages plan, investing 10 billion yuan within 3 to 5 years to establish 1,000 county-level operation centers and 100,000 village-level service stations nationwide. By opening up the bottlenecks in logistics and information flow, it strives to bridge the gap between urban and rural areas and extend the e-commerce network to 1/3 of the country's counties and 1/6 of rural areas.

Li Heming, head of JD Group's rural e-commerce strategy, also said that JD.com plans to launch the rural e-commerce 3F strategy, around which it will build networks for logistics, marketing, finance and big data to promote the e-commerce transformation and upgrading of "agriculture, rural areas and farmers."

Cooperation between major agricultural provinces and e-commerce giants is moving into deeper areas.

Lyu Weifeng, vice governor of Heilongjiang Province, said at the meeting that Heilongjiang will carry out strategic cooperation with internet companies such as Taobao and Tencent. Within 3 years, it will organize 3,000 agricultural cooperatives and green organic food enterprises, build 300 farmers' online sales points with sales of more than one million, and construct an e-commerce cluster suited to the province's agricultural development.

Specialized agricultural input service websites have also started in the e-commerce field. "Jinnong.com uses computers, mobile apps, WeChat and other third-party platforms to build an 'agriculture internet plus' platform integrating information, online trading of agricultural inputs and agricultural products, online loans, logistics tracking, customer service, and traceability of agricultural products. At present, it has attracted nearly 300,000 agricultural manufacturers, with more than 900,000 registered farmer users and 400 million annual visits," said Shen Shengbing, president of Jinnong.com.

After gradually opening up the "last mile" and getting past the hurdle of building the logistics system, rural e-commerce development also faces new problems. Wang Shujuan, the "bell-ringing girl" at Alibaba's listing, once expressed the worry that "even with a base salary of 3,000 yuan plus food and accommodation in Qingchuan County, Sichuan, no suitable talent can be recruited," highlighting the scarcity of talent behind the rapid development of rural e-commerce. According to the "Micro Report on County E-Commerce Talent Research" released by Alibaba in 2014, in the next two years, county online merchants will need more than 2 million e-commerce talents. Among them, the three most lacking types of talent are operations and promotion, graphic design, and data analysis.

To address the talent challenge, county e-commerce players have been using various methods such as high salaries and benefits, equity incentives and promotion training to retain talent. E-commerce giants such as Alibaba and JD.com have also launched models such as "rural Taobao partners" and "benefiting both ends" agricultural product processes, in order to bridge the talent gap in rural e-commerce.