Express Delivery to Rural Areas Activates the Blue Ocean of Agriculture, Rural Areas and Farmers' Development

Yang Jing never imagined that the lotus roots grown in the black mud of his hometown could be sold online, and that business would be surprisingly good. Like many young entrepreneurs, several years ago this young man born in the 1980s returned from Guangdong to his hometown of Chahe Town, Honghu City, Hubei Province, and opened an online store specializing in the sale of local specialties such as lotus roots, water caltrop, lotus seeds and lotus root stems, becoming one of the earliest rural e-commerce sellers in the area.

"If express delivery didn't reach the countryside, how could our lotus roots here ever be shipped out?" Today, his online store's turnover is approaching ten million yuan, and people call him the "Lotus Root King of Honghu." A crucial factor behind Yang Jing's flourishing business is the rapid development of the express delivery industry. Honghu's lotus roots are famous nationwide; being covered in black mud keeps the lotus roots fresh, but how to get them to customers as quickly as possible is extremely important, and in this regard express delivery has played an indispensable role.

Yang Jing recalled to a reporter from Outlook Weekly: "In 2009, shipping lotus roots by express from Honghu to Tibet took half a month. By the time the customer received them, the lotus roots had already rotted. But now it only takes two or three days, and customers in Tibet can eat lotus roots as fresh as those on the tables of Honghu residents." In his view, for e-commerce sellers dealing in fresh produce, time determines customer reputation, and the quality of express delivery service determines the life or death of an online merchant.

The 2014 No. 1 Central Document touched on the express delivery industry for the first time, requiring the improvement of the rural logistics system, accelerating the development of modern warehousing and logistics facilities for bulk agricultural products in major producing areas, and improving the cold-chain logistics system for fresh agricultural products. Yang Jing's story reflects from one angle that the "last mile" problem of express delivery is both a bottleneck currently constraining the rural internet economy and the key to activating this dormant market.

Express Delivery Spurs Urban-Rural Consumer Interaction

In the view of those interviewed, express delivery to rural areas has opened up the markets of both city and countryside, achieving interaction in consumption. Taking the efficient transport of fresh foods and agricultural products as an example, it has not only driven the development of local rural economies but also created new opportunities for rural residents to increase their income.

In Anhui Province, an Outlook Weekly reporter found through firsthand experience that a free-range hen raised in Gongjiaqiao Town, Jing County, Anhui Province, in the northern part of the mountainous region of southern Anhui, purchased from the Tmall website, could be received by the reporter in Guangzhou within 24 hours via frozen cold-chain delivery. This covered steps including local breeders catching the chicken on site, cleaning, vacuum packaging and express shipping.

An employee of the store said that urban residents' demand for ecological food is growing ever higher, and thanks to express delivery to rural areas, original ecological products from the countryside can be conveniently transported to urban customers. Despite the high price, nearly a thousand have already been sold through this channel.

The same is true in Maoming City, Guangdong Province, where the abundant lychees are being transformed through express delivery and e-commerce from being sold cheaply at low prices in previous years into high-profit direct express delivery.

"Taking the Bai Tang Ying variety as an example, the lowest purchase price in previous years was about 2 yuan per jin, while this year it has reached more than 4 yuan per jin," said Ye Fushan, Party secretary of Genzi Town in Gaozhou City, known as China's No. 1 lychee town. This year alone, SF Express and Benlai Life Network purchased 100,000 jin of lychees for sale across the country. Through the time advantage of express delivery, they not only promoted Gaozhou but also developed the high-end market.

While express delivery to rural areas invigorates the rural economy, more and more rural areas are beginning to benefit from the efficient, convenient and low-cost logistics it brings. Farmers, like urban residents, can buy goods online, and after reducing many circulation links, they can buy at considerably lower prices than from merchants.

Take the oxygenator that farmers need for fish farming as an example. This product generally costs three to four hundred yuan in physical stores, but buying it online costs only a little over one hundred yuan. The emergence of e-commerce in rural areas has raised farmers' living standards and greatly reduced production costs.

Moreover, express delivery has also spawned new business forms in the countryside. In rural areas, farmers are still at the beginning of the online shopping era and lack online shopping information. To address this, some local young people who returned from working in the eastern region invented a new business form called "online shopping agent," whereby they advance payment to purchase online on behalf of farmers according to their orders and charge 5 yuan per item.

The era of rural electronic consumption has only just begun, and there is still huge growth potential in the future. In October 2014, the Alibaba Research Institute released the "Rural E-Commerce Consumption Report," which compiled data on multiple aspects of rural electronic consumption: over the previous three years, Taobao's rural consumption share had been rising continuously, from 7.11% in the second quarter of 2012 to 9.11% in the first quarter of 2014. It predicted that the market size in 2014 would reach 180 billion yuan, and that the total national rural online shopping market could exceed 460 billion yuan by 2016. In addition, in 2013, 84.6% of rural internet users used mobile phones to go online, 5 percentage points higher than in urban areas.

EMS's First-Mover Advantage in the Rural Market

In the view of Ma Junsheng, director of the State Post Bureau, previously China's rural express delivery volume was so small it was almost negligible, but this year's sample statistics already show it accounts for 10% of the total. In the future, the development speed of rural express delivery will be much faster than urban e-commerce.

According to this magazine's reporter, in the current structure of rural express delivery business, 90% involves rural areas purchasing urban industrial products, and 10% involves agricultural products being sold to cities. Express delivery reduces the multiple layers of circulation for consumer goods, and in the future the share of agricultural products sold through express delivery channels is expected to expand.

Under this trend, at the beginning of this year, China's postal management authorities clarified the important direction and strategic goals for the development of the express delivery industry and launched the "Express Delivery to Rural Areas" and "Express Delivery to the West" projects, encouraging enterprises to accelerate network layout and infrastructure construction in rural areas and the central and western regions, and to improve network coverage and stability.

Ma Junsheng commented that launching the "Express Delivery to Rural Areas" project can enable the broad masses of farmers to enjoy online shopping services as soon as possible; advancing the "Express Delivery to the West" project can improve regional balance. The advancement of express delivery to rural areas and to the west brings many tangible benefits to local farmers.

Nevertheless, express delivery to rural areas also faces some difficulties. On the one hand, most young and middle-aged laborers in China's rural areas go to cities to work, and few return to start businesses; among the elderly and children left behind in rural areas, most have relatively low incomes and low purchasing power, and it still takes time to cultivate demand. On the other hand, logistics costs between villages are relatively high, and most express delivery company outlets stop at the township level; some express delivery outlets, besides parcel storage, also need to run various businesses such as selling tobacco, alcohol and beverages, otherwise it is difficult to stay afloat.

Against this backdrop, the postal system, which has the largest postal network in China, especially with its extensive layout in rural areas, has gained new room for development. At present, the postal system has 118,000 outlets nationwide, including village post stations, agriculture-rural areas-farmers service stations and community service stores, and even the most remote mountain villages in China have China Post outlets.

Precisely because of this, in June 2014, Alibaba and China Post signed a strategic cooperation framework agreement to carry out comprehensive and in-depth cooperation with the postal service in fields such as logistics, e-commerce, finance and information security, jointly building China's smart logistics backbone network.

Of course, for the two sides to truly revitalize resources and tap the potential of the rural electronic consumption market, they must first resolve how state-owned and private enterprises can effectively coordinate and translate their strategies into practice. Taking China Post as an example, cooperation between its mechanisms and the purely market-oriented Alibaba may face many constraints.

This is not without precedent. As early as 2006, China Post signed its first strategic cooperation agreement with Alibaba, launching e-commerce-exclusive express services such as e-Youbao. But merchants on the Taobao and Tmall platforms used the postal system's express delivery for less than 5%, while 95% of deliveries were completed by non-postal system companies such as the "four tongs and one da" (STO, YTO, ZTO, Best and Yunda).

Previously, when Ma Junsheng conducted research in Jingzhou, Hubei, he also found that after only half a year of the "to rural areas" project, express delivery companies had already penetrated into almost every township there. "We are still working hard to mobilize the supplementary construction of postal offices in townships where there are gaps, while the market-driven private express delivery companies have already arrived."

He said that private enterprises are very pragmatic; if they cannot keep operating for three months, they will certainly "withdraw their troops." But now they not only survive but thrive. An important reason is that these companies can deeply cultivate the rural market and develop farmers' online shopping, mainly including clothes, shoes, agricultural production tools and so on, with each item on average several tens to over a hundred yuan cheaper than before. In several local townships, the five major express delivery enterprises have all established outlets, with daily online shopping volume exceeding 1,000 items.

Public Delivery Platforms Urgently Need Improvement

Experts interviewed pointed out that achieving good results in the "Express Delivery to Rural Areas" project still requires government policy guidance and financial support. The infrastructure of the express delivery industry in rural areas is basically starting from zero. In the future, on the basis of fully understanding the needs of express delivery enterprises, it is necessary to integrate various express delivery enterprises, social transport forces and various outlet resources and carry out systematic, overall planning.

They said that many remote areas and rural areas are vast and sparsely populated, with inconvenient transportation and relatively small business volumes, so it is obviously uneconomical for every express delivery company to set up outlets and delivery personnel. Therefore, through the construction of public delivery platforms, the coverage rate of rural express delivery networks can be increased to meet growing market demand, while fully leveraging economies of scale, reducing rural delivery costs and achieving express delivery to rural areas. In concrete practice, it is necessary to adapt measures to local conditions and carry out meticulous planning according to rural characteristics.

First, encourage active exploration and innovation, and on the basis of public service platforms such as rural comprehensive service stations, village post stations, rural reading rooms, village committees and supply and marketing cooperatives, provide rural residents with relatively complete express delivery services through entrusted agency arrangements, and open them to all express delivery enterprises. This not only reduces the cost of delivering parcels in rural areas and solves the problem of weak express delivery service capacity in rural areas, but also opens up new sources of income for these public service platforms.

Second, integrate various rural transportation resources. Make full use of the rural bus routes, freight transport and agricultural vehicles of transportation departments, promote cooperation between express delivery enterprises and transportation departments, and use these rural transport vehicles to carry parcels, which both increases income for transport vehicles and reduces the transport costs of express delivery enterprises, achieving win-win cooperation.

Third, add online shopping service functions to rural public service platforms, guide and stimulate consumption in rural areas, and provide a source of demand for express delivery services.