An In-Depth Interpretation of the Dreams and Anxieties of Rural E-Commerce
Walking along the country lanes, farmhouse walls are busy with "Taobao." From JD.com and Taobao painting walls in villages to major e-commerce companies opening stores in the countryside, over the past few years e-commerce enterprises have set off a new round of the "up to the mountains and down to the villages" boom, and rural e-commerce has blossomed everywhere.
E-commerce is profoundly changing the way rural areas produce and live, and its role in activating domestic demand and promoting coordinated urban-rural development is also steadily emerging.
Can e-commerce become a new engine for rural economic development? How can a sound rural e-commerce ecosystem be built? A recent survey of rural areas across many parts of the country by our reporters found that this is already a question widely pondered in e-commerce circles.
Stirring Up the Rural Market and Opening Up a New World of Wealth Creation
These past few days, at the village Taobao service station of Jingxing Agricultural and Livestock Farm in Helan County, Ningxia, "village assistant" Li Wei has been helping fellow villagers shop online while also trying to find ways to sell the farm's rice online. Villager Xu Weihui, waiting nearby to shop, told reporters that he has bought a noodle press, a bean sprout machine and a small rice mill online; placing an order online, the goods arrive in three or four days. Some fellow villagers even bought cars during online promotions, paying more than 70,000 yuan less than at a 4S dealership.
The shopping experience of good quality at low prices, convenience and speed, and rich variety has activated online shopping demand in rural markets. According to statistics from the Ministry of Commerce, in 2015 the scale of rural online shopping reached 353 billion yuan, up 96% year on year. In the first half of this year, the scale of rural online shopping reached 312 billion yuan, and for the full year it is expected to reach 647.5 billion yuan.
Over the past two years, with urban online shopping penetration nearing saturation, e-commerce companies such as Alibaba, JD.com and Suning have made seizing the rural market a new strategy. By the end of 2015, across 1,000 counties nationwide, 250,000 village-level e-commerce service points had been built.
According to the "China Taobao Village Research Report (2016)" jointly released by the AliResearch Institute and the Alibaba New Rural Research Center, by the end of August this year, there were 1,311 Taobao villages nationwide, creating more than 840,000 direct job opportunities.
In some places, e-commerce has become an important path for grassroots entrepreneurship and escaping poverty to achieve prosperity. Driven by Ren Qingsheng, a leader in e-commerce entrepreneurship in Dinglou Village, Daji Town, Cao County, Shandong, more than 90% of the village's 306 households run online stores selling performance costumes, attracting a large number of young people to return home to start businesses. In 2015, the village's e-commerce sales were conservatively estimated at 100 million yuan, with net profit as high as 30%.
The wealth effect created by e-commerce in Dinglou Village has had an impact on surrounding villages. In 2016, online merchants in Cao County opened more than 20,000 online stores, with e-commerce sales of nearly 2.5 billion yuan, directly helping more than 4,000 poor people escape poverty.
As e-commerce rapidly penetrates rural areas, traditional industries have also gained new vitality. Baigou in Hebei, known for luggage and bag manufacturing, leveraged its traditional industrial base to develop e-commerce and quickly became one of the local pillar industries; in 2015 its e-commerce transaction volume reached 7 billion yuan, with 15,000 online stores and more than 150,000 parcels shipped daily on average, making it a nationally renowned Taobao town.
Huge Potential Yet "Innate Deficiencies" Remain
Major e-commerce companies have rushed to the countryside to "stake out territory," drawn by a huge market that remains to be developed. As of June this year, China had 191 million rural internet users, with an internet penetration rate of only 31.7%, far below the urban rate of 67.2%. Analysts believe that within the next 10 years, a large number of farmers will go online, and the scale of online shopping will maintain its growth momentum.
However, as the rural e-commerce fever continues unabated, some problems and challenges have gradually emerged.
Logistics and other infrastructure construction remains a weak link. Our reporters' interviews found that, apart from the proprietary logistics systems of some large e-commerce platforms, a secondary logistics network suited to rural characteristics has yet to take shape, generally manifesting as high logistics costs and lagging development of cold-chain logistics.
"After fresh goji berries hit the market this year, goji growers wanted us to help them sell online. The purchase price of one jin of fresh goji berries is only 10 yuan, but one express delivery costs 80 yuan. Fresh goji berries must be delivered within three days, and only SF Express dares to take the order," said Guo Jing, head of the county-level e-commerce service center in Yongning County, Ningxia. Some rural e-commerce demonstration counties are building a three-tier county-township-village logistics system, but most rely on subsidies to keep it going.
Easy to buy, hard to sell: the upward flow of agricultural products is "much thunder but little rain." Mo Wenjian, chairman of Jilin Yunfei Hewu Agriculture and Animal Husbandry Technology Co., Ltd., admitted frankly that most agricultural products do not meet the basic conditions for becoming "online goods." Lacking brands, quality control and after-sales service, the "upward flow" is not easy.
Nationwide, there is a widespread situation in which agricultural products come in a great variety of types, have a low degree of standardization and are mostly at the rough-processing stage; there are relatively few agricultural product enterprises with quality certification, "three types and one label" agricultural products are mixed in with inferior goods, and the promotion and application of traceability methods are also insufficient.
Industry insiders believe that the upward flow of agricultural products requires a service system integrating quality control, logistics, design and R&D, and marketing promotion, which has not yet taken shape.
"A thousand networks, one face": homogenized competition is severe. "Rural e-commerce has already turned from a 'blue ocean' into a 'campaign-style red ocean.' E-commerce's converging investment and duplicated construction waste human, financial and material resources," said Hong Tao, director of the Institute of Commercial Economics at Beijing Technology and Business University. This will inevitably lead to severe homogenized competition, operating at a loss, and stores opening and closing at the same time.
Our reporters also found during interviews that in some pilot counties that laid out rural e-commerce earlier, many village-level service stations established in the early stage have produced unsatisfactory results, with a relatively low survival rate. Partners admitted frankly that competitive pressure is great, and that opening a store is easy but keeping it is hard.
Seek Differentiation, Avoid Sameness; Don't Rush for Quick Success
Which way forward for rural e-commerce? Grassroots government managers and e-commerce practitioners generally believe that, first of all, the hard nut of "the upward flow of agricultural products" must be cracked.
"Rural e-commerce should currently focus its efforts on talent cultivation, building regional public brands, R&D and design of online goods, building a traceability and full-process quality control system, and setting up public service platforms," said Mo Wenjian. On these foundations, the upward flow of agricultural products needs to achieve base-based cultivation and breeding + on-site experience + worry-free full-process supply chain support + a visualizable quality control system + e-commerce-based operations + service guarantees.
At the recently held Fourth Taobao Village Summit Forum, Wei Yan'an, director of the Agriculture and Workers Department of the Shaanxi Provincial Committee of the Communist Youth League, proposed that Taobao villages need targeted cultivation once they reach a certain stage, and cannot grow wildly or engage in homogenized competition.
The first "China Rural E-Commerce Development Report," recently released by the Research Institute of the China International Electronic Commerce Center, proposed that the future trend is for some agriculture-related e-commerce enterprises to begin transforming from retailers into distributors, from pure channel operators into brand owners, from raw material procurement to design, seeking manufacturers for OEM production, and finally distributing goods to other small online merchants, gradually establishing a vertical e-commerce industry chain hierarchy dominated by brand owners, wholesalers and retailers.
"The development of rural e-commerce must be based on county-level industrial foundations and cannot be imagined out of thin air; existing traditional industries should leverage the wave of rural e-commerce development to achieve informatization transformation," said Qiu Jie, secretary-general of the Ningxia E-Commerce Association. The joint development of the real economy and e-commerce will produce the effect of two wings flying together.
It is worth noting that more and more rural e-commerce sellers are now cooperating with offline physical distributors to expand sales channels. Some e-commerce platforms help physical enterprises achieve e-commerce transformation, selling products and services nationwide and participating in higher-level market competition.
Many industry experts and grassroots cadres also remind that developing rural e-commerce must not "run too fast," but should advance steadily, starting from one "small goal" after another to build a sound rural e-commerce ecosystem. For example, at the current stage there is no need to rush toward "full coverage" at the county, township and village levels; attention should be paid to the "survival rate"; and the effectiveness of policies for returning-home entrepreneurship and e-commerce training should be brought into play to cultivate more local e-commerce talent.