Competitive Landscape of Rural E-commerce: Six Forces in Contention

The vigorous rural e-commerce movement has now entered its third year. The beautiful expectations at the outset are hard to call realized so far; instead, the various forces joining the battle for rural e-commerce have only multiplied, with all the appearance of "attracting countless heroes to bow." Besides the e-commerce giants represented by Alibaba, JD.com and Suning "advancing in force," there is also the "national team" represented by China Post, the All China Federation of Supply and Marketing Cooperatives and China Telecom making a high-profile entry; local "warlords" represented by Zhejiang Ganjie, Shanxi Lecuntao and Shenzhen Taoshihui "crouching like tigers and coiling like dragons"; agriculture-related listed companies represented by Kingenta, Huifeng Agriculture and Noposion driving the collective clamor of agricultural-input e-commerce; the "quiet rise" of agricultural specialty micro-businesses, marked by the emergence of the new farmer group and the formation of micro-business platforms; and, of course, the "advance on all fronts" of the major e-commerce service providers, who have become the busiest group in the rural e-commerce movement. These six forces are, through competition and integration, deepening the construction of rural e-commerce development models and the division of territorial influence, and are of course also driving rural e-commerce continuously forward.

1. The e-commerce giants represented by Alibaba, JD.com and Suning begin "transforming their formations" amid their "advance in force"

From the initial, sentiment-filled launch of the "Thousand Counties, Ten Thousand Villages" plan to the release of Rural Taobao version 3.0 in July 2016, Alibaba's rural e-commerce strategy has grown ever fuller. If Rural Taobao 1.0 was based on piggybacking on the existing rural commercial system, then version 2.0 already elevated talent to the first element and launched open recruitment of Rural Taobao partners under the principle of "fixing the site, not the person," markedly increasing vitality; by version 3.0, it had clearly evolved from simple e-commerce going to the countryside toward comprehensive creation of a rural e-commerce ecosystem and services, with Rural Taobao and Taobao Villages as the dual cores and support from several segments including talent training, finance going to the countryside, online tourism and upward distribution channels, transforming from simple online buying and selling of goods to comprehensive creation of a rural internet economy.

JD.com's rural e-commerce strategy closely followed Alibaba's launch. Initially named the "Thousand Counties, Prairie Fire" plan, it penetrated below the county level through the "two legs" of JD Bang and JD county-level service centers. By the second half of 2015, on the proposal of Liu Qiangdong, its rural strategy gradually took shape as the "3F" strategy, namely the strategy of industrial goods going to the countryside (Factory to Country), the strategy of agricultural products entering the city (Farm to Table) and the rural finance strategy (Finance to Country). Because the first English letters of the three major strategies are all "F," it was so named, effectively making up for the thinness of simple e-commerce going to the countryside.

Suning's rural e-commerce strategy was not formally launched until January 2015, mainly upgrading its township-level stores into Suning.com service stations, which still belonged to the extension of its inherent O2O model down into rural areas. Thereafter, Zhang Jindong, Suning's top leader, personally advocated and researched rural e-commerce, ultimately forming the new "Three Transformations and Five Locals" model concept, namely the "Three Transformations" vision of agricultural industrialization, branding of agricultural products and professionalization of talent, and the "Five Locals model" of "local sales, local taxation, local services, local employment and local wealth creation." This can be said to be highly targeted and also very attractive to local governments.

In just over two years, the rural e-commerce strategies of the major giants have undergone such drastic changes, fully demonstrating how fast rural e-commerce is developing and how quickly the situation is changing. The "agricultural" character of rural e-commerce is becoming stronger and stronger, and it is becoming more and more down-to-earth.

2. The "national team" represented by China Post, the All China Federation of Supply and Marketing Cooperatives and China Telecom makes a high-profile entry into rural e-commerce competition

First, the "postal chief" joined the rural e-commerce competition starting in 2014. Relying on its own platform Youle.com and its rural operating terminal, the "Post Master" system, it penetrated downward along its sound rural network, and by the end of 2015 had completed coverage of 110,000 villages. Judging from this action, the "postal chief's" attitude toward rural e-commerce is serious. If its huge rural postal delivery workforce can be effectively incentivized and the terminal distribution system of rural logistics can be openly transformed, then it is entirely possible to get a share of rural e-commerce.

Following China Post, the All China Federation of Supply and Marketing Cooperatives also made a high-profile entry into rural e-commerce in 2015. In the 2015 reform of supply and marketing cooperatives, the central government granted them new powers, namely e-commerce and finance, and with funding support, which greatly boosted their confidence, giving them the feeling of entering with an "imperial sword." Subsequently, the heavily funded "Co-op E-Home" went online and began operating. But regrettably, the experience of "Co-op E-Home" seems less than satisfactory, and the idea of having a single e-commerce platform simultaneously handle online functions such as B2B, B2C and O2O has also been widely questioned, because even Ma Yun cannot do it.

For rural e-commerce to develop, the network is the foundation. As rural e-commerce advances triumphantly, the major telecom operators have also enjoyed the dividends accordingly. China Telecom, however, seems not yet satisfied with this. Moving from "serving people" to "taking direct action," it upgraded rural telecom service points into e-commerce service points and also upgraded its B2C e-commerce website 114MALL in support. However, this platform system is still relatively open. In its pilot in Qinghai, its grassroots e-commerce service points are more like purchasing agency service points, able to act as agents for various platforms and to use various payment methods, not only Telecom's "Yi Pay."

3. Local e-commerce "warlords" represented by Zhejiang Ganjie, Shanxi Lecuntao and Shenzhen Taoshihui "crouch like tigers and coil like dragons"

Although Zhejiang Ganjie started out in Suichang in western Zhejiang, as the earliest explorer of rural e-commerce as a whole, its pace of exploration and improvement has never stopped. The initial Ganjie version inspired Alibaba's Rural Taobao, and Ganjie also expanded to thousands of villages in 10 provinces during the 2015 rural e-commerce "land grab." But along with expansion in breadth came a series of problems such as model adaptability and sustainability, so they slowed the pace of expansion and began pondering deeper issues, with local online-offline integration becoming an important direction of exploration.

Shanxi's Lecuntao counts as another restless "warlord." In less than three years it expanded to 25 provinces nationwide, covering 65,000 villages. The model they publicly promote is also O2O, and their invented "Le 6 Ji" is especially innovative: on the 6th, 16th and 26th of each month, orders are concentrated, sales are concentrated and delivery is concentrated, which can reduce the logistics costs and procurement costs of rural e-commerce.

Taoshihui, headquartered in Shenzhen, has put forward the resounding slogan of "county-level self-ecology." It wants to build a rural e-commerce service platform rather than buy and sell on its own, and proposes building five empowerment systems serving counties and outlets, namely logistics, finance, supply chain, IT and operations, so that the local economy can develop better. So far it has also expanded to several provinces.

4. Agriculture-related listed companies represented by Kingenta, Huifeng Agriculture and Noposion drive the collective clamor of agricultural-input e-commerce

In the spring of 2015, Lenovo's investment in Yunnongchang opened up yet another fiercely competitive field of rural e-commerce: agricultural-input e-commerce. Originally, the rural e-commerce businesses of the major e-commerce platforms had already designed agricultural-input e-commerce sections, but Lenovo's investment behavior directly stimulated the collective clamor of the major agriculture-related listed companies, which invested in agricultural-input e-commerce one after another and gave rise to several agricultural-input e-commerce platforms.

For example, Kingenta, together with China Agricultural Industry Development Fund and Modern Seed Industry Development Fund Co., Ltd. and others, high-profilely established Nongshang No. 1, with first-phase investment of 2 billion yuan, preparing to expand to 1,000 counties in three to five years.

Noposion, meanwhile, drove its subsidiary Tiantianquan to launch the "Tiantianquan Internet Alliance." In addition to an O2O service platform, it also launched Nongjiwang (B2B), Nongfadai (P2P) and platforms for logistics and agricultural product sales, building an agricultural internet ecosystem. Huifeng Co., Ltd. invested in Nongyiwang, highlighting pesticide products and initially realizing the online ecosystem construction of a computer-end pesticide mall online trading system, mobile APP, mobile touch-screen version and micro-mall system.

According to incomplete statistics, listed companies involved in agricultural-input e-commerce, besides Kingenta, Huifeng Co., Ltd. and Noposion, also include Huilong Agricultural Materials, Xinyangfeng Fertilizer, Agricultural Products, Sierte, ENN Natural Gas, Batian Co., Ltd., New Hope and Beidahuang. But the common feature of these listed companies' involvement in agricultural-input e-commerce is a strong platform mindset and self-contained systems. Their openness determines their future space; otherwise the e-commerce section will always look good but be useless, and profitability will be extremely difficult. Moreover, the particularity of agricultural inputs determines that competition in agricultural-input e-commerce also depends on competition in the offline agricultural-input market.

5. Agricultural specialty micro-businesses, marked by the emergence of the new farmer group and the formation of micro-business platforms, "quietly rise"

In mid-2015, a disfigurement case caused by the sale of fake and inferior facial masks through WeChat Moments went to trial, and the mask seller was sentenced. Thereafter, the first generation of violent screen-flooding, tier-by-tier stockpiling micro-businesses began to decline, but agricultural specialty micro-businesses, represented by the sale of specialty agricultural products, took up the baton and rapidly exploded. Why so? One important reason is that agricultural products are non-standardized, which happens to make use of WeChat's social genes and, on the basis of building trust among acquaintances, alleviates the demand for standardization in transactions between strangers. For a time, sentiment was everywhere, and agricultural specialty products filled WeChat Moments.

Not only that, after going through the simple and crude stage, micro-businesses began to become platformized, with micro-business platforms such as Youzan and Youliang appearing. No longer was violent screen-flooding needed, nor tier-by-tier stockpiling bordering on pyramid schemes; only an open back-end system was needed to achieve one-piece dropshipping, and the agency tiers were generally kept within two levels, becoming increasingly transparent and standardized.

Based on research results from the AliResearch Institute and data analysis from various aspects, about 2 million young people have returned to counties and below to engage in internet agriculture, generally using tools such as online stores, micro-businesses and Weibo. This force is still very scattered and individually weak, but its development momentum cannot be underestimated. It has become another active factor in rural e-commerce and is increasingly showing a trend of aggregation. Representative new farmers such as Bi Huifang, Xinba, Qinfen Nongge and Tudou Jiejie are exerting ever greater influence in the rural e-commerce world.

6. E-commerce service providers going to the countryside in sync with the major e-commerce players are "advancing on all fronts"

Rural e-commerce cannot be driven by e-commerce platforms alone, nor by the government alone. E-commerce must go to the countryside together with e-commerce service providers. Therefore, in the development of rural e-commerce, e-commerce service providers have increasingly become the focus of attention. Some of them have become honored guests of county heads, allies of rural e-commerce and guides for rural e-commerce entrepreneurs.

For example, the Pan Dongming team of Ganjie is itself one of the service providers and undertakes a large number of government e-commerce service functions; the Wang Junlong team of Lishui entered comprehensive rural e-commerce services starting from e-commerce talent training and is already quite influential; and behind Zhejiang's developed county-level e-commerce, the figures of e-commerce service providers such as Yu Bin and Wang Wenhui can be vaguely seen. The Tongyu model of county-level e-commerce, operated by the Mo Wenjian team that emerged from Zhejiang, pushed e-commerce service providers to the forefront, leading the design and implementation of rural e-commerce throughout the entire process. In other provinces, there is the Tian Jiangang team's systematic service for upward distribution of agricultural products through e-commerce, the Xu Xiaobo team's carrying of service functions for e-commerce poverty alleviation in Jiangxi, as well as the Jeff E-commerce team serving Hubei's county-level e-commerce, the Shang Yonghua team of Hebei deeply cultivating e-commerce park operations, and the Wang Xuelian team holding fast in Gansu.

As rural e-commerce advances in depth, the problem of homogeneous competition in the upward distribution of agricultural products has become increasingly apparent, and brand strategy has gradually attracted attention in various places. The Jia Xiao team of Nongben Consulting, which specializes in county-level agricultural product brand planning, has been rapidly active across the country since 2015, while the Hu Xiaoyun team of the Zhejiang University Agricultural Brand Research Center, long engaged in agricultural brand research and services, the Li Zhiqi team of Zhiqi Future, and the Lou Xiangpeng team of Fulai Marketing have also been invited into e-commerce circles to provide e-commerce brand services. Brand inevitably goes together with communication, so the Xue Qian team, former CCTV journalists, and the Hu Haiqing team, former Southern Media Group, have also participated in publicity planning and event marketing design for rural e-commerce, with classic cases.

What is also feverish along with rural e-commerce is rural e-commerce training, whose situation can be described as booming. Almost every e-commerce service provider is organizing training, starting from conceptual guidance and talent cultivation, not only for entrepreneurs but also for local leaders and company executives. After Taobao University first opened a county-level e-commerce county magistrate class, e-commerce training for leading cadres in various places flourished, and the county-level e-commerce training of JD.com and Suning quickly followed. The County-Level E-commerce Alliance under the China E-Commerce Association, Anhui's Bantang Business School, and Shaanxi's Green Field Academy, then being prepared, also joined the ranks of rural e-commerce training. Doing e-commerce cannot lack planning, and e-commerce planning often follows after training, with relevant experts and institutions also busy everywhere.

It can be predicted that as the rural e-commerce strategy deepens, more and more local governments and business people will recognize that the importance of e-commerce service providers is growing day by day, and there will still be great room for development in the future.

In summary, with the continuous increase in scale and the continuous deepening of models, especially the continuous development of the rural e-commerce ecosystem, rural e-commerce increasingly requires more forces to participate. Besides the six visible forces at present, other forces are also entering the field of rural e-commerce one after another. For example, some traditional retail enterprises in counties are also borrowing e-commerce tools to explore integrated online-offline development. All these participants will make rural e-commerce more colorful. The only wish is that in the competition and integration of rural e-commerce, all forces can ultimately be reflected in farmers receiving real benefits.