Analysis of the Eight Major Dilemmas in County-Level E-Commerce Development
Since 2015, with the introduction of as many as over a hundred national policies and the stimulus of hundreds of millions in special funds from the Ministry of Commerce for e-commerce rural demonstration counties, county-level e-commerce across China has been advancing with great fanfare. However, as a core expert on rural e-commerce for the Ministry of Commerce, after conducting research and providing services in dozens of counties across 34 provinces nationwide, I have found that most counties developing e-commerce have encountered insurmountable dilemmas. The various and sundry difficulties, once summarized, form these eight common problems. Today I have organized them into the "Eight Major Dilemmas of County-Level E-Commerce"!
1. Can't Sell
Every year agricultural products have a bumper harvest, and every year products can't be sold and rot in the fields. This has almost become an insoluble dead knot. Reading such reports in the newspapers is heartbreaking every time. But what exactly is the reason that, on one hand, established agricultural products are selling at ever-higher prices, while on the other hand, bumper harvests of agricultural products in rural areas rot in the fields? Why don't they do e-commerce to sell these products? In fact, many places have done it, but it's basically useless. This is the number one problem of our agricultural product e-commerce: "Can't Sell"! In the vast majority of areas, opening an online store results in a dead store. For e-commerce, the higher the expectations, the greater the disappointment.
Why can't they sell? Having seen many online stores run by counties, they basically all opened a store and then entered a waiting state, hoping every day that online buyers would bite like a school of fish. Is there such a good thing? Many people have been fooled by "e-commerce successology," assuming e-commerce is a panacea. Little do they know that after opening an online store, you still need to operate it seriously, and after operating it well, you need to continuously promote it. This process is quite lengthy, and even one or two years may not yield noticeable results. Such a long cycle is more than most people can endure. So this brings up another question: open one store or multiple stores? Opinions vary on this, but just compare it to the strategy our Party used during the revolution. Back then, did they establish one base area or multiple base areas? A single spark can start a prairie fire, so you absolutely cannot rely on just one place's spark. Instead, you light fires everywhere and see which one can keep burning. The same principle applies to e-commerce: multiple platforms, seek opportunities, and develop by using key points to drive broader progress! There's another question: e-commerce, does it only mean doing business online? If you learn more about the development of e-commerce in the past two years, you'll find that combining online and offline is the general trend. It's like booking a movie ticket online and then going to the cinema to watch it. This is a typical combination of online and offline. Therefore, to develop county-level e-commerce, you also need to open up channels beyond e-commerce platforms. Combining them is the best path for development.
2. Can't Ship Out
If you investigate the difficulties of agricultural product e-commerce across the country, the number one issue is almost certainly "logistics." High shipping costs, long delivery times, and no rural service points. This is the current state of county-level e-commerce logistics. So many counties have started subsidizing logistics, hoping logistics companies will set up service points in villages and hoping they will lower shipping costs. Does this work? You need to think about why logistics companies don't go to rural areas and why e-commerce express fees in counties are so high. The Yangtze River Delta region is China's most developed express delivery region. Why? Not because the roads are good, but because this region is China's most economically active zone, with the densest volume of both outbound and inbound parcels nationwide. So express delivery companies can make a lot of money in this region, and therefore can keep lowering express fees again and again. Conversely, in the vast rural areas, there are few inbound parcels and almost no outbound parcels. If express delivery companies set up points deep in rural areas, they operate at a total loss. How could they lower shipping costs? How could they stay? Therefore, subsidies cannot solve the logistics dilemma in counties. The logistics problem appears to be the "cause" of poor e-commerce development, but actually it is the "effect" of poor e-commerce development. Because e-commerce sales are poor, logistics infrastructure is poor. A vicious cycle.
This is only about ordinary logistics, but the problem with agricultural product logistics is far more than just high costs and slow transportation. Look at Figure 2. The writer Liu Liu bought several jin of mangosteen on JD.com and found many were rotten upon delivery. Complaints were not handled well, and she had a public spat with JD.com. So did JD.com really send several jin of rotten mangosteen to Liu Liu? With a little thought, you'd understand that a platform of JD.com's scale wouldn't do something that shoots itself in the foot. So why were the mangosteens rotten? This is the big problem of agricultural product e-commerce, especially fresh product e-commerce: cold chain logistics "can't chain together." From the warehouse to trunk line logistics to last-mile delivery, if any single link isn't "cold," everything fails and the products rot. So for county-level e-commerce, can't you just bypass fresh products and only sell processed goods that keep well? You should know: what agricultural products do netizens demand most? The number one is fresh products. Fresh products are the jewel in the crown of agricultural products!
3. Can't Supply
After solving the selling problem and the transportation problem, is county-level e-commerce on a clear path? Next you'll find that the most fundamental problem of agricultural product e-commerce comes crowding in: "Can't Supply"! The vast majority of counties nationwide share a common problem called "whatever you want, there's everything; whatever you want, there's nothing." If someone asks what specialty products your county has, you can certainly count out N kinds on your fingers. But once you put them online for nationwide sale and sales actually pick up, you'll find that no single product can be supplied in sufficient quantity. Most products' output is only enough to sell in a slightly larger prefecture-level city and simply cannot meet nationwide demand. Once I went to a county in Northeast China, and the locals treated me to a wild vegetable called "thorny bud" (Aralia elata). It tasted great, so I asked about local output and whether it was enough for an online group buy. The local leaders said there was absolutely no problem and asked roughly how much would be needed. I answered that if done well, one group buy could sell about 20,000 to 30,000 orders, with each order maybe 3 to 5 jin, making that 100,000 to 150,000 jin. After hearing this, the leaders thought about it and said that even harvesting all the wild vegetables locally might not reach that amount. This is the most fundamental dilemma of most county-level "specialty products" — no industry has been formed, so supply simply can't keep up!
This supply shortage also has another situation, like the "monster" garlic in the agricultural product market: last year garlic was brutally expensive, this year garlic is dirt cheap, repeating year after year! What's the reason? Garlic in Jinxiang, Shandong, has already formed a large-scale industry. Why does this problem still occur? The root cause is insufficient "enterprise-ization." Most output is still in the hands of smallholder farmers, and the biggest problem with one-household-at-a-time farmers is that production lacks planning. They decide planting plans based only on the simplest market appearances. When the market is hot, they plant more; when the market is cold, they cut production. Such blind behavior always makes them victims, never escaping the vicious cycle of one year rotting in the fields and the next year being unable to supply enough. So this is the deeper reason for supply shortages: an industry exists, but lacks enterprise-ization and integration.
4. Low Quality, Low Price
Chinese agriculture has a long history but is declining steadily. Its share of the national economy is now less than 10%. Agricultural taxes have been abolished, and grain planting is subsidized, yet it seems none of this has had much effect. Why is it that agricultural products, of all things, don't make money? Let's look at a comparison. Imported cherries cost seventy or eighty yuan per jin at every turn, while domestically grown large cherries often sell for only ten or twenty yuan. Imported kiwifruit sells for ten or twenty yuan each in supermarkets, while domestic kiwifruit sells for a few yuan per jin and still can't be sold. Are imported products inherently superior to domestic ones? In fact, "cherries" is a transliteration of the English word "cherries," and Chinese kiwifruit and imported kiwifruit share the exact same ancestry. So why is there such a big price gap? Is it because Chinese people worship foreign things? That might be part of it, but if you carefully compare, you'll find that imported agricultural products and domestic goods often indeed have a big quality gap. Imported goods tend to be uniformly bright in color, large in size, and good in taste, while domestic goods are uneven in quality. Is it because imported goods have better varieties? In fact, China doesn't lack good varieties or good products, but why do they generally perform worse than imported goods in the market? This is because of man-made problems that cause agricultural products, once turned into commodities, to be inferior in quality to imported goods. This is because the vast majority of our domestic agricultural products are grown by smallholder farmers, and the biggest problem with smallholder production is the lack of any standards. From seeds to fertilizer to the farming and breeding process, farmers act as they please based on their own experience. After harvest, farmers are extremely lacking in sorting awareness. Big and small, good and bad, all go into one basket. Such products can only be priced as inferior goods in the market. What farmers haven't figured out is: do you actually earn more by sorting out the inferior goods and selling at a high price, or by not sorting and selling everything together at a low price?
No standards and no sorting are only the most primitive causes of low quality and low price. There is a deeper reason: most county-level agricultural products have no brand, so they can only become generic goods in the market and sell at "cabbage prices." So some places painstakingly create brands, but why still no profit? What's the reason? Like the former Wuchang rice. Everyone nationwide knows Wuchang rice is good, but they're unwilling to pay the high price of ten or twenty yuan per jin. Why? Because ordinary people can't figure out whether the rice they're about to buy is genuine Wuchang-produced goods, so of course they're unwilling to pay a high price. Why can't they figure it out? Because they don't know which factory's product under which trademark is authentic Wuchang rice. So with a regional brand, you also need a product brand to carry it. At the same time, having a product brand doesn't necessarily mean you can sell at a high price. A key guarantee is also needed, and that is "traceability" of agricultural products. So having a regional brand, a product brand, and traceability — this is what constitutes a complete agricultural product brand.
5. Lack of Talent
The first four dilemmas are mostly industry problems. The next four are "people" problems. Just now I said that if you survey the difficulties of nationwide agricultural product e-commerce, the number one issue is certainly logistics. Then the number two issue, which basically every county complains about, is "lack of talent." China's current official data shows 800 million farmers, of whom as many as 200 million have gone to cities to work. This has led to a "hollowing out" of rural talent, leaving only the elderly and housewives to do e-commerce. How can they do it well? Such a severe shortage of people means there are few outstanding enterprises in the county. With no people and no enterprises, the entire county becomes an e-commerce desert, completely lacking an e-commerce atmosphere. And China's current college entrance examination system presents a seriously unfair situation. In major agricultural provinces like Shandong and Henan, students who score over 600 points struggle to get into a second-tier university, while in economically developed areas like Beijing and Shanghai, students who score just over 500 can get into Peking University or Tsinghua. The space for talent advancement is already extremely limited for rural areas, and under such circumstances, college students who emerge from this system are even more eager to leap out of the farm gate. So when they graduate, it's also when they leave their hometowns to march into the cities.
How should the problem of rural talent shortage be solved? Poach talent from cities with high salaries? You'll quickly find that for freshly graduated college students, they'd rather earn two or three thousand in the city than take four or five thousand back home. This is very hard to reverse. A fresh graduate's longing for the bustling world is not something a slightly higher salary can change. So for rural e-commerce, where should talent come from? The first target should not be newly graduated college students, but rather returning older college graduates or migrant workers returning from cities. These people, after experiencing the bustling world and looking back at their hometowns, have both vision and experience, and can also do solid work. They are truly the most viable first batch of talent for county-level e-commerce development. Besides operational talent, where should entrepreneurial talent come from? Returning entrepreneurs and existing entrepreneurs are both groups that government leaders need to win over with sincerity. These two groups are the main source of county-level e-commerce entrepreneurs.
6. Lack of Services
Will the problem of lacking talent ever be completely solved? The answer, of course, is no. In fact, even in coastal cities, there is also an extreme shortage of people. As long as the economy develops, talent will always be an eternally unmet demand. What to do when there isn't enough talent? Let's first look at how China's e-commerce developed areas got where they are. In first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, e-commerce rose to become the world's number one. This is absolutely not just the credit of e-commerce platforms like Taobao and JD.com. It's the dozens to hundreds of thousands of e-commerce enterprises of all shapes and species that form a complete e-commerce ecosystem. The coastal e-commerce industry is developed because the ecosystem is developed. From the perspective of enterprise development, it's the same. I have served international brands like P&G and Panasonic, and one thing I've always admired about them is that a single foreign enterprise typically uses dozens to hundreds of e-commerce service providers. With so many service providers joining this brand's e-commerce development, it can perform excellently in every aspect. That's why I served as a consultant for Panasonic for three years, and its annual growth was almost always a super-high-speed climb of fivefold to tenfold!
Our county-level e-commerce is weak precisely because no ecosystem has been built, and the reason is the lack of service providers. It's very hard for a single county to produce excellent service providers, because service providers develop by providing e-commerce services to enterprises. If a county has few e-commerce enterprises to begin with, how can it nurture service providers? So for counties to do e-commerce, they need a large number of excellent service providers. These service providers should not focus only on their own county, but should be sought and brought in from across the country. Enabling counties to make good use of China's excellent service providers and integrate into the nationwide e-commerce ecosystem — this is the core solution to the problem of county-level talent shortage.
7. Lack of Planning
Since 2015, nationwide rural e-commerce has inadvertently stepped into a strange trap: "industrial products going rural" has developed rapidly, while "agricultural products going urban" has barely moved. What's the reason? Because platforms like Taobao, JD.com, and Suning all coincidentally invested heavily in rural strategies of going up mountains and down to villages. The "Village Taobao," "JD Help," and "Suning Station" launched by established e-commerce platforms, plus emerging upstarts like "Ganjie," "Lecuntao," and "Taoshihui" — these enterprises have all been aggressively seizing territory, staging a great show of industrial products going rural across the country. Many counties, not understanding the situation, were overjoyed when big platforms came knocking, feeling that as long as they hitched a ride on the ship of platforms like Taobao, e-commerce would be just around the corner. Many counties went all out to help platforms sell goods, even setting hard targets that every village party branch had to lead the way in buying 20,000 yuan of goods, instantly turning their county into an "e-commerce developed county." Little did they know they were only helping e-commerce platforms contribute to GMV, without selling a single product from their own county. Ordinary people didn't earn a single cent but spent quite a bit of their savings. After all that bustling rural e-commerce work, was it just to make it more convenient for villagers to shop online? This is a mistake many regions have made. Of course, this is also because many platforms took advantage of county leaders not understanding e-commerce. At the launch meeting for the third batch of the Ministry of Commerce E-Commerce Department's "E-Commerce Rural Demonstration Counties," the department head publicly criticized many big platforms: "They only want to sell goods into rural areas, not help farmers sell goods."
When this issue is raised, county leaders may immediately respond: Our county didn't fall for it. Besides doing Village Taobao, we also set up a "Specialty Hall." Many counties' e-commerce development summary reports also lavishly describe opening their own specialty hall, as if this is the other shore of e-commerce development, as if getting on the specialty hall means boarding a spaceship. Little do they know that after opening a specialty hall, the excitement lasts only a few days, after which most specialty halls fall into silence, or even eternal silence. Because on platforms like Taobao and JD.com, a "Specialty Hall" is just an inconspicuous channel, and clicking into that channel page, there are large numbers of specialty halls waiting for visitors. A channel that itself doesn't get many buyers visiting regularly, yet has large numbers of counties competing in it — the sales results can be imagined.
So many counties doing e-commerce are, as described above, constantly influenced by platforms. Today they launch Village Taobao or JD Help, tomorrow they launch a specialty hall, one hammer here and one stick there, never having thought about what industry their county should actually develop, what products to make the flagship, how to cultivate operating entities, and how to open up sales channels for agricultural product e-commerce. These matters constitute the planning of county-level e-commerce development. This planning is best done as a three-year plan to avoid being affected by leadership changes. Most counties might say they have a plan, but when you look at it, you find these plans are all high-sounding official documents, listing everything e-commerce should do all at once. They look splendid but are actually impossible to execute.
8. Lack of Government Drive
The last dilemma of county-level e-commerce development, I call it "lack of government drive," meaning the lack of government impetus. It appears that many county governments are enthusiastically doing e-commerce, but in reality, the county's e-commerce chariot gets almost no government impetus. What's the reason? First look at a document. This is Document No. 24 issued by the State Council in 2015, "Several Opinions on Accelerating E-Commerce Development and Cultivating New Economic Momentum." One provision explicitly states that "relevant fiscal funds must not be used for the construction of online trading platforms." Many counties didn't notice this at first, and later when they learned of it, they didn't understand why building online trading platforms was not allowed. Last year at the national agricultural product e-commerce class organized by the Ministry of Commerce E-Commerce Department, I spoke about this topic. During the break, a division chief from a provincial Department of Commerce ran up to me and said, "Teacher Xu, what you said is so right. Our provincial leaders just love building platforms. Over 20 million has been invested, and there's still almost no traffic." This is the biggest problem with building e-commerce platforms: due to the nationwide integration of the internet, e-commerce platforms are destined not to survive in large numbers. Netizens can only remember a few platforms. Any more can only rely on buying traffic to forcibly pull people in, and the cost of acquiring traffic for e-commerce platforms is as high as over 300 yuan per person! But many counties never tire of it. When I was doing research in one province, a county reported, "Last year we built six national platforms for different specialty products." My spine went cold hearing it, and I silently lamented, "The greater the capability, the greater the harm!"
So many counties' e-commerce development funds have been thrown into pits where not even a splash can be seen. Misallocation of policies and funds is the first manifestation of county-level e-commerce lacking government drive. Of course, although these counties spend money recklessly, at least they're still doing something. But more counties shout loud slogans without taking real action. Holding a few meetings, issuing a few red-headed documents, putting out a few splendid-looking policies — this is the model for many counties doing e-commerce. This is a typical case of not valuing e-commerce. True valuing means: if the commerce bureau director doesn't report, the party secretary and county head will call every few days chasing the director to report; if the commerce bureau director doesn't go to the villages, the party secretary and county head will run even more diligently than the director. That's what real leadership attention looks like. Many counties might cry foul: "Our county officials may not be high-ranking, but a county has thousands of threads to manage!" That's true, but a truly excellent leader must be good at identifying development opportunities and be able to seize that opportunity and personally execute it all the way to results. In today's China, what is the development opportunity for counties? The energy era has passed, the steel era has passed, the real estate era has also passed. For a county to rise and catch up with cities, the only option is to develop e-commerce. This is very likely the county's last good opportunity for development!
Lack of government drive has another manifestation: everyone attaches importance, but each does their own thing. At the municipal level, it's conflicts between the commerce bureau and the agriculture bureau and other departments. At the county level, it's even more divided into many factions. With multiple forces fighting like this, the results certainly won't be good. So developing county-level e-commerce requires consolidating government forces, making it a top-leader project, with unity from top to bottom, twisting into one rope for development, to overcome countless difficulties and obtain the true scripture.
The above eight dilemmas exist to a greater or lesser extent in almost every county. Summarizing these dilemmas is not to undermine the confidence of rural e-commerce practitioners, but to identify difficulties and face them correctly. E-commerce is not a smooth path, still less is it the "get rich quick by doing e-commerce" promoted by "e-commerce successology." Here there are the 81 tribulations, and here a long march of 25,000 li is needed. Pressing forward despite difficulties, one step at a time — this is the attitude our generation of rural e-commerce people should have!