Alibaba and JD.com battle it out for rural China online sales
Online shopping is increasingly becoming a part of everyday life for even the rural areas of China, with Alibaba and JD.com both pursuing strategies to dominate these more remote regions. As of the end of October, there are now 1,311 Taobao "villages", compared to 780 just a year ago, which are clusters of areas with online presence on the Alibaba platform. The Beijing government is hugely supportive of ecommerce growth in the rural areas and last year said it would invest over $22bn to provide 50,000 more villages with internet access by 2020. 

 

BEIJING -- When Cheng Yuan Yuan left her job as an accountant in the sprawling southern metropolis of Shenzhen to go home and start a family, the 27-year-old thought she was leaving better economic opportunities behind.

She opened a convenience store in her rural neighbourhood on the outskirts of Ruzhou in central Henan province, where she stocked household items such as cooking oil and detergent.

But limited distribution networks and resources means that prices of acquiring goods in China’s rural areas are often much higher than in cities. Cheng wasn’t seeing much profit.

She was used to online shopping in Shenzhen, and soon realized that it was still possible to order almost the same variety of products online at cheaper prices than she could find locally, in Ruzhou.

A deliveryman carrying parcels to online shoppers. Credit: AP

If she orders in the morning, men on motorbikes usually arrive at her shop with her deliveries by the evening.

Cheng is one of 300,000 village promoters across China

Later, Cheng spotted an opportunity to earn commission as a “village promoter” for online retailer JD.com(opens in a new tab) -- second in China to giant Alibaba, which runs the popular Taobao and Tmall stores. The job sees Cheng acting as an agent in the village, helping people learn how to shop online, and having her store act as a drop-off point for parcels.

A year on, her small shop is a hub of activity. Her windows are still mostly bare, but inside there are stacks of cardboard packages of various shapes and sizes, waiting for villagers to come pick them up.

Cheng is one of some 300,000 village promoters across the country for JD.com.

As online shopping becomes a part of everyday life for more people in China, Alibaba and JD.com are battling for dominance in rural areas.

Local Tibetan residents walk past Alibaba's delivery service station, at the foot of Mount Everest, serving a population of 7,400. Credit: Alibaba/Imaginechina

Alibaba, too, has a similar strategy as JD.com for far-flung areas. As of end-October, there were 1,311 Taobao "villages" in China, compared with 780 a year ago. These Taobao villages are clusters of rural retailers with an online presence on Alibaba's platform.

But where JD.com is more similar to Alibaba's Tmall, in that it only carries goods from established businesses, Taobao has a marketplace open to individuals, allowing people to open stores and sell goods at fixed prices or by auction.

A blind shopper at a rural Taobao station getting measured by a "village promoter." Credit: alibaba

He pays her in cash, so he doesn't have to figure out getting an online wallet. Credit: alibaba

Cheng notes that her role as a promoter appears to be effective in helping with the resistance to online shopping for a lot of elderly people.

“Older people do not understand online shopping. They don’t have computers. But when I show them the cheaper prices for goods they are buying already, they admit they are intrigued,” said Cheng.

“So to get them more comfortable, I order the items first and let them inspect the items in person. Now, dozens of older people regularly ask me to order things for them, then they pay me back in cash.”

Cheng is experiencing far less barriers with the younger crowd, naturally. She counts a customer base of over two hundred millennials. They often order beauty products and food items, she said.

It's easier to get online and shop now

China’s government enthusiastically supports the growth of ecommerce in rural areas. Last year, China announced(opens in a new tab) it would invest over $22 billion to provide 50,000 more villages with internet access by 2020. Premier Li Keqiang said(opens in a new tab) in a speech that online retail didn’t necessarily pose a threat to brick-and-mortar stores, since the latter could expand online.

And for a country that has become well-known for producing counterfeit and shoddy products, a national consumer protection law(opens in a new tab) passed in 2014 introduced new penalties for fraud and false advertising. It's now mandatory for retailers to refund goods returned within seven days of purchase, helping with customer confidence.

Chinese workers sort piles of parcels, most of which are from online shopping on Alibaba's Tmall International site. Credit: Li jiangang/Imaginechina

As of June 2015, internet penetration reached 64.2 percent in urban areas and 30.1 percent in rural areas. But the number of rural internet users grew at double the rate of urban internet users that year. The government is hoping that e-commerce could raise living standards and create more jobs for China’s 600 to 800 million rural residents.

Big brands reaching deeper into rural areas

Last Friday, more rural shoppers than ever before took part in "Singles' Day", China’s 24-hour online shopping binge. Chinese e-commerce leader Alibaba pulled in a record-breaking $17.8 billion in sales from its collection of online marketplaces, while JD.com received 60 percent more orders than it had last year, it said.

The $17.8 billion figure crushed Black Friday's $4.45 billion(opens in a new tab) in ecommerce sales last year and Alibaba's own $14.3 billion record from 2015.

Chinese workers sort piles of parcels, most of which are from Singles Day online shopping. Credit: Si wei/Imaginechina

Throughout rural China, the best-selling international brands on Singles' Day included Pampers, Mead Johnson and Wyeth in the maternity and baby product category, Nike in the sports and outdoor equipment category, and Apple for mobile phones, Alibaba reported.

This Singles' Day, JD.com launched a drone delivery program to speed deliveries to consumers in some of China’s most remote areas.

A drone of Chinese online retailer JD.com hovers to deliver a parcel during a trial run at a residential quarter in Xi'an city, northwest China's Shaanxi province, 10 November 2016. From Amazon.com Inc. to Domino's Pizza, technology giants and retailers have dreamed of drone deliveries for years. One Chinese e-commerce giant intends to make it a full-fledged reality by 2017. JD.com Inc. has drawn up plans for drones to ply 100 regular routes by the end of 2017. Taking advantage of less-restrictive regulations, it's spent months testing its drones and from Friday (11 Novmeber 2016), the same day as China's annual 24-hour online shopathon, it intends to start operating four routes delivering packages to rural residents on a trial basis. Credit: Chen feibo/imaginechina

Drones set off from bases on pre-determined routes to land at drop-off points in villages, where village promoters complete deliveries.

The test fleet of 30 drones can transport and deliver packages weighing between 5 kg and 15 kg and cover distances as far as 31 miles. JD plans to have drones service 100 regular routes by the end of next year.

A drone of Chinese online retailer JD.com hovers to deliver a parcel during a trial run at a residential quarter in Xi'an city, northwest China's Shaanxi province, 10 November 2016. From Amazon.com Inc. to Domino's Pizza, technology giants and retailers have dreamed of drone deliveries for years. One Chinese e-commerce giant intends to make it a full-fledged reality by 2017. JD.com Inc. has drawn up plans for drones to ply 100 regular routes by the end of 2017. Taking advantage of less-restrictive regulations, it's spent months testing its drones and from Friday (11 Novmeber 2016), the same day as China's annual 24-hour online shopathon, it intends to start operating four routes delivering packages to rural residents on a trial basis. Credit: Chen feibo/Imaginechina

“Online shopping has made my life much easier. More and more, living in the countryside is not so different from living in the city,” Cheng says.

Joanna Chiu is a foreign correspondent in Beijing. You can follow her on Twitter @joannachiu(opens in a new tab).