Tata Group

'Taobao Villages' reaping rich e-commerce harvest

Online stores breathe life into the countryside as locals switch on to Alibaba consumer platform

PUBLISHED : Monday, 18 November, 2013, 5:25am
UPDATED : Monday, 18 November, 2013, 6:03am

In Wantou village in Shandong province, Taobao store owner Ma Yaofei looks at his wristwatch. "Three thirty. I must ask my parents to help pack the stuff otherwise we'll miss today's delivery," he says.

Wantou looks quite a normal village at first sight. Shelled corn is spread on the road to dry and in the fields wheat has just been planted. But there is something that differentiates this place from the thousands of villages on the mainland. On entering Wantou, row after row of courier shops emerge and Wi-fi signals instantly appear on smartphones.

Ma, 28, runs an online store selling hand-woven craft, including straw-made chairs, tables, cases and small decorative items. He moved from Dongying, a city in the eastern province, to Wantou 2½ years ago and set up his shop there.

Wantou, crowned a "Taobao Village", is home to more than 500 online stores on Taobao Marketplace, internet giant Alibaba's popular consumer-to-consumer online shopping platform.

Ma said the internet allows him to reach out to the outside world. His online store's sales are 3,000 yuan (HK$3,790) to 4,000 yuan per day and his products are sold across the country. "This year in our village, sales increased by 30 to 40 per cent from last year," Ma said.

But his own business was outpaced by the average, rising only 10 per cent, he said, because too many vendors rushed in after seeing the success of the online business.

An Baozhong is one of them. He has been selling straw craft for 10 years in his workshop, and extended the operation to online this spring. Almost all households that are in business have linked their real stores to virtual shops, he said.

An said his workshop cost him about 40,000 yuan a year, "including the rent and electricity etc". By comparison, the online store costs less than 2,000 yuan every year.

Wantou is just one of 14 Taobao Villages in China. Alibaba defines a Taobao Village as a one in which more than 10 per cent of households run online stores and village e-commerce revenues exceed 10 million yuan a year.

By the end of last year, more than 1.63 million Taobao stores were registered in rural areas, with total transactions from the 14 Taobao Villages hitting 5 billion yuan last year, according to Aliresearch.

E-commerce has changed traditional village life. Ma said: "It has speeded up our rhythm. E-commerce has just started here but it is irresistible."

Importantly it has liberated farmers from the field and created new jobs like couriers, drivers, online shop designers. Young people who usually prefer to work in cities can now come back home and bring vitality to agricultural areas. "Even some university graduates and those who have done pretty well in cities now come back to operate online stores," Ma said.

Lu Zhenwang, chief executive of internet consulting firm Shanghai Wanqing Commerce Consulting, said e-commerce was a means of attracting young people back to rural areas. "The key point of urbanisation is to make the young people stay at home instead of working as migrant workers. To realise this, it needs the support of commerce," Lu said.

The urbanisation rate on the mainland reached 52.6 per cent last year, compared with 17.9 per cent in 1978, according to the development research centre of the State Council. It forecasts that it will climb to 60 per cent by 2020 and 66 per cent by 2030.

Lu said e-commerce was a long chain linking activities in raw materials, processing, packing and the like. Wantou already has more than 20 express delivery companies, and three raw material suppliers, according to the village government.

Lu said the potential of e-commerce in the countryside had not been fully explored yet. "The advantage of the countryside is that it has agricultural products with local characteristics," Lu said. "The city people prefer to buy directly from farmers than from other channels."

There are challenges as well. Ma said people in Wantou are selling similar products and the crowded market is spurring a price war. To boost sales, expenses in advertising can't be spared. On Taobao, there are paid search and targeted display ads for sellers to buy.

Ma said: "Promotion fees are about a fifth of my sales."

Lu expected robust growth in rural e-commerce will be maintained for at least three years, driven by improved logistics networks and internet infrastructures in rural areas.

An said that so far about 20 per cent of the sales were from online, with the majority still coming from his physical workshop. He expected e-commerce to account for half of total sales in the next year.