Alibaba invests 4.5 billion yuan in online services firm to boost rural strategy in China

PUBLISHED : Thursday, 19 April, 2018, 11:45am
UPDATED : Thursday, 19 April, 2018, 10:58pm

Alibaba Group, China’s largest e-commerce company, has invested 4.5 billion yuan (US$717 million) in a Chinese rural online services platform as part of its continued push to expand business in the country’s rural areas.

The investment in Huitongda Network Co, a subsidiary of Jiangsu Five Star Appliances Co, will see both companies work together on supply chain logistics, warehousing and technology to improve e-commerce infrastructure in rural areas.

Huitongda, which provides online merchandising and marketing to retail outlets, currently covers over 15,000 towns in 18 provinces, with a network of more than 80,000 stores. It helps offline stores sell goods via e-commerce and also provides infrastructure for e-commerce retailers to sell to rural residents.

The investment comes as Alibaba looks to make its rural strategy one of its three core strategic development plans over the next two decades, according to the company’s chief executive Daniel Zhang Yong. As part of its Huitongda partnership, Alibaba also wants to test out its New Retail strategy of integrating online and offline commerce in rural areas.

Rural areas have become a battlefield for China’s e-commerce giants as online sales growth slows in urban centres where the market has become saturated.

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According to the ministry of commerce China Rural E-Commerce Development report for 2016-2017, rural online sales accounted for 17.3 per cent of total e-commerce in China.

In January, online retailer said it planned to assign drones to China’s “rust belt” region, comprising provinces such as Heilongjiang, Jilin and Liaoning, to help improve efficiency in farming and logistics.

The Nasdaq-listed firm also said that it would invest more than 20 billion yuan in the three provinces over the next three years to help the region “upgrade its industries, create jobs, inject innovation and upgrade retail services”

Alibaba launched its Rural Taobao strategy in late 2014, providing an e-commerce platform and logistics infrastructure for rural residents to buy and sell items online via Taobao. The company has since set up thousands of service centres to provide e-commerce delivery in rural areas.

In 2016, Alibaba followed up with a three-year plan to invest 10 billion yuan in rural e-commerce, with a continued focus on boosting infrastructure and building more service centres.

Separately, Alibaba’s financial affiliate Ant Financial on Wednesday signed an agreement with the International Fund of Agricultural Development (IFAD) to explore ways to contribute to economic development and poverty alleviation in China’s rural areas and other developing countries.

Alibaba is the parent of the South China Morning Post.