How rural China is innovating with e-commerce

How rural China is innovating with e-commerce

Published 07 January 2014 08:25, Updated 08 January 2014 10:55

Barney Tan

Every year, for the foreseeable future, another 30 million Chinese will go online to shop, according to a new Boston Consulting Group report. Pushed by a government-subsidised roll-out of internet – and poor bricks-and-mortar retailers – China could become the world’s biggest e-commerce market within four years.And while you’d imagine the online revolution taking hold largely in China’s eastern metropolises, it is also in the remotest locations, such as in Zhejiang Province, that e-commerce is being used to better the lives of the most digitally excluded segments of society.

E-commerce goes rural

At Suichang County, the local government has established an outfit known as 51ganjie (“I want to bring my products to market” in Mandarin), which has established service stations connected to a web portal in five remote farming villages to date.

The service stations are an attempt to help villagers – typically illiterate and without access to the internet – buy daily necessities, electronics, clothing and farming supplies online. And plans are in motion to expand the services to allow the local farmers to sell their produce online.

Initiatives like 51ganjie are helping rural villagers benefit from the product variety and competitive pricing offered by internet retailers. While it wasn’t previously economically viable to deliver products to these remote locations, these programs make last-mile delivery possible through integrated logistics and the consolidation of orders.

The distribution channel for farm produce that will be established with the development of 51ganjie would also generate additional revenue for the local farmers, meaning a higher standard of living overall.

Wardrobes from Songyang

In the town of Songyang, a significant number of members of the local community have become electronic merchants on Taobao.com, China’s largest consumer based e-commerce site. The most unique aspect of their participation in e-commerce in particular lies in the fact that most of them are selling a singular product: modular wardrobes.

This phenomenon is particularly curious because there are no local advantages associated with the production of these wardrobes.

Most of the materials required for the construction of the wardrobes are imported from outside Songyang, and the wardrobes do not require any specialised skills to assemble that only the locals possess.

In fact, interviews with the community members reveal that many of them got into the business only because “their neighbours seem to be doing well”.

Despite the organic, almost haphazard, nature of this development, the benefits are clear. Songyang, as a whole, began to acquire a reputation for modular wardrobes on Taobao.com, which turned into higher sales for the villagers involved.

The sharing of production and business expertise also flowed freely, raising the quality of the products and the efficiency of business operations. There were also reports that some electronic merchants, facing a glut of online orders that they were unable to fulfil, passed on those orders to their neighbours.

More importantly, the viability of the trade has helped Songyang stem the “brain drain” associated with urban migration. Becoming an electronic merchant had become a viable career option for the youths of Songyang, and they no longer have to move to the larger cities in search of employment.

Car accessories in Jinyun

In Jinyun county, the local community went online in a decidedly different way. It began with the establishment of a countywide association of aspiring online sellers, spearheaded by two merchants who were already highly successful on the Taobao platform.

One of them was selling their own brand of outdoor equipment, while the other was a supplier of car accessories.

The association was meant as a platform for sharing of e-commerce experiences. But an unexpected development occurred when a significant proportion of the members, attracted by the success of the association leaders, started to become licensed distributors for the two electronic merchants.

This development has translated into a number of benefits for the electronic merchants involved. For the two leading electronic merchants, the growing number of distributors for their products enabled economies of scale and wider market reach, which helped their businesses grow at a faster rate than ever before.

Aspiring electronic merchants were able to take already-established brands and tap into an established customer base, which helped them enter the e-commerce arena.

These e-commerce success stories in the rural counties and towns in China provide a glimpse of the potential social benefits of e-commerce.

Perhaps it would be possible to replicate the way e-commerce was used in these cases within the rural communities of Australia to help them with greater access to supplies, new means of generating revenue, and a higher standard of living overall.

Barney Tan is a lecturer in business information systems at the University of Sydney.

Tan does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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