Why China rural e-commerce is a hub of untapped market potential for exporters

2018-08-21 6 minute read China

Taobao rural delivery [Alizila.com]

Highlights

  • China rural retail consumption outpaces urban consumption
  • Rural e-commerce has untapped potential for exporters
  • Last-mile logistics drive rural China’s e-commerce expansion

Rising household incomes, retail consumption upgrade, and hunger for choice. Why China’s rural residents should be your target demographic.

Forging forward with rising household incomes, a retail consumption rate outpacing its urban counterpart, and more choice in available products, China’s rural residents are a rising force in the e-commerce market.

As of 2016, China’s rural population exceeds 589 million, 211 million of which are 26% of China’s netizens.

26% of China’s netizens are from rural areas

E-commerce is fast becoming the practical alternative for rural residents to shop with diversity, choice, and convenience.

Chinese government infrastructure programmes and technological advancements are enhancing the conditions of e-commerce penetration in China’s rural communities.

Now, as these developments become more widespread, foreign exporters to China can embrace the opportunity of tapping into this diverse and dynamic demographic.

Taobao Village in Suichang, Zhejiang Province – still from Alibaba Group video

Building the last mile

At the 5th China Taobao Village Summit Forum, Alibaba revealed that, in 2017, there were 2,118 Taobao Villages and 242 Taobao towns.

At least 2,100 Taobao villages more than 100 online stores and individual annual e-commerce transaction value of ¥10 million (£1.1 million).

Taobao Villages currently have more than 490,000 online stores, creating 1.3 million job opportunities that further drives disposable income rates up for rural residents who value options.

Taobao Village in Suichang, Zhejiang Province – still from Alibaba Group video

Alibaba operates rural service centres with representatives helping shoppers, unaccustomed to e-commerce, place orders while promoting and providing information on popular Taobao products.

New alternative e-commerce platforms are significant contributors

For foreign exporters wanting to tap into this market, knowledge of and access to platforms that cater to this demographic, as offered in ACOLINK’s digital pathway, is crucial.

Chinese rural communities’ retail consumption rate outpaced urban retail consumption in 2018’s first quarter – 10.7% versus 9.7%. New e-commerce platforms, establishing themselves as regional alternatives to China’s big names, are significant contributors to e-commerce’s development in impoverished villages rising faster than the national average.

Third and fourth tier regions offer immense possibilities for brands exporting to China. In these regions, new brands have a great opening to establish brand visibility ahead of the competition and stabilise market presence before expanding.

Boundaryless Retail

Alibaba estimates that online consumption in rural China will reach RMB ¥1 trillion by 2020. In large part, that rural consumption is driven by closing the loop between rural residents and product attainment.

Infrastructure developments (like new and improved roadways) and technology-infused logistics (like JD’s delivery drones) are leading the way to a new e-commerce consumer demographic.

We are working with top industry players to build China’s most advanced and comprehensive retail ecosystem to reach consumers wherever and whenever they shop.Richard Liu -- CEO, JD.com

To integrate China’s rural community, JD is building an extensive network of ‘drone’ airports.

JD’s drone pilots usually work from the company’s rural service centres and guide packages to specified drop-off points; much closer to home than big city depots often are.

JD is also investing heavily in online-to-offline integration, extending their outreach by distributing online goods to convenience stores and using them as depots.

In the first quarter of 2018 rural Chinese households had an 8.9% increase in disposable income year-on-year. This rapid growth is an expanding avenue for exporters, especially as appetite for foreign goods grows too.


Loading...

Updates straight to your inbox!

We're working on bringing more China features. Why not subscribing for early access to resources, breaking news, insights, updates, and more.