RURAL CHINA CULTIVATING TASTE FOR ECOMMERCE

At a rural eCommerce summit cohosted by Alibaba Group last week, statistics were released which showed China’s rural (and less affluent) population is boosting its use of the Internet and mobile devices to buy and sell goods.

Alibaba officials cited research from the China Internet Network Information Center (CNNIC), which stated the number of rural online shoppers rose to 77.14 million in 2014, growing 40.6 percent year over year, as reported by Alizila, an Alibaba Group-owned news website.

The proliferation of affordable smartphones has increased the number of rural shoppers turning to mobile devices to shop, while driving commerce into poorer, more remote parts of China, where a lack of physical stores is common.

According to Alibaba, eCommerce spending on mobile devices grew by more than 250 percent to over RMB 200 billion ($32 billion) last year for Alibaba shopping sites like Tmall.com, Taobao Marketplace and Juhuasuan. The company confirmed that among the 100 counties with the largest mobile growth, 75 were located in the country’s less developed regions, Alizila said.

With an estimated 600 million people living in rural areas of China, the eCommerce giant sees significant growth opportunity for the market.

But the CNNIC said at the end of 2014 there were only 178 million Internet users in rural China, resulting in fewer than one out of every three residents.

In order to boost the Internet usage in rural regions, Alibaba recently teamed up with China Telecom — the nation’s largest telecom operator — to roll out low-cost smartphones to citizens living in these areas. The deal with China Telecom — and access to its 186 million subscribers — is part of a two-pronged attack for Alibaba. The eCommerce giant has increasingly come to view smaller cities as a key to the growth of both its retail business and its operating system, YunOS.

However, Alibaba isn’t the only eCommerce player trying to tap into the rural market. Poor transport and less purchasing power has rendered many rural buyers untouched by the wave of online shopping that has swept across China in recent years, but the tides seem to be changing as the burgeoning market in villages continue to show great potential while keeping the country’s major eCommerce businesses intrigued.

Late last year, JD.com set up a county-level operating center in south China’s Guangdong Province. The move followed a decision to open a physical store in a small county in the northern Hebei Province in November to help farmers purchase home appliances via JD.com’s online store.

Alibaba also established branches in three counties with plans to invest RMB 10 billion ($1.6 billion) in three to five years to spread its rural operating centers in a third of China’s total counties and a sixth of rural areas. As of last year, rural buyers on Taobao.com, Alibaba’s eCommerce website, made up nearly 10 percent of total sales in Q1 2014, up from just over 7 percent two years ago.