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China's ecommerce goes rural

News, 24 December 2014

GUANGZHOU: With China's urban market well served by ecommerce companies, the market leaders are looking to expand into hitherto neglected rural areas as well as to crack the international market.

Research from internet giant Alibaba has predicted the market for rural online sales will reach 180bn yuan this year and more than double to 460bn yuan over the next two years, Xinhua reported.

The trend was evident earlier this year when Taobao.com, Alibaba's online sales website, reported that rural buyers accounted for nearly 10% of sales in the first quarter compared to just over 7% in the same period two years ago.

Alibaba is accordingly planning to invest 10bn yuan over the next three to five years as it opens operating centres in one third of China's counties and in one sixth of rural areas.

Poor transport infrastructure has been one of the factors, along with limited purchasing power, that has meant rural buyers have to some extent been bypassed by the country's online retail boom.

But an Alibaba executive said the group was developing rural e-commerce to allow farmers to buy urban merchandise easily and transport farm produce to the city faster.

JD.com, another leading ecommerce business, has also recently announced plans to establish a county-level operating centre in one of China's southern provinces.

Alibaba will, however, be hoping its rural ventures are more successful than its foray into the international market. Earlier this year it set up Tmall Global, which it billed as a "fast track into China" for overseas brands entering the market for the first time, but traffic on the site is far below its other marketplaces.

A review of the site for the Wall Street Journal, suggests that about 70% of the stores there are doing "almost no volume", according to Jacob Cooke, chief executive of digital marketing agency Web Presence in China which carried out the research.

"That platform is really going to damage [Alibaba's] reputation," he said.

The fact that Alibaba places restrictions on buying advertising does not help merchants improve their visibility, although they can advertise on third-party sites that link back to the platform.

Data sourced from Xinhua, Wall Street Journal; additional content by Warc staff