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Foreign brands look long in rural China

News, 15 January 2016

BEIJING: Overseas brands hoping to benefit from increased internet availability in rural China and the efforts of platforms like Alibaba to grow the rural market may have to play a long game, observers have suggested.

"I think what we are seeing right now is the major-ecommerce players like Alibaba really laying the groundwork for future growth," according to Ben Cavender, principal at China Market Research Group.

"Capturing these rural consumers who previously had very poor access to brands and products is going to be critical for future revenue growth given how competitive the e-commerce market already is in first and second tier cities," he told Campaign Asia-Pacific.

But, initially at least, those 600m rural consumers will not be big buyers of foreign brands. They are very price sensitive, pointed out Mark Tanner, managing director at research firm China Skinny, and likely to favour Chinese brands catering to their specific needs.

That should not necessarily deter overseas brands from making use of the opportunities on offer at Alibaba and other platforms, as over the longer term more rural consumers are expected to trade up as they are exposed to new influences via media and travel.

At this stage, however, any presence on these sites may have to be regarded as a marketing exercise rather than a revenue-generating activity, Cavender advised.

Alibaba recently stated that rural e-commerce was one of its priorities for 2016. "We are going to ramp up our efforts to bring quality goods to rural buyers, and deliver local produce to urban customers," said CEO Daniel Zhang Yong, "so the rural market can be connected to the whole country and even the whole world."

The first major test of that ambition will come in a few weeks when it runs its Ali Chinese New Year Shopping Festival. Among other things, this will feature Rural Taobao, its e-commerce arm dedicated to this sector, making products from 500 premium overseas brands available at scale to Chinese farmers.

Data sourced from Campaign Asia Pacific; additional content by Warc staff