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China hits roadblocks as it spends billions to help farmers sell online

China hits roadblocks as it spends billions to help farmers sell online

China hits roadblocks as it spends billions to help farmers sell online
March 12
12:54 2018
rural ecommerce china

A rural family in southwest China pose for a photo with home-grown persimmons sold online and about to get shipped. Photo credit: Tech in Asia

Last summer, 27-year-old Huang Dehuai quit his US$1,600-a-month job selling fertilizers across China and moved back to his hometown of Beisuo. There, he earns US$300 as a public servant for the mountain-ringed hamlet in southwestern Guangdong province.

“Part of my job is helping villagers sell their persimmons online,” says Huang with pride. “They know little about the internet, not to mention ecommerce.”

The main lure for Huang is a dream to lift his hometown out of poverty. Like most of Beisuo’s villagers, Huang’s family gets by growing crunchy persimmons. Nothing inspires rural entrepreneurs as much as the rags-to-riches example of Tongyu. Once a sleepy county in northeast China, Tongyu took off by selling sunflower seeds, beans, and grains harvested from its rich soil online.

The idea of invigorating impoverished regions through ecommerce has been on the government’s agenda in recent years. Rural income is growing but still far from reaching urban levels. In 2017, urban dwellers earn almost three times more than their rural counterparts. 30 million rural Chinese – many of whom are farmers – still live in poverty. Policymakers believe ecommerce can help them to sell more produce and boost income levels. This national scheme is making progress, but challenges loom.

Public-private sector effort

In 2016, the State Council of China officially made rural ecommerce a national strategy in its anti-poverty drive. Billions of yuan have gone to building roads, logistics networks, and broadband infrastructure in insular regions. By 2020, China aims to equip 50 percent of its poor villages with ecommerce capabilities.

Private enterprises are chipping in. By 2016, Alibaba had stationed Rural Taobao service centers in 22,000 villages, according to the the Ministry of Commerce’s annual report that year. These brick-and-mortar storefronts are loaded with computers and trained staff to help farmers open Taobao shops and process online orders. The tech giant’s archrival, JD, had also set up shop in over 1,700 counties or administrative regions that overlook villages, says the report.

Online sales of rural produce spiked as a result of such efforts. From 2013 to 2015, the transactions more than tripled to US$23.6 billion, based on data from the Ministry of Agriculture.

“The government and private businesses have done a lot to promote rural ecommerce, but more needs to be done,” argues Mo Wenjian, an entrepreneur widely credited with Tongyu’s makeover. “The shortage of local talent, the short-sightedness of local officials, and the private interests of ecommerce businesses are getting in the way in many villages and counties.”

rural china JD ecommerce

A brick-and-mortar JD storefront in a Guangdong county to help farmers sell their products. Image credit: Tech in Asia

The talent gap

Mornings in Beisuo are generally quiet, the silence interrupted by the occasional rustling sounds from persimmon trees. Most villagers of Huang’s age have decamped to urban regions for higher wages, like many other rural youth across the country. Between 2011 and 2016, the number of migrants in urban areas grew by 11.4 percent to 281 million.

What’s holding rural ecommerce back, the Chinese government believes, is the absence of local talent like Huang. “Constrained by circumstances such as [low] salaries, it’s particularly difficult to train, attract, and retain ecommerce talent in rural areas,” contends the MoC report.

While the government foots the bill for infrastructure like the internet and logistics, and online retailers offer a channel to sell, many farmers lack ecommerce know-how.

The central government prompts rural officials to seek outside help. Tongyu, for example, hires Mo’s Yunfei Hewu, a third-party ecommerce service provider whose name means flying crowd and dancing cranes. The three-year-old startup gets funding from the county government and helps farmers with everything, from quality control and processing to packaging and branding – for free.

But few places are like Tongyu. To impress their bosses, many regional officials pursue projects like building lofty workplaces to support ecommerce, but they fall short of recruiting talent.

“Most local governments want quick results – things that they can show to their superiors, such as these ecommerce centers,” comments Wu Dong, who has managed 31 ecommerce parks across China. By 2016, China had 1,122 ecommerce centers, and 300 of them were found at the county level, according to the MoC. Many of them remain empty, with vacancy rates hitting 40 percent in some regions.

Even where talent exists, ecommerce experts and skeptical farmers often butt heads.

“For things as simple as packaging, it took weeks of negotiation. The farmers don’t understand why we pack six persimmons in each box, instead of 12, the way they used to sell. They feel that they are selling less, while in fact we are helping them sell at a higher average price point, and more units in total,” explains Huang.

Winning the farmers’ trust is key, advises Li Xingning, marketing director of Dafengshou, a rural ecommerce platform backed by Matrix Partners China. Dafengshou deploys agricultural experts to train farmers in villages, free of charge. Once trust is built, Li says, the startup can start converting farmers into customers.

rural ecommerce china dafengshou

A roomful of farmers listen to an agricultural expert’s lecture sponsored by rural ecommerce company Dafengshou. Photo credit: Dafengshou

The limits of online marketplaces

Even when the crops make their way onto Alibaba and JD, it doesn’t mean that they sell well. Without tech-savvy neighbors like Huang or outside help from the likes of Mo, villagers are left to compete with thousands of other online produce sellers on their own.

Wooed by the government’s poverty-alleviation mantra, some online retailers have given search priority to rural produce for free.

“But free traffic is rare, because Alibaba and JD can’t afford to do it for every farmer in China,” says a branding executive of an ecommerce company who requested anonymity. Selling online isn’t free either. Rural merchants pay a commission to Rural Taobao whenever a transaction happens, just like their urban counterparts.

While the government talks up poverty alleviation to ecommerce bosses, profits and shareholder interests still seem to be the top concern.

Ecommerce spending in China continues to grow but its pace is slowing down, drawing titans toward untapped markets such as rural areas. These far-flung consumers have warmly embraced Alibaba and JD because online goods are often cheaper and of higher quality than those from the mom-and-pop shops.

In 2016, rural customers spent a total of US$141 billion on online goods, most of which were clothing and home appliances made in urban factories, according to the MoC report. During the 2017 Singles Day shopping spree – China’s equivalent of Black Friday – Rural Taobao saw an eightfold increase in gross merchandise value year-over-year.

In comparison, only US$25 billion worth of rural produce were sold online last year.

See: Journey to the West: How China’s online retailers are taking the battle to the rural front

The US$2 billion rural finance market is also up for grabs. In recent years, Alibaba and JD have brought payment, wealth management, insurance, loans and the like to the Chinese countryside. This ambition is evident in JD’s rural strategy, which the company encapsulates via three Fs: farm to table, factory to country, and finance to country.

“Don’t pin your hope on the ecommerce giants to solve your rural produce puzzle,” suggests Mo. Part of the solution, he believes, lies beyond Alibaba and JD. For instance, promoting through social networks is a cheaper but not less effective way. Last fall, 20 percent of the 120 tons persimmons Huang sold was through the social messaging WeChat.

“To purchase a fruit or vegetable, consumers either need to see it in person or trust the brand,” says Huang. “WeChat is a good way to build that trust online, whether it’s through content marketing in WeChat articles or talking to potential customers in group chats.”

But the ecommerce giants are beefing up their poverty-relief efforts. Last year, JD and Alibaba rolled out sales channels dedicated to marketing products from impoverished areas to urban consumers – rather than lumping them together with those from all over the world.

“Running rural ecommerce isn’t easy,” says Ling Shuisheng, a county official in southwest Guangdong involved in helping farmers sell online. “But we are doing our best to make it work.”

Each day, millions of rural Chinese chasing after the ecommerce dream wake up to more challenges. But they seem determined, as success stories like Tongyu continue to propel them forward.

Currency converted from Chinese yuan. Rate: US$1 = RMB 6.33

This post China hits roadblocks as it spends billions to help farmers sell online appeared first on Tech in Asia.

source : techinasia

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