April 1, 2020
China’s next massive market: rural ecommerce

China’s next massive market: rural ecommerce

China’s online shopping market has exploded over the past decade, largely driven by big growth in the big cities. But now ecommerce is reaching a saturation point in the bustling byways of Beijing, so Alibaba and its ilk are looking back into the countryside. Rural residents experienced a 36 percent rise in disposable income between 2012 and 2016, and the ever-increasing cost of living in larger cities has pushed some migrants back towards their rural homes, where their income stretches further. The result is that rural consumption has skyrocketed. In 2012, there were just six cars for every 100 residents in rural China. By last year, that number had grown to 17. Ecommerce stores like JD and Alibaba have been able to follow that trend thanks in large part to massive infrastructure build-outs that have boosted internet penetration and improved roadways around in smaller cities and countryside areas. Where the roads end, ecommerce firms have found other ways to reach rural customers. They’ll build delivery hubs where customers can pick up their goods. Alibaba’s Taobao has over 16,000 such centers already. JD is working on a fleet of delivery drones that’ll be able to drop packages at rural customers’ doors even when there’s no road to speak of. 2017 may prove to have been rural ecommerce’s breakout year in China. During the Singles Day sales bonanza last year, rural shoppers on Taobao spent 8x more than they spent in 2016. And there’s still plenty of space to grow. That means there may be room for players beyond JD and Alibaba, the giants that dominate ecommerce in developed coastal cities. In smaller cities and towns, new apps like Pinduoduo are capitalizing on an older demographic and making major headway. By the end of 2017, Pinduoduo had nabbed 19 percent of China’s mobile ecommerce market. 772 million of China’s nearly 1.4 billion people are online, and many of the unconnected are in rural areas, where internet usage rates only recently broached 30%. The urban, online shopping market is massive, but the rural market yet to be captured looks nearly as big… and the battle for that is just beginning.

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