Liu Qiangdong s Hometown Suqian Becomes A Test Field For JD s Rural E-commerce Business

(Chinese Version)

Posters with Liu Qiangdong on them as a local ambassador stood in the lobby of the hotel that TMTpost s journalist checked in in Suqian.

Without a doubt, the rural areas are the next market that e-commerce giants are aiming to take over.

Fixed targets were once again brought about in the two conferences of Alibaba and JD in 2016. On January 5th, CEO Zhang Yong voiced out the plan to take over the rural market in the Alibaba internal senior executive meeting. On the strategic press conference of JD that took place two months later, vice president Yan Xiaobing stated that JD was planning to open up 20,000 appliance stores by 2017 and cover 400,000 villages.

So far the scale of the rural e-commerce market has reached 180 billion, while only 30% of people in the rural areas have participated in online shopping. Last year in October the State Department announced to increase policy support for rural e-commerce and issued the Directing Guidance On Accelerating E-commerce In Rural Areas. Driven by the market and policy, it s apparent that the rural e-commerce market has immense potential.

However, obstacles also come along with opportunities. The logistics cost in remote areas is high while the villagers are not used to online shopping, making it hard for merchandise online to reach consumers in those areas. That s why e-commerce giants will have to change their mindset to gain the trust of the 700 million villagers in China.

Last week, TMTpost s journalist went to Suqian, a prefecture-level city located in the north of Jiangsu province, and witnessed the unique form of the e-commerce in rural areas.

Suqian and JD

As a matter of fact, Suqian is not the best example to illustrate the development of e-commerce in rural areas.

Suqian is Liu Qiangdong s hometown. Local people say that Suqian only has two famous people in history: One is Xiang Yu, the other is Liu Qiangdong. Even villagers in remote areas that have never seen a smartphone before also call Liu Qiangdong the son of farmers.

Suqian people see Liu Qiangdong as an idol, and it helps the development of e-commerce in local villages. That s why Suqian can t really represent the whole situation in China. But anyhow, we can see the ideal state of what JD is wishing for rural e-commerce.

In short, the development of JD s rural e-commerce can be described in some key words as follow.

First we have the promoter system. In remote villages where information channels are limited, people still rely on other people to have access to new information. Therefore, villagers are willing to pay for more expensive products in a local shop that they have been going to for years. To educate the villagers about e-commerce and appeal to them, JD builds brick-and-mortar service centers in counties to gradually penetrate surrounding villages. JD also set up JDBANG Service Center to generate channels for appliances and logistics services to reach the consumers.

Zhang Xianyun, born in 1979, is from Baoan, Suqian. She once worked in Shanghai and eventually went back to her hometown in 2014. The chairman of the local the Women's Federation approached her and asked her if she wanted to become a promoter in the village and open a Jingxiaodian. Before that, Zhang Xianyun already had the intention to start her own business and she saw the potential in it. She felt that e-commerce would also become huge in villages as it is in cities.

“I came to Baoan when I was under 20. I got to know about everyone within 15 kilometers. At first I started to sell some daily merchandise then some appliances. I promised to folks that if they have any problems they can just contact me,” Zhang Xianyun told TMTpost.

Unlike JDbang, all the merchandises on Jingxiaodian, including TVs, refrigerators, milk and bread etc. are from JD. The promoters can enjoy better discounts when logged into JD and profit from the price gap.

Zhang Xianyun opened a Jingxiaodian in Baoan, Suqian. She educates her hometown folks about e-commerce, helping them make purchase online.

Zhang Xianyun opened a Jingxiaodian in Baoan, Suqian. She educates her hometown folks about e-commerce, helping them make purchase online.

That leads to another key word: Delegated Purchase. Promoters can help buy appliances for villagers that have no knowledge on e-commerce or even assist them on using smartphone and JD s app. Every time the promoter successfully get a new user on the platform, there will be commission for it.

There are also part-time promoters who have an official job and don t own a Jingxiaodian. They mainly do delegated purchase and attract new users, earning commission. TMTpost learned that many village cadres and neighborhood committee members are also doing delegated purchase and attracting new users. They not only know about JD s online mall, but also know how to use financial products like JD Baitiao and JD Crowdfunding etc.

When the shop just started to operate, many villagers didn t trust Zhang Xianyun. However, Zhang Xianyun s Jingxiaodian can ensure the quality of the merchandise, and therefore villagers wouldn t need to worry about the getting fake products in the end. Besides, villagers trust promoters since they have reputation. That s how JD gained traction among villagers fast.

“Last year during the Double Eleven Shopping Festival, a villager who was around 60 approached me, saying that his son was planning to buy some appliances for the new house they bought for getting married. He asked for my help to make online purchase. He even went to Suning and Gome s marts in town and checked out the price. He asked me to look if it s cheaper on JD,” Zhang Xianyun recalled. Later, that villager made a purchase of nearly ￥20,000 though he doesn t even know to use a smartphone.

Countryside and e-commerce

As rural e-commerce further develops, more and more local villagers are exposed to the opportunities to learn about online shopping. And if they get a good experience with online shopping, they will keep on using this service, which will help e-commerce gain momentum in rural areas.

This is the more prosperous time for rural e-commerce as e-commerce giants are marching into this field. The first giant to enter this arena was Alibaba. Alibaba started its One Thousand Counties and Ten Thousand Villages plan in October 2014 for its Rural Taobao, planning to pour in ￥10 billion in the future three to five years to build 1000 county-level service centers and 10,000 village-level service centers.

Alibaba s slogan for One Thousand Counties and Ten Thousand Villages

When executing the plan, Alibaba s rural Taobao adopts the Rural Taobao Partnership system in hopes of keeping young talents in villages and build a talent pool with the platform. Partners can bring up consumer purchases in villages by establishing service centers and achieve the online sales of local fresh produce through e-commerce channel.

From the surface, Alibaba s rural Taobao Partnership and JD s promoter program are similar as they both try to set up footholds in villages and select villagers who really know about the local life to run the service centers. But in any case, they are very different as well.

Rural Taobao s partners are more like platform connectors and the maintenance team. Young talents in villages would have to go through complex screening process so as to become partners. Although these partners have passion, it s still quite difficult for them to actually run an e-commerce service center that s fused with online and offline retailing. In contrast to that, JD s promoters are more down to earth. By helping out ordinary villagers, their reputation also spread through mouths and ears, which truly allows them to set up a foothold in an area.

Here comes another question: What kind of role the platform should play in rural e-commerce?

Farmers have limited education and they don t embrace the changes brought about by the Internet. If you force a farmer who has been working on a field for years to open an online shop, it would cost you lots of time and energy. Besides, the farmer also need to invest in the operation, maintenance and customer service. And therefore just imposing the current e-commerce form we use everyday won t really work out in the countryside.

Whether it s Taobao or JD, they can focus on solving the following two problems with their platforms:

The logistics. Villages are usually situated in remote areas where the roads are bumpy, not to mention villages on mountains or islands. In addition to that, villages don t have a dense population. Generally a delivery guy can deliver 50 to 70 packages per day, but when it comes to remote villages where households are pretty far away from each other, a delivery guy might only be able to deliver five or six packages.

To tackle this question, Alibaba and JD are unleashing their platforms logistics power. The former is using Cainiao to build logistics network in rural areas while the latter established the X Department, focusing on smart logistics including drones, driverless cars, and automated warehouses. JD s drones have been operating in countryside and villages in Jiangsu, Hebei, Sichuan, and Shan xi province. The drones JD uses can operate on delivery mission within a 15 kilometers range when the wind level is no higher than level four. The drones can also fly in small rains.

JD s logistics team also ran a test fly in Suqian s Hanzha village with its drones. The team loaded up a package that weighed 10kg and as big as 30*30*40 to the drone and flew it.

Hanzha village, Suqian City. JD s drone team was having a test fly

“The trip is five kilometers in straight-line distance. It would take a delivery agent nearly 20 minutes to complete this delivery, but with a drone the order can be done in five minutes,” the team told TMTpost. However, drones don t just fly directly to the customer, but to the promoter center instead. Then the promoter will deliver the package to the customer.

JD s drone, loaded with a package that weighed 10kg and as big as 30*30*40, was undergoing test fly. It can fly in force 4 wind and small rain condition and complete delivery mission that s within 15 kilometers.

“Drones are just a logistics method. They can t replace the whole delivery staff. I mean if we really replace all delivery staff with drones, the staff would totally beat the hell out of me right?” Cui Zheng, senior researcher at JD Drone Department, told TMTpost.

“Drones are just a logistics method. They can t replace the whole delivery staff. I mean if we really replace all delivery staff with drones, the staff would totally beat the hell out of me right?” Cui Zheng, senior researcher at JD Drone Department, told TMTpost.

And there is the relationship between fresh produce going online and consumer goods going offline.

The truth is that villagers would like the fresh produce they grow can be sold on online platforms. Compared with buying stuff online, this is more important to them. City folks on the other hand also want to have access to organic food as people are starting to value life quality and the consumption upgrade continues.

Solving this information asymmetry issue happens to be what e-commerce platforms are good at. However, compared with merchandise from Yiwu, villages offer fresh produce. You can t really guarantee the quality and quantity of the fresh produce. Besides that, farmers are scattered, making it more difficult to collect the fresh produce. And therefore, JD is partnering with local distributors, whom will communicate with the farmers directly. The distributors will collect the fresh produce, examine them, pack them and put them on JD s fresh produce channel. In Shiling, Suqian, the local specialty organic egg had a boost in sales and value-added opportunities through this way.

Shiling organic eggs sell on JD s fresh produce sector. Originally, a box of eggs, with 40 in it, can gain a ￥15 profit. Now the profit is ￥50.

The government also plays an important role in the process of fresh produce going online. According to source at JD, local government can help JD connect with local distributors, organize and educate farmers, as well as supervise the operation to ensure the quality of the products and the transparency of the trade.

In September this year, Alibaba and Suning announced to sign a strategic agreement on agriculture to go further into the countryside with the support of the government.

Aside from the battle between e-commerce giants, we are more willing to see that resources in the countryside and the city can be circulated reasonably and orderly with the boost of e-commerce giants move in the rural market. Promoter Zhang Xianyun we have just mentioned above now can earn around ￥7000 per month and get to stay with her families. She s just a small part of the JD e-commerce system, but this grand e-commerce revolution has no doubt changed her life, like many others.

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[The article is published and edited with authorization from the author @Su Jianxun, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.