Alibaba (NYSE: BABA) has big bets on the growth of the Chinese rural market. It’s invested billions of dollars in outpost service hubs.
The growth potential in China’s countryside now outpaces the largest cities. This is true even though less than 10% of online purchases made on Alibaba are from rural customers. The e-commerce giant estimates the potential market will grow to US$74 billion by 2016.
JD.com, Alibaba’s main local competitor, also said they are focusing on e-commerce in rural areas. Although this new market seems exciting to tap into, the return on investment has yet to be seen.
“We don’t know when our rural e-commerce operations will become profitable, but there’s value in what we’re doing, there’s consumer demand,” said Gao Hongbing, director of Alibaba’s research arm.
Alibaba Expansion Needs Partners
To train the rural population how to browse and buy on Alibaba’s platform, the company has come up with a team of local “partners”. They’re trained to set up service centers in their home villages. These locals are often older, poorer, and unfamiliar with technology.
Local partners have to go through a recruiting process with a written exam, computer test, and interview. They are mainly younger, educated people who are used to platforms such as Taobao, Alibaba’s online emporium.
Out of the 1,000 applicants, 50 jobs were offered. Training takes place over 2 to 3 days in local government business offices. They are not only taught how to educate the rural population, but also about the company’s values and history.
One of the local partners, Cheng, opened a village store this week to help locals shop online. “My dreams aren’t that big,” said Cheng, 29. “I just want to live in the countryside and give back to the people there so they can have the same quality of life as people in cities.”
“Some are university students, others have spent a couple of years working in cities and want to come home, some have been working in the village all along,” said Xing Guanjie, another local partner. “You’ve got all kinds, but almost everyone is between 20 and 35 years old.”
Beijing believes having these university graduates go back to rural areas is also beneficial for local economic development.
More than 100,000 rural service centers will be opened over the next several years as part of the Alibaba expansion.
Asia’s e-commerce industry as a whole is booming. We at InvestAsian believe Indonesia presents some of the best opportunities.
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