Village rides online wave

Qingyanliu has reinvented itself as e-commerce incubation center

Qingyanliu used to be a small village of less than 1,500 farmers. But in the past seven years, the village has become a hotspot for e-commerce startups, and it is now the leading "Taobao Village" in China.

At present there are about 2,000 companies in the village in Zhejiang province, delivering around 10,000 parcels every day, with annual sales of about 800 million yuan ($126 million).

Wang Hao is among the thousands of outsiders that came to Qingyanliu to start his business.

Wang used to run restaurants in Liaoning province, but he learned about the village on the Web and came for a look in April last year. Two months later he rented two 100-sq-m rooms.

"It was good for us to start our business here, because it is convenient for deliveries and we can purchase goods at a low price," says Wang, owner of Xinhao Accessories on Taobao, China's most popular online marketplace.

"You can find whatever you want to sell in Yiwu at the lowest price in China. It's convenient and reduces costs."

Yiwu, as the world's small commodities center, provides about 1.7 million kinds of products. But the rebirth of the village as an e-commerce center was accidental. In 2005, the village finished constructing new houses with about 200,000 square meters of room available for rent, and the village committee decided to rent the extra rooms to people setting up businesses in the village.

Three years later, the village had become known as the perfect place for people setting-up e-commerce companies. As a result the rent for an 80-square-meter apartment, jumped from 7,000 yuan to almost 15,000 yuan, due to the huge demand. The total income the village makes from such rentals now totals about 30 million yuan a year.

"What we provide in Qingyanliu, is a benign environment for e-commerce startups," says Liu.

For startups, the most obvious problem is the lack of capital, experience and techniques, says Liu Wengao, vice-chairman of Yiwu Jiangdong Electronic Commerce Association, who was then in charge of e-commerce development in the village.

"Newcomers cannot get a good price from factories directly due to their lack of credibility in the market. And the delivery fees will be quite high, because they don't send enough parcels when they are just starting up."

Liu set up an online supermarket involving a few distributors. The supermarket provides pictures of the products and newcomers can choose pictures from the supermarket and upload them to their Taobao stores. And every day, they can get goods from the distributors based on their sales needs.

The village also negotiates with express delivery companies on behalf of the e-commerce companies and gets a huge discount.

There are about 30 express delivery companies in the village now, transporting goods across the country every day.

For the first few years, the village also provides newcomers with training sessions where they can learn about operating an online store. Every Saturday afternoon, there is a weekly meeting in the village, mainly about sales techniques and market information.

"Many old hands will come and you can ask them questions," says Wang Hao.

The meetings help owners improve their management skills and selling techniques and even help them find supplies, he says.

Last year Wang sold goods worth more than 800,000 yuan. This year he reached that figure in July.

Apart from the income, he also enjoys the freedom of his current job.

"I do not have to report to any government departments or pay taxes. I am totally on my own."

For Xie Zuoshou, the owner of BJ Mall, an online underwear store, the advantage of Qingyanliu is the market information to be found there.

"Almost all the owners selling similar products know each other in the village. We drink and have dinners together and share market information," says Xie, 29.

For example, in July 2009, there was a total solar eclipse. Many owners were talking about buying special glasses so they could watch the eclipse.

"Then we realized that there would be a huge demand for these glasses," says Liu.

In the past three years, the number of registered e-commerce companies had grown rapidly, from 306,000 in 2009, to 590,000 in 2011, while the number of people involved has increased from 450,000 in 2009 to 970,000 in 2011, according to a recent report by the Chinese Academy of Social Sciences and AliResearch Center.

But although many other areas are developing into e-commerce centers, such as Shaji town in Jiangsu province, which is mainly focused on furniture, Liu is confident that Qingyanliu will maintain its position as the best place for startups.

"The other areas do not have the same scale of business as Qingyanliu and they lack a complete industry chain, from printing and advertising to packaging and logistics."

Liu says that the village is creating an online warehouse that should be in operation by the end of the year.

Compared to the online supermarket, the online warehouse will provide additional packing and delivery services. The total investment will be at least 30 million yuan.

"In the future, if people want to start e-commerce companies in the village, they will be able to take care of their business sitting in front of the computer, and leave all the packaging, copywriting, graphic design and logistics to us."

However, Liu says that the current structure in Qingyanliu does not accommodate big e-commerce companies and after two years, most of the companies move out of the village because of the limited space for inventory.

"When they become successful some of the companies need a warehouse that is 2,000 sq meters or more, while rooms in Qingyanliu are limited to 100 square meters. So when these companies become successful, they will move out of the village to the industrial parks nearby."

Xie Zuoshou has the same plan.

"Qingyanliu is only an incubation center. But companies aiming at a bigger growth have to move out."

Xie's company made sales of about 17 million yuan in 2011, and he hopes it will be 30 million yuan within two years, so the company will move to a 2,000-sq-m warehouse in Beiyuan Industrial Park Zone in mid-October.

Xie says that the supply chain is of great importance to companies.

"If e-commerce companies want to survive, they have to either cooperate with factories or invest in production."

Previously Xie used to sell products for over 110 factories, but last year he started his own 2,000-sq-m factory in Wenzhou.

"With my own factory, I can better control the supply chain and product quality."