Group expects turnover to jump as more farmers trade online
Alibaba Group Holding said in a press release Thursday that it would generate more than 3 trillion yuan ($483 billion) in transactions this year, as the company is actively introducing e-commerce to rural areas.
"We believe that our global transaction volumes this year will surely surpass that of Wal-Mart Stores Inc," Zhang Yong, Alibaba's CEO, was quoted as saying in a press release e-mailed by Alibaba to the Global Times Thursday. The company handled 2.4 trillion yuan worth of transactions in 2014.
Alibaba's market valuation will rise if it can persuade 700 million people in China's rural areas to embrace e-commerce, according to the press release.
"Alibaba pins hope on rural e-commerce, which not only can generate new growth for the leading online shopping platform operator but also boost the rural economy," said Zhang.
As an example of the huge potential of rural e-commerce, the company revealed in the press release that in June, hundreds of thousands of residents in the rural areas shopped on its online marketplaces every day.
The e-commerce leader has already made strides in rural e-commerce, touting goods on its online consumer-to-consumer marketplace taobao.com to rural residents by painting advertisements on walls since 2013.
And in October 2014, Alibaba announced that it would invest 10 billion yuan to build 1,000 county-level and 100,000 village-level e-commerce service centers around the country within three to five years.
Its arch rival JD.com Inc (JD) also actively carved out space for rural e-commerce, running over 800 e-commerce service centers to support delivery and home appliances maintenance in more than 30,000 villages, a PR representative from JD told the Global Times Thursday.
The companies' foray into the rural market is in line with the aggressive push by central and local governments to promote rural e-commerce.
As the country's rural heartland, Henan Province in Central China had opened in Xinxiang 300 e-commerce service centers as of December. It plans to establish 1,200 in the city alone this year, according to an announcement on the Henan government's website in December.
The Ministry of Commerce and the Ministry of Finance in May reportedly announced that a group of 200 counties in China's central and western regions would receive 2 billion yuan in financial support from the central government as part of a rural e-commerce pilot program.
Premier Li Keqiang, who continuously emphasizes the key role of e-commerce in boosting the real economy, encouraged graduate students and migrant workers to start their own business such as e-commerce in the rural areas during a routine State Council press conference in June.
In May, some rural merchants reaped in as much as 16,000 yuan per month in profit by selling goods on taobao.com, according to media reports.
E-commerce, which can attract investment into and promote sales of local specialties, will play a key role in boosting the rural economy, Feng Lin, a Hangzhou-based independent analyst, told the Global Times.
Data from Ali Research, a market research arm under Alibaba, showed that online sales in rural China are expected to hit 460 billion yuan in 2016, compared to 180 billion yuan in 2014.
Feng's view was also shared by Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.
"Rural residents like to shop on online marketplaces, which offer an easier and convenient access to various products sold around China and abroad, while farmers can sell their agricultural products online," which will also contribute to the local governments' fiscal revenue, Lu told the Global Times Thursday.
Given China's current economic slowdown, total government fiscal revenue stood at 3.64 trillion yuan in the first quarter of the year, up 3.9 percent from a year earlier. In the same period of previous year, the growth rate was 9.3 percent.
However, analysts said that much work remains to be done to ensure product quality and availability of capital.
E-commerce companies also expect to have specific regulations covering the rural e-commerce category.
JD told the Global Times in an earlier interview in May that the company is working together with local governments to improve distribution standards and quality control system for agricultural goods sold online.
Logistics is another bottleneck in the development of rural e-commerce, as not all express companies have distribution networks covering rural areas, said Lu.
