New retail

Shopping for new retail

China leads a global consumer market revolution with the convergence of online and offline sales channels

cover P1 new retail

July 31 – August 6, 2017
By KARL WILSON in Sydney

Imagine you are in a department store looking for, say, a suit. Cannot find what you are looking for?

No problem.

You go to one of the store’s computer banks and tell it exactly what you want. At the same time you are being scanned for size and measurements.

Yes, the suit is available in your size. Click to buy and click to pay. Within 24 hours the suit will be delivered to your home or a store near you, which can include your local convenience store.

Welcome to the new retail revolution that is sweeping China, the world’s biggest consumer market.

The term “new retail” was first coined by Jack Ma, founder and chairman of the Chinese e-commerce giant Alibaba, which has been moving into traditional bricks and mortar retailing.

Ma said he views the concept as “the integration of online, offline, logistics and data across a single value chain”.

“New retail can best be described as the convergence of online and offline retail to the point where they are so mixed with each other that they simply become integral parts of each other, and therefore retail becomes new,” said Matthew Crabbe, research director at Mintel, a London-based market research firm.

“What it means is that it includes all retail, whatever the channel of sale, be it online or offline.”

On July 25, US retailer Walmart and Chinese e-commerce site announced they will be “expanding their cooperation to further integrate their platforms, supply chains and customer resources in China”.

Coinciding with the launch of the first JD-Walmart 8.8 omni-channel shopping festival on Aug 8, the new initiative will give shoppers in China faster and more convenient access to high-quality products through multiple channels, told China Daily Asia Weekly.

The collaboration will boost the popularity of US-made products in China and allow consumers to directly buy goods from Walmart through the platform.

“Our ability to tap into’s advantages across logistics, big data, technology and customer service gives Walmart a huge advantage in reaching China’s rapidly expanding consumer class,” said Ben Hassing, senior vice-president of e-commerce and technology at Walmart China.

Carol Fung, president of JD Fast Moving Consumer Goods, said that as technology pushes the boundaries of what is possible, and Walmart will offer “complementary platforms and a commitment to customers that provides us with an enormous opportunity to define the future of retail in China”.

Over the last year or so, many of China’s top retailers — led by majors such as Alibaba and — have been looking for ways to improve the online and physical relationship of shopping.

“Alibaba has experimented with opening up physical stores and seems to be getting involved with the department store market in China,” said Oscar Orozco, senior forecasting analyst with US-based market research company eMarketer.

“For all intents and purposes, (what Alibaba is doing) is similar to what we would call omnichannel integration here in the US. Not a new term by any means, but it includes a well-balanced mix of in-store and online targeting of consumers,” he said.

Fortune magazine in June said that Alibaba already accounts for more than one-tenth of China’s total retail sales (including 75 percent of online sales), with revenues surging at an astounding 50 percent annual clip.

“In little over a year, Alibaba has gone from opening its first physical store to acquiring a major Hong Kong-listed department store chain, Intime Retail, for $2.6 billion,” the magazine said.

The company also has investments in offline players, including electronics retailer Suning and white goods maker Haier.

Customers line up outside Tao Cafe, Alibaba’s first unmanned store, in Hangzhou, East China’s Zhejiang province, on July 13. Credit: ImagineChina

In February, Alibaba announced a strategic alliance with State-owned supermarket mall and department store chain Bailian Group. The deal marked another major push by Alibaba to digitize offline malls and fuel growth in the increasingly saturated online traffic.

Alibaba said a surge in mobile Internet usage and the growth of big data capabilities is driving “this new shopping experience as a way to better meet consumer demand”. The e-commerce group has 500 million monthly active mobile users.

It said it wants to bring Bailian and its 4,700 stores across 200 Chinese cities and autonomous regions into the fold as well.

“Our partnership with Bailian is an important milestone in the evolution of Chinese retail, where the distinction between physical and virtual commerce is becoming obsolete,” said Alibaba CEO Daniel Zhang in February.

As part of the deal, Alibaba and Bailian will co-design bricks-and-mortar stores that merge offline and online shopping and services to “improve the buying experience” for consumers.

They will also combine their membership bases to deliver enhanced customer service through technologies such as geo-location, facial recognition and big-data driven sales and customer management systems.

In addition, there are plans to make Alipay, the online payments app owned by Alibaba affiliate company Ant Financial, available at all Bailian stores. And the department store’s payment services — Safepass and Bailian OK Card — will be integrated with Alipay.

Mintel’s Crabbe said the rapid development of new retail is certainly not exclusive to China.

“In the US, Amazon Go is an attempt by an online retailer to go into the physical store realm, but by creating an online payment interface that means consumers shop in-store, but pay online,” he told China Daily Asia Weekly.

“Obviously, as new retail combines both online and offline retailers, the leading companies are those who lead in both the physical and online realms: Alibaba,, Suning in the online realm, and many different retailers across the physical retail sectors.”

Crabbe said that the fastest integration between online and offline appears to be happening in the convenience store sector. However, this sector is “very fragmented”, he said, as is the case with most physical retail sectors in China, so there are no clear leaders at the national level.

Convenience stores are important as they can work with online platforms to offer “last mile” delivery for online orders. This makes it one of the sectors seeing stronger growth in sales, and also faster integration between online and offline.

“This is why there have been so many new developments in terms of experiments in cashless payments, self-checkout counters and (most recently) even unmanned stores (like Amazon Go) in the convenience store sector in China,” Crabbe said.

Alibaba is at the forefront of new retail but time will tell what new innovations it will integrate in terms of new retail.

Orozco from eMarketer cited mobile wallets as an example of integration, which allow customers to shop for goods in-store and “the total cost of purchase is automatically charged to the customers’ payment option”.

“Another example would be targeted sales/discounts and newly stocked goods that are sent directly to a customer’s mobile device based off of their search preferences,” he said.

“The customer would just have to opt into this option. There are many things that can be done and retailers understand the importance of this.”

A recent report by eMarketer said, the nation’s second-largest online marketplace, has opened three offline outlets at Yonghui Superstores in Beijing, in which the e-commerce firm has a 10 percent stake.

Some of these stores even opened in lower tier cities across China, but instead of a physical showroom of products, they mostly serve as distribution, delivery and after-sales maintenance centers for home appliances, the market research company said. also took a lead by allowing the delivery of online orders for fresh, chilled and frozen produce to existing convenient stores, from which the “last mile” delivery could be made to the customer’s door (or collected in-store), once the time and place is confirmed.

In March, Dalian Wanda Group, one of China’s largest conglomerates, joined hands with card processor China UnionPay. They announced a partnership that sees Wanda partner merchants co-developing a UnionPay cardholder service system, mobile apps and marketing campaigns to serve shoppers across all Wanda properties.

“New retail is the result of efforts to find solutions to a key set of problems for each side,” Crabbe said.

“For the physical store chains, they have been unable to keep up with the growth of online retail. For the online operators, they have struggled to keep delivery infrastructure capacity up with the rapid growth in online shopping demand,” he said.

New retail means more connection and integration — not just for retailers but also consumers, manufacturers and other industry players, said Vishal Bali, managing director of Nielsen China.

“It is improvement of developed technology, consumers getting sophisticated, and diversification of industry and platform,” Bali said in March.

At the forefront of change Booming e-commerce sector in China gives glimpse into the future of global retail trends

July 31 – August 6, 2017
By KARL WILSON in Sydney

The slowing of China’s economy has had little impact on its consumers. Analysts say consumer confidence has remained resilient as salaries rise and unemployment remains low.

China’s e-commerce market is expected to top $1.132 trillion this year, and will account for roughly 23 percent of total retail sales. And growth is likely to continue, with e-commerce accounting for 41 percent of all retail sales in China by 2021.

China is already the world’s biggest e-commerce market. The country’s digital marketplace, technology platforms and online evolution have enabled it to leapfrog the more traditional retail environment in the West.

As e-commerce in China develops, it can provide a glimpse into the future of global shopping.

What China Reveals About the Future of Shopping, a report released in May by the Boston Consulting Group, said that “when Amazon and e-tailing disrupted US shopping in the 1990s, retailers and consumers alike had to rethink their deeply ingrained habits”.

“By contrast, physical retail in China was less developed. The digital revolution coincided with the growth of disposable income and consumption. As a result, e-commerce quickly became the norm, and its development was fast-tracked to the point where China pulled ahead of the West,” the report said.

Not only that, China became a pioneer in mobile commerce with many consumers skipping the PC era entirely and going straight to smartphones.

“This may explain why Samsung phones with larger screens took hold in China well before they did in Western markets,” the report noted.

According to industry estimates, online purchases made with mobile devices will account for 74 percent of total e-commerce in China by 2020, compared to just 46 percent in the United States, the Boston Consulting Group said.

Global management consulting firm McKinsey & Company said: “The days of broad-based market growth are coming to an end.”

In its China consumer report for 2016, The Modernization of the Chinese Consumer, analysts said that Chinese consumers are becoming “more selective” about where they spend their money.

They are shifting from products to services and from mass to premium segments as they seek a more balanced life where health, family and experiences take priority.

The report said the popularity of international travel is “astounding” among Chinese consumers, as is their adoption of trends such as mobile payments.

“In short, our latest research suggests we are witnessing the modernization of the Chinese consumer, and that will only make the market more challenging for consumer goods companies. But for those able to get it right, the rewards may be substantial,” the report said.

US-based market research company eMarketer forecasts that e-commerce sales in China this year will grow by around 33 percent.

Oscar Orozco, senior forecasting analyst with eMarketer, said China’s growth “comes from the continued adoption of e-commerce platforms in many four- to five-tier cities”.

China tends to be at the forefront of trends when it comes to retail and e-commerce.

Students line up for their parcels, mostly bought during Singles Day, at a university in Binzhou city, East China’s Shandong province, on Nov 17 last year. Credit: Gao Limeng / ImagineChina

Analysts say aspects of new retail in China could catch on globally, especially in Western Europe and North America, as they become more tried and tested in China.

“However, it remains to be seen what exactly this will be,” Orozco told China Daily Asia Weekly.

Matthew Crabbe, research director at Mintel, said online retail in China is still growing fast. The online retail market is expected to reach 6.4 trillion yuan ($945 billion) this year, he said, and perhaps about double that by 2022.

China’s booming e-commerce market can be attributed in part to the proliferation of dominant domestic marketplaces, such as Alibaba and, which took advantage of the country’s undeveloped traditional retail infrastructure.

These online marketplaces, in particular, positioned themselves to capitalize on growing consumer demand, eMarketer said. Alibaba’s Alipay established its own payment system while set up its own logistics network.

“In addition, with rising incomes and increased Internet access in rural areas, the cultural appetite to shop digitally will continue and we can expect to see further growth in mobile spend,” eMarketer said.

One area of e-commerce set for continued growth is haitao, which means “buying overseas”. Haitao is popular among China’s growing middle class who buy from e-commerce sites in developed countries.

Most goods bought overseas are usually shipped through an intermediary company to China, since most foreign e-commerce sites do not offer direct shipping services to the country.

Analysts say that foreign retailers and brands looking to build greater sales in the China market must shift focus and set up local online, in-store and delivery services. This is to assist Chinese customers rather than selling directly from overseas.

The online retail market (and with it, the haitao market) remains dominated by Alibaba’s Tmall, which has an estimated 50 percent share of both, according to Mintel’s Crabbe.

Alibaba’s Tmall Global portal has led the way in attracting more global brands to China by providing not only the local online storefront to gain customer attention, but also the back-end logistics to help with payments and filling orders.

Crabbe said others are catching up though, and is proving to be among the potent competitors for Tmall, along with Suning and Vipshop.

“While and Suning have both expanded their sectoral offering to a much wider market, others continue to specialize in key sectors, such as Vipshop for high-end foreign fashion brands,” he said.

“The growth in online grocery sales has created potential for more foreign food brands and retailers.”

US-based Costco, Sainsbury’s in the United Kingdom and Australia’s Woolworths have all made an online push in the Chinese mainland via Tmall Global and International, creating logistics capabilities through Hong Kong.

“Foreign retailers that already have a physical presence inside China are also trying to reach more Chinese consumers with their imported products and brands (both online and in-store),” said Crabbe.

“But with so many foreign retailers and brands now in the market, standing out from the crowd is getting more difficult.”

Analysts say this is a common problem across the online retail market in China. It is also forcing retailers and brands to become more creative in ways to engage with consumers.

China’s e-commerce market is expected to grow by 15 percent annually by 2020, according to a report by Worldpay, a provider of secure payment-processing services.

E-wallets were the most popular payment method in China in 2016 with an overwhelming 56 percent of market share, followed by debit and credit cards, both with 11 percent of the payments market.

“The growth of the Chinese e-commerce market is highly significant and can be best exemplified by China’s recent shopping spree, the Double 11, in which sales volumes achieved a record,” Tang Kok San, manager in charge of Worldpay’s business in China, said in the report.

Double 11, also known as Singles Day, is the world’s biggest online shopping event. It was launched by Alibaba in 2009 and takes place annually on Nov 11.

Bumper sales boost revenue for ‘big three’ online giants Alibaba, Tencent and have all seen earnings soar, while rising incomes and wider Internet access mean potential remains huge

July 31 – August 6, 2017
in Shanghai

Shoppers with a taste for premier goods and services are boosting the profits of China’s Internet giants and driving an increasingly consumption-fueled economy.

Online retail sales of goods surged 25.9 percent in the first four months of this year to 1.46 trillion yuan ($210 billion) compared to the same period last year, according to data from the National Bureau of Statistics.

The amount splashed out on services also jumped 55.9 percent, outpacing the 10.2 percent growth in overall consumption.

“Rising incomes among Chinese consumers mean that online retail demand is moving from low prices to better quality-driven products,” said Matthew Crabbe, Asia Pacific research director at consultancy Mintel.

The big three online players — Alibaba, Tencent and — are reaping the benefits.

In its latest earnings report, Alibaba Group posted a 56 percent year-on-year growth to 158.3 billion yuan.

Tencent also announced a revenue surge of 54.8 percent to 49.6 billion yuan in the first quarter of this year compared to the same period in 2015. This was triggered by a range of sectors from gaming to social media.

With those numbers, it is hardly surprising that these online behemoths are valued at $300 billion each, and represent the rise of China’s new economy.

In addition to their core businesses, Alibaba and Tencent are now funneling billions of dollars into long-term projects such as Hollywood-style entertainment and online finance.

Staff at Alibaba’s Xixi garden in Huaian, East China’s Jiangsu province, feed a colleague with crayfish, a popular seasonal dish, after the Xuyi government signed an agreement with Tmall to seek a wider online sales channel for the product. Credit: Niu Niu / For China Daily

Tencent has already scored a huge hit with the mobile game Honor of Kings, which has had around 50 million daily users since its debut in 2015.

According to game analyst company Niko Partners, players spend an average of $6 a month for the game and play for six hours a week.

As for Alibaba, it has reaped rewards from the steady growth of Tmall, its business-to-customer site. The company announced that 80 percent of the world’s most valuable 100 brands on Forbes’ rich list are on Tmall.

“Transactions on Tmall alone probably jumped by 25 percent in the March quarter,” Alicia Yap, an analyst at Citigroup, said.

Of course, consumers are now more accustomed to paying for goods and services online., the nation’s second-largest e-commerce company by gross merchandise volume, reported its first profit as a public company of 239 million yuan for the three months that ended in March.

Potential for China’s big three is still huge.

In a report, the Boston Consulting Group pointed out that online spending is expected to grow by 20 percent annually in China during the next five years to $2.73 trillion. That is twice as fast as in the United States and the United Kingdom.

“The next phase of online retail is the move away from simply selling products as efficiently as possible to create an enjoyable experience for the consumer,” said Crabbe from Mintel.

“Most of their revenue comes from charging for space in their online environments,” he added. “That represents an economy of scale in the revenues they receive from the services they offer to those companies.”

Workers sort commodities at a logistics center in Langfang, North China’s Hebei province, on the eve of the Singles Day, an Internet shopping festival in China every November. Credit: Reuters

It is not just physical goods that are gaining popularity in China.

New technologies have transformed the way people receive information and entertain themselves. This in turn has opened up another lucrative revenue stream for the Internet titans.

Tencent, perhaps best known for its ubiquitous WeChat platform, has grown into a gaming unicorn with 70 percent of its profits coming from that sector.

Resilient in-game spending is backed by an established fan base of hit novels and anime that are turned into fresh mobile titles.

But what delights investors even more is Tencent’s ability to make money out of its vast social network empire through digital advertising to “mobile wallets”.

The company, for example, reported that advertising revenue climbed 67 percent year-on-year to 4.38 billion yuan in the first quarter of 2017.

Payment and cloud services, which are classified as “other revenue”, enjoyed a massive 224 percent growth in the first quarter.

Last year, one-third of WeChat users spent four hours or more per day on the mobile platform. That was double the period of time from a year ago, according to Penguin Intelligence, a research arm of Tencent.

“Of course, that has helped Tencent reap early gains in digital advertisements through WeChat Moments, the social feed of friends’ updates,” said Li Chao, a senior analyst with local consultancy iResearch.

New categories are being added all the time. There are sections for restaurants, taxis and cinemas which can all be tailored to an individual profile.

“But that requires a high degree of competence and the use of big data, which is another field where Alibaba and Tencent are both leading the way,” Crabbe said.

Bloomberg contributed to this story.

Traditional retailer bucks the trend In the face of fierce online competition, Yonghui Superstores defies industry gloom with new business models, niche outlets

July 31 – August 6, 2017
in Shanghai

Yonghui Superstores has proved adept at rolling out new business models to retain market share and combat the challenges thrown up by online rivals.

The traditional retail chain has nearly 500 stores, with another 200 due to be opened later this year, and employs more than 70,000 staff.

Sales topped about $7.3 billion, according to Forbes magazine, while the company’s market cap came in at $8 billion. It also made Forbes’ list of Asia’s Fab 50 companies in 2015.

But even Yonghui Superstores has been forced to change its approach in the face of fierce online competition.

“Consumers now have higher expectations for online-to-offline business,” said Bruno Lannes, a Shanghai-based partner at Bain & Company, the global management consulting firm. “Retailers must come up with new models.”

Consumers are attracted by the fresh seafood and cooking service at Bravo YH in Fuzhou, East China’s Fujian province. Credit: Zheng Shuai / For China Daily

Yonghui Superstores has done just that. Known for its massive 5,000-square-meter hypermarkets, the company launched Super Species, a smaller sized supermarket brand, in its home city of Fuzhou in East China’s Fujian province.

The 500-sq-m stores target middle class consumers that like to combine shopping with dining.

Customers choose their favorite foods, such as salmon or prime beef, which are cooked in store. Wine is also available at the store.

With a wide range of produce, the company’s plan appears to be working.

“Up to 50 Super Species stores are scheduled to be opened this year,” said Lin Chuangyan, a partner at Super Species. “The ultimate goal is to introduce the consumers, who come into the store, to our online platform.”

Still, these niche outlets are just the latest attempt Yonghui Superstores has made in recent years.

Back in 2015, the retailer launched its first YH Member Experience brand outlet in Shanghai. So far, they have opened more than 30. But the aim was to roll out 800 outlets in the city by 2018.

Defined as a mid- to high-level community supermarket, the branded stores covered just 200 meters, and featured fresh produce and imported goods.

Consumers living within a few kilometers of these outlets can shop online with the added attraction of a delivery service.

In May, another new brand was launched by the company. YH Life first popped up in the financial hub of Shanghai with the store covering the neighboring 1 square kilometer.

Just like a small convenience shop, it sells mainly cigarettes, ice-creams, semi-finished food products and fresh food. Online services are also available, including delivery.

The move has proved a hit.

Yonghui Superstores reported that operational income in the first quarter reached 15.3 billion yuan ($2.3 billion), a jump of 13.8 percent compared to the same period in 2016.

A woman uses the self-service machine to weigh products at a Yonghui Superstores outlet in Fuzhou, Fujian. Credit: Chen Hao / For China Daily

It also exceeded analysts’ expectations. “When the entire retailing industry is shrouded in gloom, Yonghui Superstores has come up with a totally different story,” said Wang Liting, a senior analyst at Haitong Securities in Shanghai.

“Quite simply, it has integrated its supply chain and created new business models,” he added. “We expect the company’s annual income growth rate will remain at around 20 percent in the next five years.”

Yonghui Superstores has certainly managed to buck the trend for bricks-and-mortar retailers.

Statistics released by the China Commerce Association for General Merchandise showed that 150 department stores closed between 2012 and 2016, with 100 going to the wall last year.

Soaring rents have been a huge problem as they have nearly doubled in the past five years in first-tier cities, according to WinShang Commercial Property Intelligence Center in Guangzhou in South China’s Guangdong province.

Rising labor costs have been another huge burden. Figures from the Pudong Innovation Research Institute in Shanghai showed that the average annual income in major cities, such as Beijing and Shanghai, increased by 10 percent in 2016.

Lannes of Bain & Company agreed that traditional retailers have struggled in the past five years, with sales contracting 10.4 percent in some sectors as stores are forced to close down.

“Retailers have to bring together online and offline businesses, logistics and data to integrate them onto a single value chain and redesign the retail industry,” he said.

AI makes stores more convenient New technology sees checkout-less, cashier-free outlets transforming China’s retail landscape

July 31 – August 6, 2017

Artificial intelligence (AI) is poised to move into your local 24-hour convenience store.

BingoBox, a new kid on the block in the sector, opened its first checkout-free outlet in Shanghai in June and plans to launch thousands of stores in the next two years.

Although that might look rather ambitious, the Chinese startup has a few tricks up its sleeve.

Already it has received 100 million yuan ($14.7 million) in a series A investment round, spearheaded by venture capital firm GGV Capital, as well as signing a strategic partnership agreement with French retail giant Groupe Auchan to strengthen its supply chain.

But it is the technology that has made the difference.

“We have built a team of artificial intelligence experts to research and develop technologies, including product recognition and sorting algorithms,” Chen Zilin, founder and CEO of BingoBox, told business website China Money Network.

“This technology has successfully recognized more than 200 types of products,” he added. “We are planning to launch AI solutions for retail enterprises starting in August.”

Chen appears to have chosen a winner. He rolled out the company’s first 24-hour unattended convenience store in northern Shanghai’s Yangpu district in June.

Similar to Amazon Go’s experimental outlet in Seattle, in the United States, there is no checkout or cashier.

For shoppers, the process is easy. First, they scan a QR code, via their smartphone, to open the store door.

After that, they choose their snacks and drinks before scanning them in the “product identification area”. Payment is made through a QR code that pops up on the screen to complete the transaction.

At that point, the door opens to let the customer out. Simple, but very effective.

“We are optimistic about the retail industry’s transformation, and especially in BingoBox’s team,” Eric Xu, a managing partner at venture capital firm GGV Capital, told China Money Network.

The concept was developed by Zhongshan Bingo Internet Technology in South China’s Guangdong province, using AI and face-recognition technology.

To address its supply chain problems, the company put together a partnership deal with Auchan.

“It was a way of testing the waters,” said Gu Xiaobei, who is in charge of investor relations at Sun Art Retail Group, the parent company of Auchan, in Shanghai.

A shopper pays her bill by scanning a QR code at a BingoBox outlet in Shanghai. Credit: Ji Haixin / For China Daily

BingoBox’s approach illustrates what Jack Ma, founder of e-commerce giant Alibaba, talked about at a conference in Hangzhou, capital of East China’s Zhejiang province, last October.

He called for online and offline businesses to be combined with logistics in the next 20 years. Ma’s vision is starting to take shape in Alibaba’s $150 million investment in Hema Xiansheng, a platform which combines bricks-and-mortar stores with online services.

Known as online-to-offline, this fresh food startup has steadily expanded its network of supermarkets since it opened its first outlet last year.

Now, it has nine stores in Shanghai, one in Beijing, and one in Ningbo, in Zhejiang province.

Most of the supermarkets have more than 3,000 kinds of products. In the seafood sector, customers select what they want and pay online before having it cooked to order.

They can also have their orders delivered within 30 minutes as long as they are within 3 kilometers of the store.

“Up to 80 percent of the company’s customers are born in the 1980s and 1990s,” said Hou Yi, founder and CEO of Hema Xiansheng.

“They are Internet natives. This generation has grown up in an increasingly affluent China. Therefore, they care more about quality and are less sensitive to prices.”

Customers visiting a Hema Xiansheng supermarket will see shoppers and employees rushing around with mobile devices, picking up produce and other products from the shelves.

They then bundle them into shopping bags before some are clipped to hangers. At the touch of a button, they are lifted toward the ceiling on overhead conveyor belts.

By using this business plan, the offline stores double as the warehousing, sorting and delivery centers for its online supermarket.

Last year, shopping online was worth 4.7 trillion yuan, an increase of 24.7 percent compared to 2015, according to iResearch, a market consultancy based in Beijing.

“The keywords for retailers are equality and interaction,” said Wu Zhige, associate research director at market intelligence provider IDC China. “Retailers should create new shopping models and advance the digital transformation of their distribution channels.”

Rural areas reap e-commerce gains Access to online marketplace boosts spending on consumer and farm products in China’s villages

July 31 – August 6, 2017

Every day, Chen Yandong handles dozens of packages for the residents of Gaozhai village in Northwest China’s Gansu province. These range from appliances such as refrigerators and air conditioners to daily necessities like razors and toothpaste.

Chen is amazed by how residents of the remote village make the most of their Internet connections to add convenience to their lives.

“People are happy to get access to good prices and quality products from online vendors,” Chen said.

E-commerce is helping revitalize China’s rural villages, home to half of the country’s population. It has also emerged as a new growth driver for consumer spending in the world’s second-largest economy.

China has the world’s largest e-commerce market. As the incomes of rural residents increase, growth in online retail purchases by rural shoppers has outpaced their urban counterparts.

China’s rural residents spent 894.54 billion yuan ($132 billion) online in 2016, accounting for 17.4 percent of the nation’s total, according to the Ministry of Commerce.

E-commerce is also opening the door to the huge rural market for companies and farmers.

Alibaba, which began a rural strategy on its e-commerce platform Taobao in 2014, has set up local service centers in about 30,000 villages across 700 counties to support its e-commerce business and provide delivery services in rural areas.

To meet rising demand, e-commerce giant is expanding its service center workforce to more than 300,000 in rural areas.

Farmers have also raked in handsome profits from selling premium produce online.

Li Chunwang from Wugong county, in Northwest China’s Shaanxi province, has set up a cooperative which purchases fruit from farmers and sells it online. Previously it made an annual income of around 3 million yuan. In 2016, the number shot up to nearly 300 million yuan.

The city of Donggang, in Northeast China’s Liaoning province, is well known for its strawberries. In 2016, more than 80 percent of the city’s strawberries and strawberry-based products were sold online. In the first three months of this year, online sales reached 1.2 million yuan.

Tian Yihong, Party secretary of Wugong county, said e-commerce has given local agriculture a boost and farmers no longer remain stuck at the lower end of the value chain.

The government has reiterated its support for e-commerce in underdeveloped rural areas. The Ministry of Commerce announced in October 2016 that “policy support will be given to small online retailers … to lower their operational costs”.

More will be done to support and nurture e-commerce businesses operating in rural regions, and training programs will be offered to small business owners, according to the ministry’s website.

As part of the Chinese government’s goal to eliminate poverty by 2020, it has created more than 1,000 “Taobao villages” over the past decade.

Online sales revenue in 105 national-level poverty-stricken counties, including the model districts lauded by the Ministry of Commerce, reached 220 million yuan on average in 2016.

E-commerce plays a key role in poverty reduction, by not just giving a man a fish, but also teaching him how to fish, said Liu Qiangdong, chairman of

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