Alibaba’s “Taobao” e-commerce portal continues to demonstrate the collective buying power of rural Chinese citizens through the ongoing expansion of its rapidly growing rural service center program. The centers help rural citizens without the e-commerce hardware or know-how conduct business transactions online.
Alibaba says the number of centers it operates has grown 800 percent since June 2015, to reach more than 16,000. Within three years, the company expects to operate a total of 100,000 centers.
A quick look at the swelling number of rural transactions and the growing package volumes explains Alibaba’s rationale for rural expansion. As rural connectivity to online shopping increases, merchandise sales have soared. Alibaba’s internal research organization, Alizila, estimates 7 billion packages were delivered to rural consumers in 2015, up 33 percent from 4.5 billion in 2015.
Meanwhile, the report found the value of e-commerce transactions originating from government-designated impoverished areas grew 81 percent, year-over-year, to US$3.3 billion in 2015. However, with nearly 50 percent of the Chinese population residing in rural areas, the market is far from reaching its potential.
The process of establishing a new center takes a top-down approach, which begins with high-level company and local government officials, and then gradually shifts control of the center to a local representative. Local representatives take a commission from each transaction and operate the center as if they were the proprietor. During a typical day, a single center associate is able to conduct upwards of 40 transactions, Alizila said. Packages arrive within two to seven days, depending on the distance and selected delivery option.
Moving forward, Alibaba said it hopes the rural centers can provide not only a platform for rural residents to purchase goods online, but also an opportunity to sell. A recently launched pilot program in Zhejiang, Guizhou and Shandong provinces has enabled rural farmers to sell their produce to urban-dwellers.
For an overview of Taobao’s Rural Service Center program, see: