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[Report] E-commerce and Countryside in China | Daxue Consulting

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The development of e-commerce in rural China will be the next challenge for Chinese rural areas in the following years. As e-commerce has been successfully implemented in urban areas in the past, the main actors of Chinese e-commerce such as Alibaba (阿里巴巴) within its Taobao (淘宝网) services, already started to expand to the Chinese countryside in 2014. As a matter of fact, E-commerce growth in rural China will be the main reason for the future increase of the China rural GDP.

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[Report] E-commerce and Countryside in China | Daxue Consulting

  1. 1. E-commerce and countryside in China, The Next frontier April 2018 By Daxue Consulting 1
  2. 2. 2 -1- Internet in rural and urban China 2
  3. 3. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Internet in rural and urban China (1/4) More and more Chinese people are leaving rural areas to settle down in urban areas. 3 Source: Slides from the Alibaba Group, 2016 INTERNET IN RURAL-URBAN CHINA
  4. 4. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Internet in rural and urban China (2/4) The number of internet users in China remained stable over the past few years. 4 Source: CNNIC reports on China’s rural internet development INTERNET IN RURAL-URBAN CHINA
  5. 5. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Internet in rural and urban China (3/4) Internet access in rural areas is still limited in comparison to urban areas. 5 Source: CNNIC report on China’s rural internet development, 2016 Rural-urban internet and mobile payments usage (% population) (2016) INTERNET IN RURAL-URBAN CHINA
  6. 6. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Internet in rural and urban China (4/4) The lack of computers and internet access explains the lower use of internet in rural areas. 6 Source: CNNIC report on China’s rural internet development, 2016 INTERNET IN RURAL-URBAN CHINA
  7. 7. 7 -2- Taobao villages insights 7
  8. 8. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (1/8) A “Taobao Village” (淘宝村) is a cluster of rural e-tailers within an administrative village where... : 8 TAOBAO VILLAGES Residents got started in e-commerce spontaneously with the use of Taobao marketplace Total annual e-commerce transaction volume is at least 10 million RMB (= $1.6 million) At least 10% of village households actively engage in e-commerce, or at least 100 active online shops have been opened by villagers Source: Alizila News, An introduction to Taobao villages, January 2016
  9. 9. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (2/8) Taobao villages are all over China. 9 Source: Slides from the Alibaba Group, 2016 Provinces with Rural Taobao presence TAOBAO VILLAGES
  10. 10. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (3/8) It took only 4 years to establish more than 2,000 Taobao villages in China. 10 Source: AliResearch reports, Alibaba Research Center for Rural Dynamics TAOBAO VILLAGES
  11. 11. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (4/8) Most of the Taobao villages are concentrated in 6 provinces. 11 2014 Source: AliResearch report, Alibaba Research Center for Rural Dynamics, October 2016 TAOBAO VILLAGES
  12. 12. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (5/8) “Taobao Town” is defined as a town, when it comprises at least three Taobao Villages. 12 Source: AliResearch report, Alibaba Research Center for Rural Dynamics, October 2016 TAOBAO VILLAGES
  13. 13. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (6/8) Some Chinese cities gather dozens of Taobao villages. Ranking City Province Number of Taobao villages 1 Taizhou 台州 Zhejiang 浙江 107 2 Wenzhou 温州 Zhejiang 浙江 101 3 Jinhua 金华 Zhejiang 浙江 95 4 Guangzhou 广州 Guangdong 广东 91 5 Quanzhou 泉州 Fujian 福建 69 6 Hangzhou 杭州 Zhejiang 浙江 65 7 Heze 菏泽 Shandong 山东 61 8 Shantou 汕头 Guangdong 广东 50 9 Suqian 宿迁 Jiangsu 江苏 50 10 Suzhou 苏州 Jiangsu 江苏 46 13 Top 10 cities by the number of Taobao villages (2016) Source: AliResearch report, Alibaba Research Center for Rural Dynamics, October 2016 TAOBAO VILLAGES
  14. 14. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (7/8) A taobao village cluster gathers at least 10 Taobao villages and makes more than 100 million RMB annually. 14 Top 10 Taobao villages clusters in China (2016) Ranking County / District Province Number of Taobao villages 1 Yiwu City 义乌 Zhejiang 浙江 65 2 Wenling City 温岭 Zhejiang 浙江 54 3 Caoxian County 曹县 Shandong 山东 48 4 Puning City 普宁 Guangdong 广东 48 5 Suining County 睢宁 Jiangsu 江苏 40 6 Jinjiang City 晋江 Fujian 福建 32 7 Baiyun District 白云 Guangdong 广东 32 8 Panyu District 番禺 Guangdong 广东 32 9 Shuyang County 沭阳 Jiangsu 江苏 31 10 Ruian City 瑞安 Zhejiang 浙江 30 Source: AliResearch report, Alibaba Research Center for Rural Dynamics, October 2016 TAOBAO VILLAGES
  15. 15. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Taobao villages insights (8/8) “Clothing” is the most popular commodity in Taobao villages. 15 Ranking Commodity 1 Clothing 2 Furniture 3 Shoes 4 Auto supplies 5 Suitcases, bags, leather products 6 Toy 7 Household commodities 8 Bedding 9 Outdoor supplies 10 Main home decoration materials Top 10 commodities by sales revenue of Taobao villages in China (2015) Source: AliResearch report, Alibaba Research Center for Rural Dynamics, 2015 TAOBAO VILLAGES
  16. 16. 16 -3- Online shopping in rural areas 16
  17. 17. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Online shopping in rural areas (1/4) The number of netizens remains stable in rural areas, while they are increasingly engaged in online shopping. 17 Source: CNNIC reports on China’s rural internet development ONLINE SHOPPING IN RURAL AREAS
  18. 18. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Online shopping in rural areas (2/4) . Rising internet penetration rate Growing income Promoting policies Decrease of offline trade E-commerce main players moving to the countryside Rise of consumption 18 Source: AliResearch report, Alibaba Research Center for Rural Dynamics, 2015 (translated from Chinese) Major reasons for the rapid growth of online shopping in rural areas ONLINE SHOPPING IN RURAL AREAS
  19. 19. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Online shopping in rural areas (3/4) The e-commerce development already contributes to the growth in rural areas. 19 Source: The Economist Intelligence Unit ONLINE SHOPPING IN RURAL AREAS
  20. 20. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Online shopping in rural areas (4/4) Whether e-commerce services exist or not strongly impacts the wealth of Chinese households. 20 Source: AliResearch and SWUFE, 2016 ONLINE SHOPPING IN RURAL AREAS
  21. 21. 21 -4- Contact us 21
  22. 22. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE About us Daxue Consulting is a market research and management consulting firm focusing on the Chinese market. We are leveraging a multiple-methodology approach in order to support clients’ needs, auctioning traditional methodologies as well as technology-driven tools. With offices in Beijing and Shanghai (as well as a commercial representation in Hong-Kong), Daxue Consulting’s team is composed of local and overseas-educated Chinese and china-educated foreign project managers. Our commitment to understanding clients’ challenges and base all our recommendations on data have convinced more than 120 clients to work with us and come back to us for new research projects. In total, we conducted more than 250 projects over the last 6 years. With a team of 15 full-time project managers and a network of hundreds of data-miners, Daxue consulting is able to cover China entirely in terms of data collection and research. Daxue Consulting is often solicited in order to work on market sizing, market opportunity assessment, acquisition and target identification, consumer understanding. We have worked with major international companies as well as for SMEs. 22 ABOUT DAXUE
  23. 23. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE Disclaimer 23 Timeliness of Content: • The information provided in this research project, including, but not limited to, reports and other opinions, is current as of the date appearing on such information and is subject to change without notice. Liability Restrictions: • Information, opinions and statistical data contained in this report were obtained or derived from sources believed to be reliable, but daxue consulting does not represent that any such information, opinion or statistical data is accurate or complete, and they should not be relied upon as such. All estimates, opinions and recommendations expressed herein constitute judgments as of the date of this report and are subject to change without notice. • Nothing in this report constitutes legal, accounting or tax advice. Client is responsible for obtaining independent advice concerning these matters, which advice may affect the guidance given by daxue consulting. Further, daxue consulting has made no undertaking to update these materials after the date hereof notwithstanding that such information may become outdated or inaccurate. Copyrights, Trademarks, Intellectual Properties: • The material contained in this presentation are designed for the sole use by the Board of Directors or senior management of the Client and solely for the limited purposes described in the documents. The materials shall not be copied or given to any person or entity other than the Client (“Third-Parties”) without the prior written consent of daxue consulting or mention of the origin to the receiver. These materials serve only as the focus for discussion and are incomplete without the accompanying oral commentary and may not be relied on as a stand-alone document. • Further, Third-Parties may not, and it is unreasonable for any Third-Party to, rely on these materials for any purpose whatsoever. To the fullest extent permitted by law (and except to the extent otherwise agreed in a sig). ABOUT DAXUE
  24. 24. – Daxue Consulting [Beijing, Shanghai, Hong-Kong] – – April 2018 – – All rights reserved – INTERNET IN RURAL-URBAN CHINA TAOBAO VILLAGES ONLINE SHOPPING IN RURAL AREAS ABOUT DAXUE 24 For any inquiry or further information, please contact us at dx@daxueconsulting.com 24

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