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Alibaba invests big on Rural Taobao

Alibaba, Rural Taobao, online shopping

Last fall, 30-year-old Luo Rong quit his $30,000-a-year engineering job in Shanghai, moved back to his mountaintop village of Jade Peak with his wife and newborn baby and opened a shop with a big orange and green sign out front. The store is thinly stocked. There are a few packages of seeds, Skittles candy, some sweaters, sneakers and laundry soap — but no lack of customers.


The main draw is Luo's computer and the big-screen display perched above him on the wall — both provided by the Chinese e-commerce giant Alibaba. From 7:30 a.m. to 11 p.m., breaking only for meals at his parents' house, Luo pecks away at his keyboard, helping his technology-challenged neighbors buy fertilizer, TVs and even electric cars on an Alibaba shopping site called Rural Taobao. Luo arranges the payments, as well as delivery to Jade Peak, and earns a commission from the sellers.


"This is going to change the whole village," said Luo Laibing, a 56-year-old farmer who stopped by on Tuesday to purchase more than 1,000 pounds of fertilizer. "It's saving us money and time, and is making life much more convenient."


Rural Taobao is an ambitious effort by Alibaba to turn China's 600 million rural residents into online shoppers — and sellers — at a time when the company's growth in transactions is slowing and China's economic growth has ebbed to a 25-year low. In the last year and a half, the company has enlisted more than 15,000 village "partners" like Luo Rong and hopes to have at least 40,000 by this time next year. Alibaba says it plans to invest $1.6 billion in the effort through 2019, with the ultimate goal of opening 100,000 Rural Taobao centers.


But the company is hardly going it alone. It's getting a big helping hand from the government, which is footing the bill to renovate storefronts like Luo's, sending officials out to talk up e-commerce to skeptical farmers, providing gratis space for new logistics centers and deploying propaganda workers to promote Rural Taobao.


The ministries of commerce and finance have allocated $300 million to 200 rural counties to spend on warehouses, training and anything else that might push the project forward.


While it's inconceivable that Uncle Sam would offer such assistance to, say, EBay or Amazon, China's Communist Party leaders see no problem working hand-in-glove with a company like Alibaba when it suits national aims. Government officials and Alibaba executives say Rural Taobao jibes neatly with national goals such as boosting consumer spending to fuel economic growth, narrowing the income gap between urban and rural citizens, promoting entrepreneurship and harnessing the power of the Internet to invigorate backward regions.


And while China is still expecting an additional 200 million or so people to move from the countryside to its burgeoning cities, the government is aware that it can't urbanize everyone.


Already, Luo Rong has plans to move his storefront into a bigger space, which the government will pay to renovate. Rent will be about $500 a year. He envisions adding more services, including printing, copying and video-conferencing, so elderly parents in Jade Peak can chat with their sons and daughters who have moved to big cities.


"Next I want to help sell our local products like potatoes and smoked meat online," said Luo Rong. "It's long been my dream to contribute to the development of my village."


He's got neighbor Luo Laizhang, 45, selling eggs online; now, the two are trying to figure out how they can market the farmer's special breed of black chickens. "We have to figure out the slaughtering, packaging and transport," says Yuan Chunjiang, Rural Taobao regional manager for the eastern part of Jiangxi province. "It's a bit complicated."


There is great room to grow e-commerce in rural areas, Alibaba believes. Of the 600 million rural Chinese, only 77 million shopped online in 2014, according to data from the China Internet Network Information Center. In the first quarter of 2015, less than 10% of online purchases made through Alibaba platforms were shipped to rural areas. Alibaba will have the opportunity to offer them a wide variety of services, including loans through its affiliate Ant Financial and financial services.



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