What Happens When Farmers Go Hunting for Treasure

The Old Switcheroo

Online retail has changed consumer behavior all around the world – particularly in Asia. Around 50 percent of the e-commerce industry’s global revenue is currently generated in China. This boom has opened up new prospects for the population of the People’s Republic, a portion of which lives in abject poverty.

No work, no money, and little hope – large swathes of China’s populace are left in the shadows of the metropolitan regions as the nation swiftly develops into a commercial powerhouse. Hosts of migrant workers have been leaving villages for the economic centers on the country’s east coast for decades. The government is strongly promoting production facilities in the country’s interior in order to put a stop to this development and reduce the disparity between east and west. The government is also providing for infrastructure and logistics to ensure that goods reach the east quickly and inexpensively. Online retail has aided these efforts. The Taobao (‘treasure hunt’) platform, in particular, has made farmers millionaires and turned small rural communities into flourishing economic hubs.

Sun Han is a pioneer. But he started out dreaming the same dream that so many of his peers from rural China chase: a good job in a big city. He left his home village of Dongfeng and struggled to stay afloat in a big city with odd jobs. He gave up, returned home, and got lucky – he found a full-time position in the next-closest town working as a customer support representative for a mobile provider. However, this well-paid work bored him. He quit and bought a laptop – which made him the first resident of Dongfeng to possess a computer with an Internet connection. Han had his lightbulb moment when, shortly thereafter, he visited a large furniture store during a trip to Shanghai. He was impressed by the massive selection available there. However, he wasn’t quite so impressed by the quality and high prices. He returned home and hired a carpenter to construct furniture. In 2007, at the age of 25, he sold his first furniture models through his new Taobao account, via his laptop. Han’s inexpensive products came into such high demand that, within a very short period of time, he was able to set up a furniture factory in the village and earn a fortune. His success story is an influential one: The village residents who initially mocked his business idea have now gone on to imitate him. Today, Dongfeng is home to over 600 furniture manufacturers, as well as an attendant supplier industry.

Targeted support

The village of Wantou witnessed a similar development around a decade ago. Its residents sell baskets woven from willow and straw online. The first Wantou-based shop began peddling its wares on Taobao in 2008; now, there are well over 1,000 online shops based there. More and more farmers are seizing the opportunity to sell their creations online – from food, to clothing, to special goods such as Chinese musical instruments. And more and more other villages are focusing on online retail, too. This development hasn’t escaped the notice of the Alibaba Group, which operates the Taobao platform, or of the Chinese government. Both of these parties began steering and supporting this trend from an early stage; among other measures, they offer special training in the relevant regions on subjects ranging from basic computer skills to professional customer service expertise. The mobile network is also being radically expanded to aid rural commercial growth. These efforts are paying off; Dongfeng and Wantou number among the first ‘Taobao villages.’ This is a distinction that Alibaba awards to places where ten percent of the population is involved in online retail, generating a minimum annual turnover of ¥10 million ($1.6 million). There were 20 such villages in 2013; three years later, there were over 1,300. This growth has created around 840,000 jobs, and the number of individuals migrating out of rural areas has dropped by around 12 million.

Optimally serving the target market

The Taobao villages illustrate how fundamental proper market access is to economic success. They also demonstrate how important it is to know, understand, and optimally serve the target market. Four years after Alibaba was founded (it initially served as a B2B retail platform), eBay announced that it wanted to enter the Chinese market. Alibaba responded by copying the eBay concept and further developing it. Taobao, the new platform for end consumers, featured an integrated payment system (Alipay) and a live chat function. “Credit cards were barely in use in China. The question of payment was a crucial one,” says Frank Holzmann, an e-commerce expert at TÜV Rheinland. “The same applies for the chat function. This allowed customers to contact retailers quickly and easily.” eBay, however, relied on its proven website, and didn’t set up a hotline for Chinese customers. This decision proved to have fatal consequences: Following after close to three unsuccessful years, the American company withdrew from the Chinese market, while Alibaba and its better-equipped platform celebrated one record-breaking year after the next. Alibaba’s biggest one-day annual retail event, Singles Day, generated a turnover of $25.3 billion in 2017. The roughly $8 billion that Amazon earned on Black Friday and Cyber Monday combined pales in comparison.

Picture credit: U.S. Geological Survey and NASA