Village entrepreneurs' love-hate relationship with e-commerce

There are 225 million rural internet users and over 9.8 million e-businesses in China’s rural areas. With internet sales for agricultural products standing at over 230 billion RMB, e-commerce seems like the perfect way to alleviate poverty in China. Edwin Ong speaks to village entrepreneurs to find out how e-commerce works, the many problems it faces, and its future.
Agricultural e-commerce is helping to lift rural Chinese villages and townships out of poverty. (Meng Dandan/SPH)
Agricultural e-commerce is helping to lift rural Chinese villages and townships out of poverty. (Meng Dandan/SPH)

“Previously, people had to go up to the mountains before dawn to chop wood and farm the land. Now, they wake up in the morning, get some work done, then relax and do a bit more in the evening. Life is a lot better than before,” says 25-year-old agriculture e-commerce entrepreneur Wen Xin in Ping’an township (classified to be in extreme poverty) in the northwest of Fengjie County, Chongqing.

For decades, despite being China’s second-largest producer of navel oranges, Fengjie’s economic development languished, with 135 of its villages living in poverty. However, in recent years, the county government has been working with Chinese e-commerce giant Alibaba to push its Taobao online shopping service for agricultural products in rural areas, rapidly transforming the fate of poor, remote areas.

Fengjie County: 2,000 RMB increase in annual income

Back in 2015, when Rural Taobao (农村淘宝) came to Fengjie on its first recruitment drive, Wen Xin was in his third year of university reading landscape engineering. Though he came from a farming family, he was prepared to try something new, signing up for a one-week course on e-commerce for agricultural products, and going for further training on an ad-hoc basis.

After graduating in 2017, Wen Xin went home to set up Fengjie Kuiye E-commerce (奉节夔野电子商务公司), giving up the agricultural life of his grandparents’ generation. He reveals that previously, the annual income for the entire family from selling agricultural products was only about 1,000 RMB (about S$194). Now, the monthly income from his e-commerce business is about 7,000 to 8,000 RMB.

wen xin
Young e-commerce entrepreneur Wen Xin talks to this reporter while checking orders on a big screen.

Currently, Kuiye has service centres in all the 12 villages under Ping’an township. Wen Xin purchases agricultural products such as cured meats, sausages, and honey from the villagers at about 5 to 10% above market price, then sells these items to places such as Hubei, Shanghai, and Guangdong, at about 20% above market price.

E-commerce is succeeding due to government support. Wen Xin says, his and other service centres in the various villages, are all provided rent-free by the local government. There is also an annual subsidy of 20,000 RMB for overheads.

Since March last year, Chongqing mayor Tang Liangzhi has undertaken efforts to alleviate poverty in Ping’an, and poverty rates have gone down from 14.35% in 2014 to 1.14% currently.

As for the entire county of Fengjie, backed by agricultural e-commerce, poverty rates have also fallen to 0.99%, with 135 villages all lifted out of poverty. This reporter understands that 12,000 families in the entire county have gotten out of poverty through e-commerce, out of which 11,000 have seen an average increase of 2,000 RMB in annual income.

Shizhu County: Sharing resources and centralised training 

Fengjie is not the only county in Chongqing that is boosting its agricultural economy and alleviating poverty through e-commerce. Shizhu Tujia Autonomous County has built an e-commerce industrial park to share resources and provide centralised training.

e-commerce park
The Shizhu e-commerce park is part of China's poverty alleviation efforts.

Shizhu is the home of Chinese goldthread (Coptis Chinensis, a herb used in traditional Chinese medicine) and chilli, and the largest producer of chives in China. Like Fengjie, Shizhu is rich in agricultural products but lacking in infrastructure, with goods unable to move out and people unable to move in, leading to a depressed economy. At one point, the county had 85 villages living in poverty.

This reporter understands that soon after Chen Min’er became Chongqing party secretary in July 2017, he chose to focus his poverty alleviation efforts on Zhongyi township in Shizhu. Chinese president Xi Jinping visited the place in April this year. All 85 previously poor villages have now risen out of poverty, and poverty rates have plummeted from 12.7% in 2014 to the current 0.87%.

The e-commerce industrial park covers about 4,500 square metres, with about 30 e-businesses and 120 staff. There are six areas in the park: big data, product display, customer service, business entry, e-commerce incubation, and online stock processing.

big data
The big data centre shows the latest e-commerce information.

In the big data centre near the entrance of the park, the large screens on the walls are particularly eye-catching. They show real-time figures of Shizhu’s agricultural products and e-commerce, including the latest orders, trends of online sales prices, sales volume, popular items, and store rankings, along with reviews of Shizhu’s agricultural products from various platforms such as Taobao, JD.com, and Pinduoduo.

Take chilli for example. The top three positive reviews are “satisfyingly hot”, “tasty”, and “nice bright red”. Negative reviews are “lousy packaging”, “a little damp”, and “not the full weight”. All these comments help Shizhu’s e-businesses keep a finger on the pulse of the market, and allow them to monitor and analyse real-time figures on supply, demand, and logistics of agricultural products.

This reporter understands that the e-commerce incubation centre in the park mainly works with educational institutions, e-commerce enterprises, and the Chongqing Business Vocational College to teach the locals about e-commerce, while providing advanced training to impart skills for the industry. Currently, the centre has run six training cycles and trained over 800 people.

incubation centre
The incubation centre provides e-commerce skills training.

Luo Wujiang:  Monthly sales of 100,000 RMB

E-commerce owner Luo Wujiang, 37, moved into the park in March. He says the e-commerce incubation centre organises classes every month and invites overseas instructors to teach the latest online trends and e-commerce skills, where he has learned a lot.

He says, “I go every month, and even if I can’t make it, I’ll send someone else.” He has five staff.

luo wujiang
Luo Wujiang turned to e-commerce last October, and now sees average monthly sales of about 100,000 RMB.

Mr Luo is originally from Shizhu, but worked in Guangzhou. After sustaining liver damage due to excessive drinking, he could no longer do manual work and for a time fell below the poverty line. In late 2017, he returned to his hometown and opened a brick-and-mortar store selling agricultural products, but could not turn a profit. In October last year, he turned to e-commerce. For him, the best thing about running an e-commerce platform is that there is no burden on him in terms of storage or logistics.

Mr Luo’s online store sells traditional handmade smoked cured meats and honey, with average monthly sales of about 100,000 RMB, translating into a profit of about 20%.

Yang Shiyou: How to build a top e-commerce brand

Head of Shizhu’s e-commerce industrial park and e-commerce association Yang Shiyou, 44, says that with the training from the e-commerce incubation centre, even if the locals do not master the skills of going into e-commerce, they would be aware of the benefits that e-commerce can bring. Right now, the centre is organising more targeted training sessions to teach skills such as product promotion through short video clips, aesthetic design, and platform operations, in order to improve the operational capabilities of Shizhu’s e-businesses.

Mr Yang is also from Shizhu. Before starting his own business, he spent about ten years as a career manager in Shenzhen and Chongqing. Having observed the rise of e-commerce for agricultural products in China, he spotted the potential of entrepreneurship and innovation in this field. He saw very early on that Internet Plus (互联网+) — the plan as proposed by China's prime minister Li Keqiang in his Government Work Report on 5 March 2015 to grow the digital economy — would be the government’s focus.

In 2016, Mr Yang decided to switch careers. He started an agricultural e-commerce platform called ynwall.com. Although it was initially unpopular, it is now one of the top ten e-commerce brands in Shizhu.

Mr Yang says that before ynwall, the farmers rejected e-commerce platforms because the registration process was complicated. ynwall simplified the process and made it easy for farmers.

He adds that selling agricultural products online has given a big boost to the farmers’ incomes. In the case of Zhongyi’s bamboo shoots, since the advent of e-commerce, the purchase price from the farmers has doubled from 7 or 8 RMB per kati to 16 RMB per kati.

Apparently, Shizhu is pushing e-commerce as a means of alleviating poverty. Already, there have been 180 sessions of e-commerce talent training, which has benefited some 13,000 people, of whom 2,500 fall below the poverty line. The county is also encouraging some 3,500 people to go into e-commerce — over 400 of them fall below the poverty line.

The many problems of village e-commerce

Even as agricultural e-commerce platforms are popping up all over China, the road ahead is not easy.

Yang Shiyou, the founder of ynwall, reveals that the initial stage of starting an agricultural e-commerce platform is full of technical issues and financing difficulties. Agricultural supplies in southwest China are also unreliable — e-commerce platforms spend hundreds of thousands of yuan to promote products online, only to find that the suppliers are unable to replenish stocks.

Mr Yang says that unlike maturing e-commerce platforms for factory-made products, nascent agricultural e-commerce platforms involve higher investments. “I don’t need money for industrial products. On Taobao, I buy from the left and sell to the right, I don’t need money... for agricultural products, you need ready stock, and for that you need money.”

Refrigeration facilities are also needed to store agricultural products. Mr Yang says, “Most of such entrepreneurs can’t afford to rent a freezer or refrigerator, much less maintain it.”

yang shiyou
Yang Shiyou is the head of Shizhu’s e-commerce industrial park and e-commerce association.

Even if one is able and willing to build a storage facility, the agricultural e-businesses might be tied down by rigid government policies. Mr Yang says agricultural fields are everywhere in the villages, but the government does not want to change land use. E-businesses have to build their storage facilities in the city where storage spaces are expensive. There are also restrictions on truck routes in city centres which can create problems for the transportation of agricultural products.

E-businesses also face financial pressure and are unable to get loans. Mr Yang reveals that although millions of yuan have gone into technical development for ynwall, because e-businesses have no material assets as collateral for financial institutions, funding does not come easy. “If they can’t see or feel it, they’re not going to trust you or give you a loan.”

Kuiye E-commerce owner Wen Xin initially did not have the farmers' trust, and had to constantly haggle over the final purchase prices. “The prices were a mess. A week before collection, it was agreed that we could have 50 eggs for 1.50 RMB each, but when we went to collect them, the price would become 2 RMB each. That happened all the time.”

After two years, Wen Xin has finally won the trust of the villagers, who are a lot more polite to him now.

However, Wen Xin faces another major problem: he is not able to get e-commerce talents to work in rural areas. He says most young people want to venture out to the city because a monthly salary of 3,000 to 4,000 RMB in the village does not match up to the 5,000 to 6,000 RMB salary offered by companies in cities like Chongqing or Wanzhou.

Wen Xin is still the only e-commerce owner in Ping’an township. He only has one employee  — a 25-year-old female colleague from his hometown in charge of business development..

Targeting the Southeast Asia market

On the proliferation of agricultural e-commerce leading to more intense competition, Chongqing University economics professor Yao Shujie says intense competition is both good and bad. On the one hand, it motivates e-businesses to open up sales channels, and gives the farmers more room for negotiation of purchase prices of their products. On the other hand, e-businesses earn very little, and it is difficult to have economies of scale.

Recently, there has been a push in cold chain logistics in the new land-sea transport corridor in western China, so that more agricultural goods in western China can be moved to Southeast Asia through rail and sea links along that corridor.

Prof Yao feels that agricultural e-businesses in Chongqing and elsewhere can aim to be more professional, high-end, and international, and target the Southeast Asia market through the transport corridor. “You can mark it up two, or three, or even four times, no problem. But you have to guarantee that the produce is clean, and the quality is reliable.”

225 million rural internet community 

In 2012, at its 18th National Congress, the Chinese Communist Party (CCP) declared a target of having a moderately affluent society (小康社会) and winning the battle against poverty by 2020. In the following years, agricultural e-commerce was seen as an important driver to reviving the agricultural economy. For six years beginning from 2014, agricultural e-commerce was also written into the CCP Central Committee’s No. 1 Central Document (中央一号文件), as a guide to handling rural issues.

chongqing map
The Chinese government is giving a lot of focus to e-commerce to lift rural areas out of poverty. (Image: Jace Yip)

On a visit to Henan in September this year to look at efforts against poverty, CCP general secretary Xi Jinping emphasised the intention to actively develop the digital economy and good delivery processes in agriculture, expand sales channels for agricultural products, and boost farmers’ incomes, showing the CCP’s belief in e-commerce to alleviate poverty.

Statistics show that agricultural e-commerce development in counties like Fengjie and Shizhu are not flashes in the pan but signs of an enduring trend. With the Chinese government’s strong push towards Internet Plus and building up the internet in rural areas, e-commerce giants such as Alibaba, JD.com, and suning.com have moved into rural areas in a big way since 2015. Chinese farmers are joining the internet community, and e-commerce is driving sales of agricultural products.

live studio
An in-house studio in Shizhu's e-commerce park connects buyers to products.

A report on the growth of e-commerce in China’s rural areas released last month shows that as of June this year, the internet community in China’s rural areas has grown by just over 3 million people since last year to hit 225 million people this year, or 26.3% of China’s total internet community.

Also, according to a separate annual report on China’s internet growth, also released last month, as of last year, there are over 9.8 million e-businesses in China’s rural areas, with internet sales of agricultural products standing at over 230 billion RMB, a 33.8% increase year-on-year. If this trend continues, we will likely see even more agricultural e-commerce entrepreneurs like Wen Xin throwing their hats in the ring in counties across China.