Weaving a Fortune

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“I make more money than many other rural women，” said An Guixiang， a 53-year-old villager in Wantou， Shandong Province. An， dressed in a stylish checkered shirt， is one of the village’s e-commerce mini-moguls. Her annual net profits of more than US$20，000 （triple the income of the average resident in Beijing） comes from her wholesale business， selling straw woven products to 191 retailers on Taobao and Tmall， online retail platforms operated by the world’s largest e-commerce company Alibaba， based in Hangzhou， Zhejiang Province.

The Internet has made handicrafts， a local tradition in Wantou， into an industry with sales worth US$10 million per year. Before that， the market was very small， and unsold merchandise was often burned as household fuel. Now， nearly half of the village’s 1，617 households are engaged in this business， and products made in Wantou are exported around the world.

By the end of 2012， Chinese rural residents in towns and villages were operating a total of 595，700 Taobao and Tmall outlets， according to a survey released in August by AliResearch， Alibaba’s research institute. Taking into account the 700，000 villages and 165 million rural Internet users throughout the country， the potential for e-commerce in rural China is enormous.

E-Twee

“Want a better life？ Get on Taobao，” or “No need to go searching east and west getting on Taobao at home is best.” The white walls around Wantou are daubed with slogans aimed at rallying the village’s army of potential online merchants. More than 20 domestic courier companies， including China’s five largest， have offices in Wantou， and compete fiercely for supremacy. While many residents in Chinese villages only have access to the Postal Savings Bank， Wantou boasts a wide range of banking options.

In 2005， 20-year-old villager Hu Wei opened Wantou’s first online store selling straw woven products. By 2008， it had made quite a splash on the market， leading many other villagers to follow suit Hu personally tutored many of them on the finer points of operating an online store.

“Our customers are white-collar workers. I give our products soul，” said Meng Lili， an online retailer in her 30s who owns the largest Taobao store in the village. Selling kitschy straw baskets， boxes， coasters and coffee tables covered with floral-patterned cloth， Meng hopes to please urbanite customers with products that are， as her store’s maxim goes： “heartwarming， and easy on the eyes.”

In 2003， when Meng Lili met her husband and co-founder Jia Peixiao， a university graduate with a degree in computer science， was working as a security guard in a nearby city. In the early years of their marriage， the couple struggled to make ends meet. New clothes were a luxury： “I told myself that I didn’t need beautiful new clothes， because I’d gotten fat after giving birth to our baby，” Meng told NewsChina.

In 2006， as Taobao was already in the process of revolutionizing China’s retail sector， Meng Lili and Jia Peixiao returned to Jia’s hometown to try their luck opening an online store. The gamble paid off their business boomed， and in 2009， they graduated to Tmall， Alibaba’s platform for branded retailers. Now， Meng and Jia employ eight staff， all of them college graduates. They are confident that their sales will double this year to more than US$1 million. Lured by success stories， more and more young people have returned home to Wantou， carrying with them great expectations.

Wantou is one of the country’s 14 “Taobao villages” named by the Alibaba Group. Total sales revenue across all 14 has hit US$800 million， and they have collectively created some 40，000 jobs. At the end of August， Alibaba unveiled a training program for rural residents who want to join the online gold rush.

Technology-driven consumption， particularly that made possible by e-commerce， was recently identified by the central government as one of the most important growth engines for the country’s economy. Bain Capital estimated in its report at the end of August that China’s e-commerce sales figures could exceed those in the US this year.

The Internet， said Professor Qiu Zeqi of Peking University， has helped push forward the modernization of rural areas and their residents， one of the biggest challenges China faces in its overall develop- ment program.

Troubles Ahead

But obstacles loom ahead. In many rural areas， infrastructure like roads and Internet access is still poor a lack of logistical support forced Wang Xiaobang， a farmer in a village in Lüliang， Shanxi Province， to move to the provincial capital Taiyuan to expand his online retail business. A report by the State-owned People’s Daily in June found that in some places， the cost of delivery via China Post in many places， the only shipping option was higher than the value of the products being delivered.

Wantou Village also has problems a lack of highly skilled product designers， for example. Last year， Hu Wei， the village’s e-commerce pioneer， recruited a college graduate majoring in computer-aided design， only to see the young man quit two months later. “Even if I double the salary they could earn in [the provincial capital] Jinan， they would not be happy to stay in a small village like ours，” he said.

Another problem is the lack of a next generation of laborers in Wantou’s handicraft industry. Although there are roughly 20，000 straw-weavers scattered across household-run workshops in the area， only a handful are highly skilled， and most are over 40 years old. For the average weaver， it takes one to two days to weave a pair of straw slippers， and becoming an expert weaver takes many years of practice. An entire day’s labor earns a weaver around US$16 a single Taobao transaction can often be more profitable.

Jia Peixiao， the security guard-turned-online retailer， is more worried about disorder in the market. As competition heats up， rival sellers tend to resort to dropping their prices for competition， dragging the market down with them. “Once prices sink too low to cover the costs， the only way to see profit is to reduce the quality，” he said.

Jia’s idea of forming a guild to regulate the market by unifying prices and certifying good-quality brands has so far gained little support from other big sellers. Some are bent only on expanding their own market share in order to make more money， and others believe（correctly） that price fixing will exacerbate the problem.

In addition， bigger sellers like Jia occasionally need more cash to meet the big orders they receive from time to time Jia， like most small businessmen in China， hopes the government will find a solution to the problems he has getting his hands on hard cash.

All of these issues infrastructure， expertise， finance， market regulation are common in all Taobao villages， and more severe in China’s central and western hinterland areas， where e-commerce is particularly helpful for farmers. According to the People’s Daily report， 30 percent of the vegetables produced in Guyuan， in the Ningxia Hui Autonomous Region in China’s northwest， are sold online. Local farmers and officials hope that more support from the government would help improve this vital service， and in turn facilitate its growth. “A government-sponsored e-commerce platform would be very helpful， and we would pay for its daily operation，” said Feng Zhanqian， a local farmer in Ningxia.