Interview with Sheng Zhenzhong from Aliresearch, Jul 19th, 2015
A: Tell us what your role is in the AliResearch group, and tell us something about this conference that is currently taking place right here in Tonglu.
S: I am a researcher at AliResearch (abbreviated at Ali) specifically studying regional E-commerce. Ali’s research covers a wide range of topics. Here are a few key questions of our primary concern:
1. What roles do various actors, such as small enterprises, consumers, industry clusters play in the development of E-commerce?
2. How does regions, logistics, retail, and finance interact with each other in the context of E-commerce?
3. In what ways should small cities (below 3rd tier), counties, and villages in China incorporate E-commerce into their developmental strategy that will better accelerate their rate of urbanization?
This meeting we are at right now, “The 2nd annual China’s county-region D-commerce Conference” is held by Alibaba. Our goal is to showcase what we have done in rural China, with regards to logistics, human resource, finance, etc., and how can E-commerce help these rural villages to become richer and more developed.
A: I’m aware that Ali has been doing research on rural China’s urbanization through E-commerce for a few years. Your study of the bourgeoning of Taobao villages is exceptionally fascinating. Can you tell us if you have found any developmental models, or patterns, in their development?
S: Yes. Through our observation, we have identified two basic patterns in the development E-commerce in rural China. One of them is a bottom-up mode of development. In this mode, local enterprises, farmers, and other affiliated/collaborating organizations take the lead in understanding the nature and functionality of E-commerce, and integrating it into local industrial development. The market is the driving force in this scenario. In the other model, the (local) government becomes the key force in pushing the growth of E-commerce, and we can call it a top-down way of development. From the point of long-term development, these two forces need to come together in order to have E-commerce fully integrated into the development of a region.
Let me make an example. In Tonglu, the local government has taken great effort to support the growth of local E-commerce. However, its development is not really top-down. It may seem so as we are at this meeting, hearing the mayor’s speech about their government support plans. However, before the government began to take measures, individuals and enterprises had already become engaged. I would say that the autonomous development of the grassroots had influenced the government in their decision for support.
Another example is Yiwu. This is where the market completely takes the leading role in the development of local E-commerce.
The third example is Shaji. Shaji locals began to run online business selling furniture on Taobao in 2006. As of now, nine years have passed, and they’ve grown into one of the most successful Taobao villages in China, and E-commerce has grown into the town’s most profitable industry. The sustainability and vitality of E-commerce in Shaji is very interesting and deserves our close examination. Ali has already published a report on Shaji three years ago, you should look into that. The finding of the report, and our study of many other Taobao villages have led us to the conclusion that, a common characteristic of E-commerce development in rural China is that, the bottom-up force provides E-commerce with vitality. The townsmen are the leading actors. The foundation of the sustainable growth of a Taobao village is its people. However, after a certain amount of time—usually a few years—as the industry grew in size and scale, they encounters problems with land, competition, storage space—problems that demands help and guidance from the local government. Therefore, bottom-up and top-down are both essential in the development of Taobao villages, and the overall development of E-commerce. What the government needs to do is to help—they should not intervene with whatever the market is capable of handling.
Another very interesting factor about Taobao villages in relation to sustainable growth and urbanization is that, not all of them are geographically located in entirely rural parts of China. Generally, we can divide these villages into two groups: some of these villages are “real” villages, such as Boxing in Shandong, and Anxi in Fujian. On the other hand, the other villages lie in the “in-between” zones, the fringe field of big cities. In this case, these villages were already urbanized to a certain degree prior to the advent of E-commerce. We must look at these two groups and evaluate the relation between their local E-commerce and their rate of urbanization critically and differently. Another fundamental reason for that is, in those “real” villages, their urbanization tends to be truly autonomous and self-enacted, because the participants are actually local townsmen, farmers, or college students who moved back home to make a living off E-commerce. In rurban villages, on the other hand, the participants are usually from elsewhere, and this population is rather transient.
A: Do we have any statistics on the migrating rural population, like the numbers of people who moved back to their hometown because of the promise for a bright future that E-commerce holds?
S: Unfortunately, no. To collect such statistics is no easy work, and we we need help from local government. In some villages such as Shaji, the local government actually made effort to collect such statistics. However, existing statistics is sparse.
I believe the following two characteristics of regional E-commerce are decisive of any rural region’s rate of urbanization and sustainable development. First of all is people. You must look into the participants of a village to understand thei nature of its local E-commerce and its development, whether it be young people, farmers, returned college graduates, or existing industries. Second of all is scale and ecological systemization (ecology). Only when the local E-commerce network has grown into a certain scale, can we talk about urbanization. This is fairly easy to understand. The ecology of the village refers to the environment, or network, that circulates around E-commerce. When a village’s E-commerce industry grow in size and scale and become an actual ecological environment. Various actors participate in it maintenance and development, be it logistics, training, sales (what we call the service industry), or the government, organizations, schools, etc. These actors of various roles may be working in collaboration with each other, or at rival with each other, but regardless, the diverse relationships among these various actors are proof of the existence of an actual ecology/ecological system/environment. The sustainability of its development depends on how this system functions.
A: Please tell us more about the Village Taobao plan that Alibaba announced and kicked off last year. How will these service stations operate? How do the grassroots – the key players of the growth of these rural villages participate in it?
S: I suppose you already know about the basic plan itself. We plan to build one thousand operation centers in the centers of one thousand counties, and one hundred thousand service stations in different villages. The operation centers will be administrated and run by Alibaba. The service stations, on the other hand, are owned and run by local townsmen, and we will provide guidance for their operation. The merchandises coming in and out of the villages will be first taken processed at these operation centers, and Alibaba will handle the logistics from counties to cities and overseas.
The main purpose is to help lay out a more complete network. As we all know, the central problem when it comes to logistics in rural China is “the last ten kilometers”. The main reason why E-commerce has not found its way into many rural villages is actually because of the low consumption power of these villages. The delivery companies refuse to deliver to these villages, or only deliver twice a week. As these service stations are built, and the benefit of E-commerce is better promoted in rural villages, the consumption power will increase, thereby accelerating the growth of logictics. Of course, in some villages, the lack of public roads (infrastructure) is also a problem. By building these service stations into these remote villages, the locals will begin to sell things and make purchases online, and the increasing supply and demand will help solve this issure. In this way, the locals, or grassroots as you call it, again becomes the primary force leading the urbanization of their homes.
