China Focus: E-commerce no longer a golden goose for villagers

Attracted by the slogan "with just one room and a computer, you can have your own online store," a young woman surnamed Xu went to Qingyanliu Village in east China's Zhejiang province to seek her fortune.

The "No.1 Taobao village in China," has become the model for over 1,300 villages across the country.

Xu, in her twenties, arrived with high hopes, but she soon got frustrated. "I never thought running an online store would be such torture," she sighed.

BIG PLAYER GAME

In Qingyanliu, small retailers used to collaborate in placing orders to reduce costs, but the system collapsed when more successful stores became big online merchants, with the clout to sign contracts directly with suppliers.

Small shops were left behind and many were unable to survive without the discounts of bulk buying. Likewise, with fewer orders, delivery companies are not interested in giving discounts.

It all came as a surprise to naive young entrepreneurs like Xu.

The legend of Qingyanliu village began in 2008, when the world was struggling through the financial crisis. Qingyanliu is a suburb of Yiwu City, China's largest small commodity wholesale market. With 200 plus newly-built flats available for lease, students from Yiwu Industrial and Commercial College, one of the first colleges to offer e-commerce classes, smelled an opportunity. Qingyanliu was soon an e-commerce base, dubbed "the first Taobao village," just over a year later.

Once home then to 1,700 residents, the village now has a population of over ten thousand, with 2,800 online shops bringing in over one billion yuan (150 million U.S. dollars) every year. Alibaba claims that China now has over 1,300 "Taobao villages," with more than 840,000 jobs created.

RISING COST

The average annual rent of a three-room house, a standard "office" in Qingyanliu, has risen from 5,000 yuan in 2008 to 16,000 yuan today.

Widespread fraud on e-commerce platforms has pushed up operational cost and reduced credibility.

"An online store relies on its reputation, but many turn to fruad to attract buyers. If notstopped, the whole online market will become a mess," said a 30 year-old Taobao store owner who has been in the business for five years.

Fake goods, unreliable delivery and lack of certification has forced many consider leaving the villages.

"I have been running a Taobao shop for three years, and kept facing new challenges in the process," said Wang Mingqiang, who owns an online shop in Longxi village in Zhejiang.

"Sometimes we're unable to maintain stable supplies for surging sales. Sometimes we receive complaints from consumers for selling slow-moving produces without quality certification. We also face fierce competition as the products everyone sells are quite similar," he said.

UPGRADE NEEDED

Lack of staff is another big issue. The first round of e-commerce craze in villages was led by fresh graduates with business sense, but the rural villagers who followed had seldom even set foot in a city.

Price wars is not good for Taobao villages.

"Low prices can't be the only business strategy. We must offer quality products," said Ren Mei, who runs an online store and said her profit margin is shrinking year by year.

"Rural areas should upgrade their entrepreneurship environment, with infrastructure, logistics, and better financial support," said Sun Lijun, vice-president of Alibaba. Endi