Alibaba has a new area to target that they are hoping will help make up for the slowing e-commerce sales that have made it harder to bank on the major cities to drive growth. While Alibaba has discussed the importance of targeting rural China for some time, now seems to be when the e-commerce giant is putting more stake into the concept.
Alibaba and its smaller rival JD.com have invested more logistics by partnering with companies that can help get more of its goods to rural towns. In fact, Alibaba and JD.com combined have a 80 percent share of China’s e-commerce market (roughly $440 billion). And the goal, Wall Street Journal notes, is to hit 100,000 villages by the end of 2020.
This may seem like an ambitious target, but with incomes in rural areas rising at a higher rate than in urban areas, there’s a lot of potential growth for the e-commerce giants to tap into. The issuance of smartphones into the regions (with help from the government) has also helped give China’s e-commerce market a boost. Sure, the numbers in rural China are still slim compared to those of urban shoppers, but those figures are shifting.
During Alibaba’s most recent earnings call, CEO Daniel Zhang focused on Alibaba’s logistics investments, which have paid off for Alibaba through its logistics affiliate, Cainiao, which has helped scale Alibaba’s next-day delivery services. Next-day services are now available in 41 cities and are expected to expand to nine more by the end of the year.
Alibaba’s logistical investments, if all goes as planned, may help scale that ambition through its recent investments in the country’s logistics side. This includes investing 10 billion yuan (about $1.7 billion) into distribution centers all over China in the next 3-5 years.