Riches and Risks in‘Taobao Villages’

By+Ding+Ying

On January 21， Chinese Premier Li Keqiang mentioned a small village in east China when delivering his speech at the annual World Economic Forum in Davos， Switzerland. In the village more than 30 million items are sold to different parts of the world daily. “The story of the village speaks vividly of the hardworking Chinese people actively engaged in entrepreneurship，” said Premier Li.

This village is one of those that makes fortunes every day by online business mostly through the modern e-business retail platform， Taobao. These villages spread in different places of China with the same nickname： “Taobao villages.” With the help of a hi-tech platform for online shopping， Chinese farmers are now able to find a way to get more from the treasures on their land.

Tale of the Taobao village

According to Alibaba， Chinas leading e-commerce giant and parent company of Taobao， a Taobao village is any place where 10 percent of local population is engaged in online retailing and conducting at least 10 million yuan （$1.6 million） in e-business on Taobao platform every year. In China， there are already 212 Taobao villages.

The Taobao village that Premier Li went to on November 19， 2014， was Qingyanliu Village in Yiwu， east Chinas Zhejiang Province. There， the premier paid a visit to a business owned by Yang Yaohui and his wife.

Yang and his wife moved to the village and opened an online store after graduating from college in September 2013. In the beginning， he only sold belts. After his son was born in early 2014， Yang started a baby clothes business. Now his store has a four-member team： the couple， Yangs mother-in-law and his 1-year-old boy for a model.

The family has been working very hard to run the store. According to Yang， it is very common for the three adults to stay up until the next morning when business goes well. After Premier Lis visit， Yang and his store became very famous. His monthly sales hit 200，000 yuan （$32，000） recently.“Although it is very tiring， I never think of giving it up. This is my career，” he said， adding that Premier Lis visit brought him more confidence about future. Yang plans to start his own brand one year from now and run another online store three years later.

Yangs tale is a common one in the village. The whole village collectively earned a combined 4 billion yuan （$635 million） in 2014. Each year， more than 4 million parcels are sent out from the village to destinations across the country and even abroad. Supporting businesses like couriers， Web-design， photography and packing also thrive in the village. Several years ago， its original population was only 1，500. Now there are over 10 times that population working in online stores and related business alone. Qingyanliu is located near to a huge smallcommodity market and cargo terminal， which are crucial to the villages success.

Qinghe County in north Chinas Hebei Province is famous for its cashmere products. About 74.6 percent of the countrys cashmere products are sold online from Qinghe. Donggao Village， a village in Qinghe， which is near a huge cashmere wholesale market， is a Taobao village that sells cashmere products.

Liu Yuguo is one of those who has scored the first pot of gold from online business. In 2007， Liu was still a young man who had failed to earn a living with other business ventures. With less than 1，000 yuan （$333） to his name， he took a chance on the Internet. Three years later， his fellow villagers were astonished to learn that Liu had spent 2.1 million yuan （$333，000） buying a building inside Qinghes cashmere market. Today， over 90 percent of families in the village sell cashmere products online.

Get rich quick

Convenient Internet and advanced information terminals have brought prosperity not only to Chinas e-commerce market but also to rural areas. If Taobao villages development can be guided， the Internet era can greatly narrow the gap between the rural and urban areas.

Before the Internet era， Chinas farmers had to make hard choices between living poor at home or earning more money in unfamiliar cities. Now， they can make money at home with their families by turning agricultural products into fortunes.

Grass and willow wickerwork is a 600-yearold traditional handicraft of Wantou Village in Boxing of east Chinas Shandong Province. In 2008， the first online store in the village began to introduce the handicraft to the outside world. Today， this village with 1，700 households runs over 1，000 online stores selling wickerwork products. Nearly 30 stores have created an annual sales volume over 1 million yuan（$159，000）. Now， Wantou Village is honored as one of the 14 Taobao villages by Alibaba.“E-business has brought us is not only much more income but also an improvement of the overall condition of our village，” said An Baokang， an online store owner in Wantou.“Paying more attention to our online stores， we can introduce our hometowns handicraft to a wider audience.”

With the development of e-businesses， more and more farmers from Wantou are able to sell their local agricultural products on the Internet， which brings them more income by omitting intermediate distributors.

Gao Hongbing， Vice President of Alibaba， pointed out that considering the number of Taobao villages， online stores and employees， Taobao villages are really blooming. “Taobao villages have become formidable in influencing the development of Chinas rural economy，”said Gao. “E-commerce has become a natural way for modern farmers to conduct their businesses at home.” At the same time， local governments are intentionally boosting the development of Taobao villages by opening professional schools to teaching everything from beginner-level computer skills to advanced customer service.

However， several hidden risks such as vicious competition and ineffective supervision can wreak havoc on these small businesses.

“It took only a few years to cultivate over 200 Taobao villages. On one hand， it shows a rapid growth of online store owners in rural areas. On the other hand， it indicates a future with much fiercer competition between sellers and Taobao villages，” said Liu， a successful Taobao cashmere salesman in Donggao Village of Hebei.

Such competition has already emerged. It is very common that most products in a Taobao village are similar， which leads to excessive undercutting that may end in meager profits.

Recently， Chinese authorities have lashed out against the quality problems on the Taobao platform. Realizing efficient quality supervision of e-businesses has become a pressing issue for both Alibaba and the government.

“Fortunately， the opportunity is still bigger than the risks. As long as they are properly guided and supervised， Internet-based retail in rural areas will boost domestic consumption，” said Qing Zhongchun， a researcher at the Development Research Center of the State Council.