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Ecommerce in China spreading from the cities

A report by global management consultancy McKinsey shows that ecommerce in China is no longer confined to the biggest cities. Small towns and villages have narrowly overtaken the major urban centres in ecommerce sales, the report finds.

McKinsey Senior Partner Alan Lau, who is based in Hong Kong and a co-author of the report, told the South China Morning Post that these findings are a “huge revelation for foreign brands, which need to rethink their strategy in that segment of the market. The lower-tier cities and rural areas are now home to 257 million online shoppers, compared with 183 million in the higher-tier cities.” The value of goods sold to these more rural customers is US$315.63 billion, 50.1% of the total market.

According to the report, “Brands that have historically focused on high-tier cities may benefit from revisiting their geographic strategies and making adjustments to take advantage of opportunities in low-tier cities, where physical retail needs time to mature.”

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The increase in rural and small town sales is largely being driven by sales from mobile devices. China’s two largest ecommerce retailers, JD.com and Alibaba, have both taken initiatives in this area. Alibaba has created Tmall Global, a mobile platform for international retailers to sell to China. JD.com runs the social network QQ, which allows western retailers to increase online awareness of their products. It also has 213 warehouses in 50 cities, which it claims is the largest logistical infrastructure in China.

Meanwhile, Alibaba has created over 10,000 service centres at village level across 20 provinces.

Alibaba Chief Executive Daniel Zhang Yong said that the company plans to “ramp up” its efforts to deliver “quality goods” to buyers in rural areas. It also plans to deliver local produce to customers in urban areas. Other ecommerce providers are expected to follow suit.

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