Big market potential
As we discussed previously in this series, major e-commerce players in China like Alibaba Group Holding (BABA) and JD.com (JD) are now targeting the country’s rural citizens to enhance consumer spending.
But the question is this: Does rural China have strong potential for a big market?
According to a report from the China Internet Network Information Center, the number of internet users in China reached 668 million in June 2015. This accounts for 48.8% of China’s total population. The internet penetration rate in urban areas is around 64%, whereas the penetration rate in the rural region is only 30%.
Rising online shopping in rural China
Last year, many villages in China were introduced to internet-enabled smartphones via government programs, and many consumers had their first experiences with online shopping. According to a report from the CINIC (China Internet Network Information Center), and as the above graph shows, the number of online shoppers grew at a rate of 41% in rural regions, compared to the 17% growth rate of online customers in the urban areas.
These figures clearly suggest a strong potential for increased online shopping in rural regions of China (FXI). E-commerce players like Alibaba, JD.com, Tencent Holdings (TCEHY) and Baidu (BIDU) are stepping up their games accordingly, working toward expanding their logistics networks to these rural regions.
Read the next part of this series for a look at Alibaba’s particular expansion strategy for these rural Chinese regions.