(Chinese Version) 

Editor’s Note:

Recently, e-commerce industry zones, or parks, have been the new ‘gold rush’ for many cities and ambitious entrepreneurs in China. Xinyi city, a small county-level city located in northern Jiangsu (one of the developed provinces in China only second to Guangdong), is just one of the players in this mass ‘gold rush’ for China. Although Xinyi city has made it into the top 100 counties of China before, it still appears to be in disadvantage in terms of economic development when compared with counties in southern Jiangsu province. However, the five newly established and already operating e-commerce parks may be the game-changers for this progressing county to catch up.

The municipal government of Xinyi city has promised that every year 10 million RMB（about US$1.6 million）of financial fund will be put into to support the development of Xinyi city’s e-commerce industry. The financial fund from the government and the construction of e-commerce parks are no doubt signifying a new era of economic development and many Xinyi entrepreneurs have come back to the city from developed regions to join this ‘gold rush’. It’s hard to predict whether this great economic movement for Xinyi people would succeed or not, but our journalist at TMTpost was in Xinyi city and has brought back an in-depth exclusive coverage on this matter:

“We have already successfully launched 5 e-commerce parks in the past years, covering an area of over 550,000 square meters in total, ” Zhang Xubo, deputy mayor of Xinyi city, told the Business Value. “Currently, there are two large-sized e-commerce companies in the city with a turnover of over a hundred million RMB.”

“The thrity-thousand-square-meters e-commerce industry park is designed as an incubator and startup base for e-commerce businesses, while the over-320-thousand-square-meters logistics park will serve as the necessary infrastructures and logistics center for e-commerce businesses here,” Zhang Xubo added. “We also set up a beauty makeup industry park here that takes up an area of over 100 thousand square meters, aiming to be the only professional beauty makeup product sales platform in China. There is also a fur industry park that’s under construction and it would take up an area of 50 thousand square meters. We hope to enhance the competence of local fur businesses through this initiative. Also, we have a 50-thousand-square-meters inventory and distribution park to meet the storage needs of e-commerce companies here. ”

Xinyi is a county-level city under the administration of Xuzhou, Jiangsu province, China. It borders the prefecture-level cities of Linyi (Shandong) to the north, Lianyungang to the northeast, and Suqian to the east and south. Xinyi, with a total population of 1.09 million, has 13 towns, 4 resident districts and a development area, covering an area of 1,616 square meters. Agriculture used to be the main industry for villages within this city and the main contributors of the city’ GDP are several chemical companies in the town, about which local residents always complain.

“Whether it’s B2B, B2C, O2O, O2C, or B2B2C, in our Xinyi city, they can all be divided into two groups. One is those that can stimulate the transformation of local companies, the other is those that can help local farmers sell their agricultural products through the Internet and build an e-commerce ecosystem in the countryside. It’s a way to improve social justice and help local people live a better life.” Huang Youfeng, director of the Xinyi E-commerce Center of Jiangsu province said on an e-commerce meeting of Xinyi municipal government at the end of April this year. As a man in his fifties, he not only knows all the definitions and theories of all those e-commerce models, but also has his own unique understanding.

Such meetings on e-commerce are held monthly in the municipal government of Xinyi and relevant personnel such as leaders in different e-commerce sectors will be present. In the meetings, they will share the difficulties they have come across in operation and have in-depth discussions on the possible solutions and future plans.

The municipal government of Xinyi city has already promised that every year 10 million yuan of financial fund will be put into to support the development of Xinyi city’s e-commerce industry. The financial fund from the government and the construction of e-commerce parks are no doubt signifying a new era of economic development. Meanwhile, many local entrepreneurs have come back to the city from developed regions to join this gold rush.

Homecoming

“I’ve got 50 thousand RMB from the government’s ecommerce fund. Thought it’s not much, but it encourages our company to work harder,” said a rather proud entrepreneur born in the 1990s, Li Jie, the vice president of Xuzhou Gold Fleece, a company located in the Xiqi e-commerce park. “And by far we are the only company that has received a support funding from the government.”

In 2012, Li Jie decided to join Gold Fleece, and the company back then was still based in Xuzhou city. The main businesses of the company ranged from providing technical maintenance and website development solutions for merchants on Taobao to promoting enterprises’ official websites. After knowing the Xinyi municipal government’s great support for the development of e-commerce industry, the company decided to move back to it hometown, Xinyi, in 2014.

In August, 2014, Gold Fleece acquired a Shenzhen-based e-commerce startup whose original founders were also from Xinyi and together they became the new Gold Fleece. The company not only got free office in the newly constructed e-commerce park, but also received many benefits from supporting policies such as tax-cut.

On one hand, the company continues to provide services for middle and small-sized e-commerce companies and merchants on Taobao, on the other hand, it works closely with the government and offers help to Taobao business owners in the countryside such as technical support for their websites and training on business operation. Li Jie also told Business Value that more and more Xinyi villagers, who used to make a living through floriculture had started to set up their footholds on Taobao with his help. One villager told us that even though some plants couldn’t be sold on Taobao due to their size, getting a series of orders from the Internet still amazed them. He also added that he wished one day, villagers in Xinyi wouldn’t have to deal with those sneaky wholesalers from other regions and would be able to earn more money.

Soon after his return to his hometown, Li Jie sensed the e-commerce movement within the city. According to him, the startup wave of O2O industry had just started to sweep through China back then. Inspired by the startup wave, he was thinking about possible approach to entering the O2O market in this great era of O2O. As a marketing major graduate, Li Jie very soon came up with a project aimed at the O2O market and launched Running Little Lamb.

Running Little Lamb is a comprehensive local services platform designed for Xinyi city. Through the cooperation with local big brands, Running Little Lamb now is able to provide to-your-door logistics service for businesses and their customers. “It might seem that our rivals would be scary giants such as Meituan and Eleme, but we are not afraid of them at all,” Li Jie said. “We know better when it comes to meeting local Xinyi people’s needs. We know what they like. Through distribution methods such as revenue share model and prorata model, our business has already made some progress and we are making profits. ”

Xiao Zhou from Xinyi Mohe resident district has been quite busy with the founding of the Xinyi Faux Fur Association these days. He’s a local resident in this district and a young entrepreneur born in the 1990s, who had come back to his hometown recently. His startup project is about the processing and sales of faux fur products. According to him, his company is working to be a standardized company and he’s hoping to be able to make his brand big in Xinyi city.

Party secretary Mr. Ye of Mohe resident district told Business Value that their district had a long history of faux fur business but many people decided to move to the markets in the south in 2000 due to the inconvenient transport condition and poor logistics power in Xinyi. But in recent years, the development of e-commerce platforms such as Taobao and Alibaba have been encouraging people to return to their hometown to continue on their entrepreneurship. By far there are over 800 faux fur companies registered in the Mohe resident district with a total sales volume of around a hundred million RMB, most of which were achieved through e-commerce platforms.

However, in secretary Ye’s opinion, even though this industry is currently doing great in terms of sales volume and size, it’s still a low-end manufacturing industry. The per customer transaction remains low and there is no major brand that’s known nationwide. Secretary Ye added that the government’s now constructing a faux fur industry park in the Mohe resident district in hopes of stimulating the transformation and upgrading of the faux fur industry.

Xiao Ma has been running his own shop on Taobao for 3 years and his business is basically about the wholesale of men’s belts. Last year he made up his mind to return to Xinyi after getting to know his hometown’s new supporting policies for e-commerce. The government not only gave him tax-cut policy but also provided him with free warehouses. According to Xiao Ma, many of his friends have started to look for goods supplies and are starting their businesses on Taobao and other e-commerce platforms.

“Now that we have such wonderful policies, it would be stupid not to make something out of it,” Xiao Zhou said in a serious tone.

Turning to e-commerce industry

ZoomWoo Co. Ltd is on the right track running its businesses in the e-commerce industry and has received 200 thousand RMB funding from the government.

“We got those merchandise on the truck from other cities and provinces nearby, but we are having problems negotiating with local brands’ agents and wholesalers,” Zhao Yue was joking with his colleagues when inspecting the goods in front of a shop near the Xinyi city bridge west road. “I think now they are considering us as their competitors.”

Zhao Yue is the general manager of Xinyi ZoomWoo Co.Ltd. Zoomwoo online supermarket is a brand of his company, and this two-storeys shop is the very company. The first floor is used as an office and the second floor as the warehouse.

“Actually we are kind of like a company acquired by Alibaba,” said Zhao Yue. The story was quite complicated. Zoomwoo’s former investor was Xi Shiwei, the CEO of Teiron, whose PP assistant was first acquired by UC, and later UC was acquired by Alibaba.

Zhao Yue and Xi Shiwei were friends even before leaving Xinyi. In 2011, Xi Shiwei advised Zhao Yue and helped him make a local web portal named Zoomwoo Forum. After a short time of operation, Zoomwoo had become one of the most active local forums in Xinyi. According to Zhao Yue, the portal could earn over a million thousand RMB during its best time.

As classified websites such as 58.com entered the market, like other local forums, Zoomwoo started to lose its users and its turnover decreased drastically. Suggested by Xi Shiwei, Zhao Yue then started to lead Zoomwoo to transform itself.

Even though Zoomwoo had lost many advertisement clients, but it still had thousands of users on the website. Then the company decided to use online supermarket as an entry point to enter the retail market in Xinyi and once again attract new users in the city.

In Zoomwoo’s supermarket warehouse, the first thing you see would be a goods shelf for vegetables. According to Zhao Yue, to maximize the advantage as a local online supermarket, the company had decided in the beginning that vegetable market would be the priority. The vegetables on Zoomoo online supermarket are all acquired directly from the farmers in Xinyi’s countryside. Zoomwoo gradually cooperated with farmers and had signed a deal with them to reduce the fertilizers that were being used on the vegetables. This act increased the work efficiency of the farmers and helped them improve their incomes, enabling the city residents to enjoy fresh and organic vegetables from local villages.

Zhao Yue said that after deciding on a transformation, the company reinvented its official website and developed a mobile app. Besides that, to integrate the users’ data on the forum, the company also opened a supermarket section on the front page of the website, where users could click in and buy goods directly on the forum.

Zoomwoo is running as a local online supermarket. Compared to other online supermarkets such as 1 The Store, Zoomwoo is more thorough and more ambitious in terms of the localization efforts.

Besides offering basic necessities like traditional supermarkets, the platform also integrated the direct supply of fruits from their source areas, and medical care products and takeout services as well. When talking about the company’s takeout service, just like Li Jie, who runs the Little Running Lamb, Zhao Yue is confident and is not afraid of major giants like Eleme and Meituan Takeout. They both mentioned the same thing: they know what local people like.

According to Zhao Yue, the company is now working to roll out its real estate service, providing a platform where clients can visit houses virtually. It’s said that with the help of advance technologies, consumers would be able to enjoy services such as 360-degree inspection on their ideal houses. The company’s very first physical store is already under decoration. Zhao Yue said that they would open a series of physical stores in the future serving as a warehouse and self-pickup point. In the mean time, these physical stores will increase consumers’ trust on the company. These physical stores will be deployed in different villages and towns. “This platform’s ultimate mission is to push Xinyi people to accept online shopping and eventually get used to it,” said Zhao Yue.

There is another company that’s deeply connected to Xinyi people’s everyday life and is also receiving great attention from the municipal government, which is known as the North Market of Agricultural Products, the wholesale distribution center of vegetables in Xinyi city.

The North Market of Agricultural Products is not only the wholesale distribution center of vegetables for local people, but also an intermediate point for neighboring cities and provinces. Everyday there will be a mass of agricultural products going through this intermediate point to the outside, and many flock into the city from outside through this point and become dishes on local people’s tables.

“Our market receives a management fee of over 30 hundred million RMB annually, but we want to do something more interesting to catch up with the advancing society,” Jiang Peng, the technical director of Jiangsu Shiquan Co.Ltd, told the Business Value.

Shiquan.com is an e-commerce project established by the North Market of Agricultural Products in 2014. Up to May this year, the company has launched e-commerce projects such as Xinyi 1 The Store, Xinyi Suning Center, Shiquan.com, and Shiquan Little Store etc. According to Jiang Peng, the current and next job for them is to import goods from other regions for Xinyi people to buy and maximize the advantage of their platforms to better the trade of local products such as Xinyi agricultural products.

In 2014, after the peaches had grown ripe, Shiquan collected all the peaches that its farmer partners had and sent them to the warehouse. Shiquan.com put all the peaches into boxes labeling Xinyi, the hometown of peaches, and priced them from 108 RMB to 198 RMB according to the number of peaches. The statistics showed that Xinyi center and its shop on Taobao had sold over 8,000 boxes and they got bought out a few times, reaching a sales volume of over a million RMB. This unexpected success made the whole company feel the power of e-commerce.

Shiquan.com is an online platform similar to Zoomwoo online supermarket. The difference here is that Zoomwoo focuses on local agricultural products while shiquan.com focuses on basic necessities and appliances that are from Suning. After making an order on shiquan.com, Suning’s warehouse would also received the order and send out the product. All the products are sent directly from Suning’s Warehouse and are delivered through Suning’s logistics team.

“Most of our products are from Suning, which makes many people think that shiquan.com is just an outlet of Suning. But it’s not true,” Jiang Peng explained. “We cooperated with Suning because the company doesn’t possess advantages in terms of the supply chain while Suning needed us to conquer the local market in the countryside.”

Shiquan Little Store was a crucial bargaining chip in negotiating the revenue share and cooperation with Suning.

Shiquan Little Store is the offline physical store of shiquan.com. Up to April this year, Shiquan Little Store has setup its footholds in over 100 villages in Xinyi. This is also what sets Zoomwoo apart from other platforms. Shiquan.com now mainly targets villagers in the countryside.

Shiquan Little Store adopts a chain store system and it doesn’t require any initial fees from franchisers. So far, shiquan.com decorates and install everything for free for its Shiquan Little Store franchisers. It's also exploring though different means to find an adequate operation model that caters to every village.

Lianma village, 50 kilometers from the downtown area of Xinyi city, is an extremely poor village and was one of earliest villages that Shiquan Little Store entered. In Lian Ma village’s Shiquan Little Store, there a 40-inches LCD display hanging on the right wall which displays the front page of Shiquan Little Store. The computer in the other room controls everything that’s being displayed on the screen. Whenever a villager walks in and tells the shop owner what he or she wants, the shop owner will do a search on the computer and the villager can see all the options on the display and make his purchase. It doesn’t even require online payment, since the customer can give the money directly to the shop owner. If the customers want to return the goods, they can also complete all the procedures through the physical shop. Shiquan.com will distribute the profits on a certain proportion based on the sales and the previous agreement.

Lianma village’s Shiquan Little Store will soon be equipped with the POS ATM of RCC（Rural Credit Cooperatives）, which will be conducted by the government. There are many left-behind old people in this village and the government gives them financial support through the bank. This project is supposed to make it easier and more convenient for old people to get their money in cash. The government will give shiquan.com a certain subsidy for providing the platform.

A small store called Dong Mei near the provincial road of Ahu town joined Shiquan Little Store on March last year. The owner of this shop said he had been running this shop for 6 years and they were suspicious when the representatives from shiquan.com told them joining them was free. But when they learned this company was supported by the government and belonged to the North Market of Agricultural Products, they decided to give it a try.

During the first month after joining shiquan, according to the shop owner, numerous villagers came to ask for information but didn’t really buy anything. Sometimes there would be some villagers that wanted to buy farm tools but relevant products couldn’t be found on shiquan. The shop owner was disappointed and he didn’t know when villagers would finally accept shiquan.com since the people here were old and knew little about the Internet.

“We have noticed the drawbacks, but the company’s current priority is to dominate the rural market, which not only includes selling products to the villagers,” Jiang Peng said. “The company will continue to work on the sales of agricultural products such as peaches to sell local products to outside regions. In this way, Shiquan Little Store will become a wholesale center of agricultural products, making the shop owners of Shiquan Little Store the communication channel between the company, farmers, and villagers.”

In every Shiquan Little Store, there will be a label telling people that the store is a partner center of Suning, which makes people wonder if Suning would eventually squeeze Shiquan out after infiltrating the local market. Cooperation with Suning was formed by the local government and there’s no doubt that the local government would consider the obstacles that local brands would face from major brands in the future.

Using e-commerce to boost the economy

“The annual 10 million BRM fund form the government will be used in the building of infrastructures and rewarding companies, and also will be used into marketing and advertising to provide opportunities for local brands to enter outside markets,” Zhang Xubo told the Business Value. “Xinyi Peaches has successfully become a national brand and it encourages the government to carry on its work on making local agricultural products famous. The government aims to make a star product in every town and village.”

The once abandoned factories now have become the county’s very e-commerce park, which is now creating new opportunities and pumping new blood to the economic development of Xinyi. Besides that, the government has also started to order enterprises that generate pollution in the city to move their factories to elsewhere. Several chemical plants in the county have been the main sources of the city’s tax revenue, which also are the pollution source the residents have been complaining for years. Other medium and small-sized chemical companies that didn’t have up-to-date equipment and did great damage to the environment were closed during the transfer process.

The current leaders of the municipal government of Xinyi all believe that the secondary industries will transform and upgrade themselves when developing to become tertiary industries, and during the process secondary industries that don’t serve the local benefits will be abandoned.

To teach more people about e-commerce and attract more people to join e-commerce, Xinyi’s professional training center has a classroom for people that want to get professional trainings.

“Our trainings include basic photoshop shills, business operation on Taobao and other e-commerce platforms,” Wang Rufeng, the deputy manager of Baitu E-commerce Co.Ltd introduced us to the trainings that are provided by his company. “Our trainings are all free. The lecturers will use their own experiences as examples to teach the students and will also provide support for those that want to start a business on the e-commerce platform.”

According to Wang, the company’s core business is providing operation service and maintenance service for e-commerce business runners. The free training project is a cooperation project with the government and the government gives them subsidy for it.

Mrs. Lee is 32 years old now and she had been at home taking care of her kid ever since giving birth to her baby. But as her kid grew older, she started to have a lot of spare time and she just needed to find something to do. However, after being a housewife for so many years, she didn’t really know what she could do. So when she knew the government was providing free trainings she just signed in. “Learning to use Photoshop is quite fun,” she said with a smile. “ If I am not going to start a e-commerce business, I can still use the skill to photoshop my families’ photos.”

“I think I will open a shop on Taobao. Starting a business is not as difficult as I have expected. But I don't know what to sell though, maybe I will go for socks…” just like Mrs. Lee, many students from the training classes all think starting a shop on e-commerce platforms is not difficult. But when it comes to choosing specific things to sell, it turns out to be rather hard. The government can’t really give them advice on this matter.

At the forum, many people all think that even though a number of e-commerce companies and Taobao shop owners that have achieved success and acquired some foundation locally might seem troublesome and lag-behind to the outside world, it’s still a milestone for them to set their first steps on the path leading to a new era when compared to other rural areas in China.

It’s hard to predict whether this great e-commerce movement in Xinyi would succeed or not, but the Practice Is The Only Criterion For Testing Truth written by Hu Fuming, who was born in Wuxi in the southern Jiangsu, did bring up a big stir in the country and stimulated a heated discussion throughout China once. I guess we just need to see how the story will go from here in the future.

[The article is published and edited with authorization from the author @Zhao Lei, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.