Alibaba pushes further into rural with a 4.5 bn investment in Huitongda

Written by Leilei Wang || April 26 2018

On April 7th, 2018, Alibaba announced an investment of 4.5 billion RMB (7.1 bn USD) to Huitongda, showing the intention to develop business in the rural areas of China. They will cooperate on supply source, logistics, technology and life services.


Huitongda is a success in rural e-commerce

Huitongda E-commerce was set up in 2010 by former Five Star Appliance founder Jianguo Wang. The company focuses on China’s rural market, bringing e-commerce to rural areas and providing B2B2C/O2O e-commerce tools, funds and supply chain services. Huitongda has a deep understanding of rural market and villagers. For example, their O2O management system only has four functions, which covers core use cases and is easy to understand. When giving classes to family-run shops, Huitongda put more focus on the wife as normally the wife would be more responsible in running while the husband does not pay attention to the system. When the local team go visit a shop owner, they dress like a farmer rather than in smart suits.

After years of development, the company has covered over 15,000 towns from 18 provinces, helped 80,000 member shops and created 300,000 job opportunities for 50 million rural families. Huitongda’s business focus and model attracted investors’ attention too. From 2010 to 2017 the company in total received over 1.3 billion RMB from seed to C round investment.

New E-commerce and helping country are both Ali’s plans

In 2014, Alibaba had already proposed the plan to invest 10 billion RMB to set up 100,000 Taobao shops within 3 to 5 years. However, Alibaba stopped running the rural version of its App in June 2017.

Rural Taobao tried to set up new branches as Taobao shops, adding e-commerce model to villagers’ life. Huitongda, in a different way, updated original rural business then tried to expand their influence based on existing user groups. Their way proved to be more acceptable by the rural market, also agreed by Alibaba group.

According to the investment plan, the both parties will work on improving supply channels, logistic chains, storage and technology systems. Alibaba will bring the brand marketing experience to Huitongda, helping build up business infrastructure and sales channels for rural suppliers.

Apart from those, Alibaba will also bring Tmall, Cainiao delivery, Alicloud, Dingding office system, financial inclusion products and travel or entertainment resource to help Huitongda further develop market opportunity.

Big rural market awaits to be developed

According to National Bureau of Statistics, as of 2017, China’s population reached 1.39 billion, 41.48% of which are rural residents. Internet penetration reached 55.8% nationwide, while in rural areas it was 35.4%. As per data from the Ministry of Commerce and iResearch, e-commerce transactions reached 6.1 trillion RMB in 2017, 1.24 trillion RMB contributed by rural areas which indicates around only 20% market share of total e-commerce.

It is obvious that rural market is a blue sea full of opportunities. To seize the chances, just investing in a lot money is not the right way. Understanding the group and solving actual problems will help gradually seeping into their life. In most of towns, specially in western part and north-east part, lack of internet, logistic infrastructure and talents are the problems. Companies like Huitongda take down to earth methods to get in touch with rural people and they gain their trust, which becomes the base to further develop the market.

After years of groundwork Huitongda achieved good results. Now it is the time for them to improve basic infrastructures and expand more business lines. Alibaba’s investment not only provides fund but also the valuable various resource that can give them more ability and inspirations. With the development of telecom infrastructure and increase of internet, rural areas have trillions of RMB market to develop, which is Alibaba’s next target.