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Taobao Town

Ten years of e-commerce in China’s countryside

04·08·2017

The whitewash at the village entrance is dazzling in the afternoon light. Brushed onto the buildings and gateway that flank the dusty road, the paint lends an air of a corporate campus done up in startling Jiangnan pristineness, reinforced by chrome-plated company names displayed beneath the tiled eaves of the gate. Further inside, the aesthetic flips between that of an office and a theme park; a plastic QR code materializes out of the masonry while the orange “Taobao doll” and Tmall black cat mascots rise out of the hedges to remind you to love the environment and e-commerce.

Here in Beishan village in Zhejiang province’s Jinyun county, before a house adorned with rhyming slogans extolling Taobao instead of the customary Chairman Mao, village Party secretary Lü Yang makes no secret of the community’s literal and figurative rising stock. “CCTV has been here four times,” she notes. “We’ve been on CCTV-4’s ‘Across China.’ CCTV news was also here. They made a documentary”—two, actually—“that featured our ‘Beishan Model.’”

Across from Lü, a traditional red emblem hangs on the wall of a home, but it has been remade in plastic, magnified about 100 times its usual size and, on closer examination, has the Taobao doll and JD.com dog mascot woven into the auspicious fish symbol of abundance. The slogan on Lü’s other side, through contrasting with the upright Communist slogans they’ve replaced in both message and whimsical basket-weave design, nonetheless represents the nation’s hopes for its countryside written literally on the village’s walls: “Going away to roam—can’t beat doing Taobao at home.”

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Taobao-themed decorations were added to the village as part of a drive to beautify the area

Welcome to China’s new socialist countryside. It’s splashed with corporate logos and is a more or less a spontaneous side effect of the digital revolution, but to the Chinese leadership today, “Taobao villages” like Beishan speak to the success of a policy long in the planning. Speaking at the 2015 World Economic Forum in Davos, Chinese premier Li Keqiang painted a compelling scene of one insignificant village that could send “more than 30 million products daily around the world” through the magic of e-commerce, vindicating the efforts of the last 30 years of Chinese market reforms.

However, for most of those 30 years, the village itself had been the afterthought. As symbolized by the millions of workers traveling home for the Spring Festival, the byword around the Chinese countryside was “empty village”—bereft wealth, future, and even people, as its young and even middle-aged residents left to seek opportunities in the cities, leaving just children and the elderly at home. The concept of the “new socialist countryside” first appeared in 2006 in the country’s 11th Five Year Plan, as the authorities’ label for their vision of closing the urban-rural development gap induced by market reforms.

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Items sold in bulk, such as these backscratchers produced in the village, bring different returns online versus offline

Defined by Alibaba, Taobao and Tmall’s parent company, a village is considered a Taobao village if more than 10 percent of its households are involved in e-commerce and bring in a total revenue of more than 10 million RMB per year. Though the phrase and its definitions were first published in 2013, there were supposedly already 20 extant Taobao villages around China by that time; the first ones, Beishan among them, had gotten their start as early as 2006. As of 2016 the total number of Taobao villages had increased exponentially to 1,311.

It’s not exactly clear how Alibaba originally developed those metrics, and in Beishan itself there is some confusion about the percentage of its 1,000 households that are involved in e-commerce—Lü says there are “300 to 400 registered stores, but a household can own multiple stores by registering one under the unique ID number of each family member—it’s all free.”

Ultimately, it doesn’t really matter: Taobao villages are important for their emotional and symbolic meaning as much as their actual numbers. Beishan’s story began in an almost cliché fashion with what Chinese media has dubbed the “pancake-to-Taobao” narrative of the village’s first e-commerce entrepreneur Lü Zhenhong.

Lü, as the story goes, was a migrant who made a living in various Chinese cities selling Jinyun’s famous baked pancakes. In 2006, just three years after Alibaba launched Taobao, he decided to open an online store selling outdoor equipment such as hiking and camping gear. This allowed him to come home and take care of his parents. He tells TWOC that his early days of Taobao entrepreneurship were “improvised”; he got into it because a few friends had opened online stores and he chose outdoor equipment because it seemed like an interesting product category that could sell well.

However, in the new frontier that was consumer-toconsumer e-commerce in those days, there was everything to win for the entrepreneur who seized opportunity at the right time. In 2008, Lü registered his own outdoor equipment brand, BSWolf; the BS stands for Beishan. The company brings in around 8 million USD in revenue each year.

According to Lü Zhenhong, many of his friends and neighbors in Beishan got into e-commerce when they became curious about what he and his family were doing. He then became the unofficial advisor as well as supplier for the village’s new batch of Taobao entrepreneurs: besides getting pointers from Lü on what to sell and how to sell, many in the village got their start on Taobao as distributors of BSWolf products, which they could acquire from Lü as orders came in, so as to reduce overhead.

Today, while some in the village continue to act as BSWolf agents, others merchants have added product lines, registered their own brands, or branched off to other products in the broad “outdoor equipment” category: firewood, barbeque grills, and “wind blankets” for electric scooters. Whereas e-merchants used get their stock order-by-order from BSWolf because they worried it wouldn’t sell, now it’s because their home-based businesses have no storage space for the amount of orders they get.

This scenario is what Lü Yang refers to as the Beishan Model, and the Jinyun County Youth League Committee, the body that handles public relations for the village, promotes it on the national stage as the “classic model” of what a Taobao village ought to be: “It is an example of one homegrown enterprise that stimulated the economy of a whole village; executives, leaders, and other entrepreneurs are coming here to see how it works,” says Liu Yicheng, deputy secretary of the Youth League.

Having seen its success, Jinyun’s county government invested money in improving the area’s internet infrastructure in effort to keep Beishan’s momentum going. Across China, other local governments are investing in rent-free warehouse spaces for their Taobao villagers and assist e-businesses with loan applications, while even Alibaba has gotten in on the action with “Taobao University” training courses for new merchants. Lü Zhenhong is now a major part of this machine in his own village, as Jinyun’s Youth League also reached out to him to create intro- and intermediate-level training workshops for would-be e-commerce merchants, some of whom have never used a computer before, as well as for “online store employees” ranging from customer service representatives to product photographers and webpage designers.

According to Lü Yang, since 2014 there has also been a plan to replace the current village government building with an industrial park, which will provide office and warehouse space to the village’s expanding enterprises. Intended to be finished to coincide with a visit from Alibaba founder Jack Ma, the project was put on hold when Ma’s travel plans changed.

For now the park is still just a series of concept illustrations, which Lü Yang proudly indicates on her office wall. But she suddenly grows wary, revealing that the village’s growth doesn’t come without misgivings. “Do you think it still looks like a village?” she asks. “See all these buildings at the entrance, the renovation…it doesn’t look so different from the town, does it? I wonder if that’s inevitable as a village develops.”

After e-commerce, what?

In the late 1970s, Canadian scholar Dallas Smythe famously wrote a memo to Chinese market reformers titled, “After Bicycles, What?” Originally an admonition to the authorities to not neglect the consequences of technology to the political and social organization of the country, the question remains just as pertinent to the story of the Taobao village. Ten years after Lü Zhenhong started his online store, four years after the village’s first appearance on CCTV News, it’s not just the buildings that are evolving away from the familiar patterns of village life.

In comparison to rural Taobao’s frontier days, when it was a relatively low-stakes gamble with potentially astronomic gains, “making it” in a mature and competitive Taobao village takes as much complex maneuvering as in any metropolitan corporate economy. Lü Lubin, a “post-1980s generation” retailer of electric scooter blankets, rattles off a litany of products he used to sell but abandoned for those with better returns: “folding chairs, stoves, air mattresses, car seat cushions, car parts…I’m always on the lookout for good products, and I often travel to Yiwu city to see what’s selling at the warehouses, see if I can spot an emerging trend,” he says.

He also keeps diligent contact with other merchants across the country through online forums, swapping tips and alerting each other to potential changes to the market. “It takes more discipline and effort than just reselling camping equipment; I used to sell that too.” E-merchants can also be victims of their own success, according to him. “Our manufacturers see how well we’re doing and figure they can also sell online and cut us out.”

Not every entrepreneurship story ends in success, and Liu admits that not everybody has the right combination of ability, resources, and circumstance to run their own business, despite the lure of success stories and free-to-register stores. “It’s the reason [the county’s] training workshops are divided into ‘entrepreneurship’ and ‘employment’ tracks. We make it clear that not everyone is going to be suited to opening their own shop, but everyone can find something for themselves in the e-commerce economy,” he says.

This almost exactly describes the e-commerce career of Huang, a customer service representative at a Beishan Taobao store, who took the job after his own store failed. “It’s free to register a store, but with so many people doing that around the country, it’s takes more than just having a product and putting it [online],” he says.“Let’s say you type in the product name: There are more than 100 pages of results. How do you make sure yours is seen?”

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“It takes a special amount of strategizing, not to mention energy, to constantly think of ways to make yourself seen. It’s tiring,” he adds, in between typing responses to a customer’s insistent pings on Taobao’s instant messaging system, another crucial avenue for the merchant to stay ahead of the competition. The e-merchants TWOC spoke to all agree that the computer is never turned off, and they are available to customers from 8 a.m. to as late as 1 or 2 a.m. every day if they have enough manpower for it—but even the smallest mom-and-pop operations rarely log off before 11 p.m.

“We keep a phone by our bed. I’ve slept through it, but I’ll answer if I hear it, and a few times I’ve run downstairs to the computer to handle problems at night,” says Zhou, who sells air-mattress with her husband. “City folks work late, people simply message you at 2 a.m.; what can you do?”

Alternatively, money could get you the recognition you need. Taobao is after all a business, and you could pay to get your product put on sidebars or linked on other products’ pages. Lü Zhouyang, a BSWolf agent and relative of Lü Zhenhong, says that his profit margins are actually starting to shrink the longer he has been running and trying to expand his business. “The costs of those services are too high. It’s one of the biggest pressures my business faces these days,” he says.

Others gamble on a more sophisticated but challenging option: transitioning from being agents to brand owners. In 2009, another Lü, one of Beishan’s first villagers to embrace e-commerce, chose to develop a line of folding chairs under the brand “Wild’s”on Alibaba’s business-to-consumer marketplace Tmall after three years on Taobao. “Compared to being a BSWolf agent, I had to do a lot of paperwork, and invest money in everything from the business licenses to getting my logo designed and printed, which not everyone can afford, and I definitely took a bigger risk if the sales aren’t good and I don’t get a return on my investment,” she says. “I think it’s worth it, though—when you have your own brand, you stand out, and if you then focus on having high quality and innovation to go with that, people remember you.”

Lü also believes owning a recognized brand will safeguard her if ever the outdoor equipment market shrinks, and in this sense the Taobao village is a microcosm of the Chinese economy, which on the whole has been trying to develop innovation, quality, and a focus on original products over the cheap knockoffs and low-skilled assembly work for which it is notorious. Taobao has been recently co-opted into the process, as authorities have tried to crack down on fake products and encourage e-merchants to improve their product quality.

However, those pressures had already developed organically in Chinese villages. Some communities that experienced a small renaissance in the market economy by becoming clusters of small, home-based workshops producing or assembling single types of products—a common economic structure in developing economies—are experiencing a second “hollowing out” as their type of production gets left behind by the increasing technical demand of the Chinese and global economies. One example is South Dahongmen Village, one of many “clothing villages” that used to populate Beijing’s Daxing district, whose economy is now collapsing as clothes-manufacturers leave China for cheaper countries to produce in. Actually populated by migrants who were lured in by cheap rents, residents of the village tells TWOC that not even two years ago, almost every home had an “assembly” workshop, which added buttons and did other piecework for clothes sold at the nearby Dahongmen Wholesale Market.

Now, says a button-sewer surnamed Li, local restaurants are failing since the majority of residents have closed shop and left to “rejoin” the migrant lifestyle. His next-door neighbor, Yu, is one of a few in the village who have turned to e-commerce to salvage their livelihood, but this also entailed transitioning from a producer of “cheap” finishes to a proprietor of his own product line. “I’ve changed to selling suits that I make myself, right here, and custom uniforms that companies can order from me,” Yu says. “You make nothing these days just finishing someone else’s product: Now, everywhere, it’s all about innovation.”

Beishan also has a handful of these product-finishing workshops remaining, usually overlooked by media and Alibaba’s assessments of the village economy. Zheng, the owner of a workshop that assembles and sells cheap plastic toys and backscratchers, also started a Taobao store, but admits that her products, as they currently are, make negligible returns online compared to wholesale merchants. “The others, with their outdoor equipment, that’s a bigger product and their customers tend to have more, pay more; so they make more per product,” she says. “Mine are not worth much individually; I don’t think the platform is really suited to my products.”

Whither the Taobao Village

Lü Lubin tells TWOC, just offhand, that Beishan is no stranger to international media attention. After repeating the fact of CCTV’s four visits, he says we’ve been preceded recently by a German reporter, and before him came China Daily and CNBC. Both have written glowing reports of how Taobao has transformed rural livelihoods, and only slightly played up the juxtaposition between rustic village life and the villagers’ sophisticated, technology-driven, and far-flung business connections. “Their questions are more or less the same as yours: How did you get into e-commerce, how did it change your way of life?”

What did it mean to tell the story of the Taobao village? It might be a story of optimism, as it is to Premier Li, perhaps mingled with some awe and relief that an almost unforeseen miracle of technology could alleviate one of China’s greatest economic and social development headaches. It could be a story of DIY entrepreneurial spirit and increasingly cosmopolitanism of a once communistic and closed-off nation, as it is to many Western media. It could even be a story that looks inward, as with many Chinese media and researchers that have followed the lives of individual villagers, young people especially, who have been able to leave behind the stressful life of migrant work to return home, take of their families and “revive” the millennia-old fabric of traditional Chinese society.

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Packages from Beishan village are sorted in the nearby town of Huzhen before they are sent out to customers across China

Ultimately, it signals a return of the village and its people to the forefront of the story of China’s development. After all, the e-commerce village and its merchants were there long before they were branded as Alibaba’s “Taobao villages,” and the more things change, the more they also stay the same. Not every person in Beishan is involved in e-commerce, of course, and the elderly in particular are continuing to farm. Their attitudes toward e-commerce are mixed, with one elderly sweet-potato farmer surnamed Zhang saying that there’s no need to sell online “if you sell well enough in town,” as her produce does.

On the other hand, Chen, who owns a lantern-making workshop that is one of the remaining producers of traditional handcrafts in the village, and which is emphatically not an online business, has a more pessimistic take: “Why think about e-commerce if you can’t even run a physical store well?”

Ironically, BSWolf’s Lü Zhenhong has the answer to this question. In 2009, his online business wellestablished, he opened a physical store in the nearby town of Huzhen but later closed it because the volume of sales didn’t justify the cost of upkeep. “We chose this product because it sold well online, not because it was popular locally,” he admits. “Nowadays in the village, we’re used to selling as well as buying things online, and it has really changed the way we think about consumerism.”

On the other hand, Lü Lubin thinks the core of the Beishan story is about people and their connections, and in those cases it’s actually neither a story of constancy or change, but the adaptability of anything that’s really central to the identity of the village. He notes that he himself never took any of the county’s classes and that most in the village still learn by helping each other. “There was a lot of ‘feeling the stones’ when we started out, and you can say we do that in collaboration. This whole place got started when we saw somebody we knew doing something good.”

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Handicrafts and small manufacturing workshops still operate offline business in parts of the village

This is still the way that the village embraces innovation, carried over from those early days when e-commerce was in its infancy and its future was theirs to define. Then again, small communities and village entrepreneurial “clusters” have relied on networks of family and neighbors to obtain resources, form bargaining blocs with suppliers, and act as labor force, information network, credit lender, financial and legal advisor, and myriad other supporting roles that urban businesses take for granted.

As Lü steps out of his home office to leave a WeChat voice message for what he says are questions from a colleague he communicates with online, the fundamental question of the Taobao village story reverses itself: In the 10 years since e-commerce arrived, is it the platform that changed the way we think about the village, or is it the other way around?


“Taobao Town” is a story from our issue, “Taobao Town”. To read the entire magazine, become a subscriber and receive the full issue. Alternatively, you can purchase the digital version from the iTunes Store

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