Small village cashes in big on online retailing

BEIJING - For the residents of Qingyanliu village, Yiwu city, in East China's Zhejiang province, work begins at dusk. As afternoon creeps into evening, delivery company trucks and vans pull up outside each house and start loading the thousands of packages.

In the daytime, the empty streets reverberate with the screech of sticky tape yanked off its roll as workers package goods.

In the basement of Wu Licai's house, four workers nimbly sort, pack and load a mass of boxes. Everyday, about 700 neatly wrapped parcels are sent from this village to Wu's customers across China - after having been bought and sold on Taobao, China's biggest online retailer.

Wu is among the 1,800 Taobao traders in Qingyanliu who buy products in nearby markets and sell them online. During the day, the villagers sit in front of their computers to receive the online orders. At dusk, the seemingly deserted village begins to buzz with activity.

"E-commerce has changed the lifestyle of our village. Instead of tending to our fields, we now use keyboards and mouse clicks to make money," says Liu Wengao, vice director of the local e-commerce association.

Known as China's No 1 e-commerce village, Qingyanliu has produced 10 percent of Taobao's "golden crown" stores - that is, the stores which have made over 500,000 transaction records. In 2009, Qingyanliu villagers pocketed 800 million yuan ($121 million) from their online sales.

The first step in the establishment of the e-commerce village was made in 2005 when Liu's e-commerce association helped build many five-storey houses in Qingyanliu, making low-rent housing abundant. From then on, small traders started to converge on the village, increasing its population from 1,486 to over 8,000.

The advantage of the village is its proximity to Yiwu city, which is the world's largest wholesale market for a wide range of small items, from pencils to socks to cups, said Liu.

"The e-commerce market is big enough for our development. Instead of deterring competition, the traders benefit from sharing information with each other," Liu said.

Statistics released by China's State Council Information Office show the number of Chinese Internet users had risen to 450 million by the end of last year - more than a third of the country's total population. Moreover, some 140 million of the nation's netizens have shopped online.

China's total online retail sales in 2009 were estimated at between 253 billion and 500 billion yuan in 2009, according to Analysys, an international research firm.

Given the huge business potential online, the villagers of Qingyanliu generously share their experiences.

Trader Zhang Feng said the idea for his first deal popped up via a casual chat with a neighbor. Two years ago he opened his store with 40,000 yuan borrowed from the bank. Now he drives a luxury car.

The clustering advantage has also attracted businessmen from other provinces to shift their bases to the village.

Zhang Haiyang, a businessman from Anhui province, moved his online store base for daily necessities to Qingyanliu two years ago.

"Here, all the traders have representatives to negotiate delivery fees with the more than 20 companies. Besides, all other necessary services, like webpage designing, are available here. It surely is the right choice," he says.

Qingyanliu is not the only place riding China's e-commerce wave.

Qinghe county, Hebei province, is China's largest cashmere production base. Many of its villagers began running online stores in late 2007.

In the country's Donggaozhuang village, which has about 400 households, there are more than 20 stores with an annual trading volume of over one million yuan. A research report by Chinese e-commerce giant Alibaba said the rural hubs of online traders in Zhejiang, Jiangsu and Hebei provinces have witnessed robust development in recent years.

While such villages are cashing in on China's online shopping trend, the relatively slow Internet speeds and logistics systems are likely to impede their development, said the report.

Experts say the community development model exemplified by Qingliuyan might ease the bottlenecks, because traders gathering together reduces costs.

At the latest international commodity fair in Yiwu, 25 traders from Qingyanliu teamed up to organize promotional events, such as group buying.

"We are looking for sources of supply as well as potential buyers. We can develop better as a group," said Liu.