China's rural areas' USD 200 bln online sales are e-tailers next battlefields.

Online retail sales in the most impoverished areas of China have surged last year by 52% to RMB 120.8 billion with commerce in these areas shaping up to be the next battlefield for Chinese e-commerce giants.

China's rural areas are home to more than 620 million people or nearly 10% of the world's population with total online consumption from these areas increasing by 39% in 2017 to RMB 1.245 trillion (USD 180 billion), crossing the RMB 1 trillion mark for the first time. China's rural residents spent RMB 894 billion in 2016 according to the Ministry of Commerce. Retail sales from rural areas is expected to continue growing by 12% this year, about 1% to 2% higher than that in urban areas.

Rural e-commerce now represents the next frontier for China's e-commerce giants. However, the question on how to penetrate these areas remain. Efforts by e-commerce giants Alibaba and JD.com to enter the rural market have been faced by roadblocks such as a lack of talents as more young people choose to migrate to larger cities, and the current state of poor logistics services. Logistics costs in rural China can run up to 5 times higher compare to urban areas with many of these areas out of deliverable areas for logistics companies.

In its effort to expand to more rural areas in China, Alibaba has launched the "Rural Taobao" project back in 2014 to bring its high-tech cloud-based logistics services to these areas and to develop what is...