Online Shopping Making Inroads in China's Rural Fujian Province

China may now be a country with the largest Internet user population as well world's No. 1 mobile market. However, when it comes to e-commerce, particularly business-to-consumer (B2C), it is still in its infancy.  For instance B2C market accounts for less than 1 percent of the total e-commerce market and so far, the only place where consumer-related online commerce that has performed well has been online gaming led by companies such as Shanda and Giant Interactive.

Experts say that one reason why e-commerce hasn't taken off yet is that despite impressive potentials, merchants in China have not yet applied e-commerce as their principal channel to grow their business and therefore pave the way for e-commerce as a whole.

But the other important inhibiting factor has been the fact that Chinese Internet users fear fraud and generally have low trust of B2C commerce. Consumers, say experts, usually prefer to limit themselves to only large companies or brands.

But that may be changing. With the government and authorities trying their best to push China's merchant to adopt IT for doing business, and consumers shedding their online fears, B2C e-commerce is picking up fast. According to China Internet Network Information Center's (CNNIC) latest Internet Development Report, with the growth of Internet, use of practical applications such as online shopping is becoming popular as well, as the China's netizens are increasingly drawing the Internet out of the virtual world and bringing it close to their real life.

CNNIC said that currently with about 63 million Internet users using the Internet for online shopping, close to a quarter of its population use the Internet for B2C e-commerce. And although Shanghai is the only city where most of the e-commerce transactions still happen, slowly online shopping is spreading to their regions as well.

Clearly a number of companies, from local companies to global biggies, are making a beeline in China to cash in from the new opportunity. And the latest one to join the fray is Nokia Siemens Networks, (NSN) one of the leading global enablers of communications services.

NSN announced today that in collaboration with Fujian Mobile -- a subsidiary of China Mobile Group -- the German-Finnish telecommunications infrastructure giant is running an "innovative" e-commerce platform in the Fujian Province of China that promises an important link between rural consumers and urban businesses.

According to Josef Lorenz, head of innovations, NSN this project is unique in the sense that it sets up an e-commerce platform in the existing shops in the rural areas where its residents can visit to buy goods online. "This will help them buy products for which they either had to travel or could not get at all," says Lorenz.

Fujian, situated along China's southeastern coast with population of approx 40 million, is one of the first cities in China to be classified as a Special Economic Zone. However, according to Lorenz, despite being an important economic zone, Fujian has no significant e-commerce platform primarily due to lack of connectivity and the absence of a payment link.

For instance, according to rough estimates, while the average Internet penetration rate is about 27 percent in urban China, its reach in rural Fujian is about 7 percent.

'Which is why the uniqueness of this model is not so much in the application but in the business model," says Lorenz, adding that this e-commerce platform provides an integrated end-to-end service, which contains an online Catalogue Sales Platform (CSP), on which merchants from even a far away Chinese city can upload their products for marketing to rural customers. The service is delivered to villagers through local entrepreneurs or retail stores, who provide shared Internet access to the online shopping platform

"This platform shopping model challenges traditional ways of conducting business and purchasing goods in remote locations -- villagers gain access to a wider selection of reliable consumer products and urban suppliers are provided with a new sales channel reaching the mass market in villages," adds Lorenz.

NSN, says that this platform has been a pilot project for the past 5 months in 4 Fujian villages But in about a year's time, it should see a roll-out throughout the province.

"When done, this platform will open new doors for villagers and retailers in Fujian province," says Lorenz, adding that the main objective of the project is to establish a new business model for rural e-commerce, where, using ICT, rural Chinese people can get better access to their needs in life, at better prices. "ICT then can become more efficient and improve wealth and lifestyle in China," he added.

Besides, says NSN, this project will also enable small and medium-sized retailers and distributors to improve their business efficiency, and offer a wider product range. In addition, it could spawn potentially powerful new business model of Business to Business to Consumer (B2B2C) services that will help Chinese merchants to improve local presence in rural areas.