The Chinese city of Yiwu can’t seem to decide on a defining slogan for itself. This industrial center for light manufacturing, located about a two-hour drive south of the provincial capital of Hangzhou, variously proclaims itself to be “commodities city” and “the zipper capital of China”—both on the same billboard near the city limits. Check Wikipedia and you’ll discover Yiwu is also known, somewhat more humbly, as “sock town” because its factories purportedly have produced more than three billion pairs of knitted footwear for companies such as Wal-Mart.
But if you ask local entrepreneur Liu Wengao, zippers and socks are not the area’s future—the digital economy is. Liu is secretary general of the Yiwu E-Commerce Association, a 13-month-old organization that’s helping to incubate and promote online trading in Yiwu’s Qingyanliu Village. Once an impoverished farming community on the edge of the city, Qingyanliu has in just a few years transformed itself into one of China’s so-called Taobao Villages: prosperous clusters of online shop owners who sell goods on Taobao, the country’s largest online retailing website.
With only 1,486 permanent residents, Qingyanliu is home to some 2,000 online retailers that last year registered a total sales volume of about RMB 2 billion ($308 million), according to Liu, the village’s head cheerleader and Internet impresario. “They all started from Taobao,” Liu said. “As they grew, they built out their own e-commerce ecosystem” replete with hundreds of thousands of square feet of warehouse space, box and packaging vendors, express shipping companies and logistics operations, all supporting the online stores.
In fact, “village” is a bit of a misnomer for Qingyanliu. It’s a reminder of a simpler and poorer time when it was a community of struggling rice and wheat farmers.Thanks to a government real estate redevelopment program in the mid-2000s, the area saw the construction of some 200 five-story industrial and residential buildings, which threw off rent and a subsistence income for the villagers.
But real change came in 2008 when Liu, a successful local businessman, got together with friends and neighbors to chart a better economic future. Yiwu’s factories were already churning out a gusher of small, inexpensive household items that would be attractive to China’s emerging consumer class. Yiwu is home to what it bills as the world’s largest market for wholesale commodities, as well as a high concentration of warehouse space and trucking companies capable of delivering goods to bricks-and-mortar retailers throughout the country.
Liu said villagers figured they could capitalize on their location by becoming online vendors, channeling Yiwu’s prodigious output directly to consumers by opening Web storefronts on Taobao, which in 2008 was growing fast as a host for thousands of like-minded Chinese entrepreneurs. Taobao currently sports over 800 million product listings and more than 370 million registered users, and is by far China’s largest online retailing platform. “We decided e-commerce was a way out,” said Liu.
With infrastructure already in place, Qingyanliu’s bid to become a center of e-commerce was almost an overnight success. Yet this prosperity is not always readily apparent to visitors.Despite the traffic on nearby roads, which bustle with flatbed trucks, delivery vans and even the occasional Lamborghini, on an early Thursday afternoon in April there appears to be little happening on Qingyanliu’s dusty streets.
Appearances can be deceiving. Among the small restaurants, hair salons and other businesses on one of the village’s main drags, Qingyan St., are storefronts featuring their Internet URLs prominently displayed on signboards. These enterprises are a special breed of wholesaler adapted to cater to Qingyanliu’s e-commerce trade.
Liu calls them “net products supermarkets.” The village contains about 30 of them, all selling a mind-boggling array of inexpensive consumer goods to smaller e-commerce merchants who in turn sell on Taobao and other C2C sites. The supermarkets offer not just physical products but also digital photos of the products so merchants can easily upload them to their own websites. They also serve as warehouses for the smaller mom-and-pop e-tailers, who “don’t have the pressure of keeping big inventories,” said Liu. “They just come here to replenish when they are out of stock.”
One such supermarket, www.92PIFA.com, looks like an overstuffed dollar store, its bins overflowing with inexpensive, kitschy kitchenware, cosmetics, plush toys, plastic picture frames, chopsticks, coat hangers, flashlights, ear-wax pickers, and on and on. The shop owner, a diffident man who does not give his name, said he offers some 3,000 different products, although he has no clear idea how many are actually in stock.
On Thursday at around 1 p.m., 92PIFA.com is eerily devoid of customers, as are the nearby noodle shops and tea stalls. Liu said this is perfectly normal. The daily grind in Qingyanliu moves to a beat that is very different from the village’s up-at-dawn agricultural roots. Here, the rhythm of life is driven by the just-in-time e-commerce supply chain.
Online shop owners tend to wake up late. They spend their mornings at their computers collecting customer orders. Around 3 p.m., they head for the net products supermarkets in the center of the village, queuing up to buy the products they need to fulfill orders from the past 24 hours. As the day winds on, the products are carted home for packaging, and by early evening fleets of delivery vehicles from five express companies serving the village take to the streets, picking up orders and transferring them to logistics centers for shipment to consumers. Toward midnight, the day’s work done, villagers head back to the center of Qingyanliu Village where they eat and talk until late into the early morning hours.
For those who are willing to hustle, there is money to be made. “The young people here who used to play mahjong all day and just fool around are opening their own Taobao stores,” said Liu. “The results have been way beyond my imagination.”
One of those young people is Zhou Junjie, who in 2008 started selling cosmetic accessories on Taobao with his wife. The work at first was tough. Zhou said he got up at 8 a.m. and worked until 2 a.m., but his original RMB10,000 investment has multiplied thousands of times over. His company, www.1985yy.com, has since become a wholesaler to other Taobao resellers, boasts 50 employees and operates out of a large underground warehouse in Yiwu.He’s recently opened his own factory making specialty paper products on an OEM basis and under his own brands.
At age 26, Zhou said he is a millionaire. His wife’s bright red Porsche Boxster is parked near the warehouse;Zhou himself wearsan expensive Rolex watch and his spacious office is outfitted with a shiny new universal gym. The secret to his success? After graduating from college and working at a powerplant for two years, Zhou heard about Taobao from a friend. “I just did it and it went out of control,” he said. Today, he said, “I don’t have a refined way of developing my business. I just try to increase my customers.”
As head of the local e-commerce association, Liu is trying to boost more entrepreneurs like Zhou by funneling capital to startups and providing e-commerce training on the nuances of trading on Taobao. The association, which recently moved into a bright new office building next to a sprawling Toyota dealership near the village, now sports 64 members, companies that employ more than 20,000 people. Members continue to share information and support each other. “The key to our success is the integration of capital, skills and infrastructure,” Liu said. “We brainstorm together. For example, if there’s a solar eclipse coming, we decide to stock the special glasses people need to view it. We catch the moment to make money.”
Still, Liu wonders if the golden age of Qingyanliu, when simple villagers with little capital could prosper on the Internet, is disappearing almost as quickly as it arrived. As e-shop owners expand and hire more people, they are facing rising labor costs, and it’s getting tougher to keep employees. “The problem here is that staff just go off and start their own shops,” Liu said. Now the trend is for shopowners to set up product fulfillment and customer service centers in Henan Province, where costs are lower and the workforce is more stable, Liu said.
He also worries that the rapid spread of e-commerce in China is giving way to an era of consolidation, during which the small shops that have helped raise so many out of poverty will find it harder and harder to compete with a handful of dominant e-commerce companies. “Some of my brothers and sisters will be driven out by the bigger players,” said Liu. He’s not sure what to do about that. Maybe start selling beyond China, to customers all over the world? “We are on our way to find the answers,” Liu said. Yiwu’s city fathers may one day decide it’s better to be known not as sock town, but as the e-commerce capital of China.
