The new target consumer for China’s e-commerce giants sits in the tiny hamlet of Miaoxia, deep in rural Henan province.

Gao Xiaoli, who is training to be a doctor, has money to spend, a smartphone to shop with and online emporiums JD.com Inc., No. 1 in the Internet Retailer 2016 China 500, and Alibaba Group Holding Ltd. beating a path to her doorstep more than 500 miles south of Beijing. Rural e-commerce is expected to be worth 1 trillion yuan ($148 billion) by 2020, providing a massive incentive for marketplaces such as Alibaba’s Taobao. Alibaba operates Taobao and Tmall, the dominant web marketplaces in China, but it is not ranked because it is not the merchant of record.

“I have some friends who spend over 2,000 yuan each month buying clothes on Taobao,” Gao said.With the approach of Singles’ Day on Nov. 11, the biggest shopping promotion of the year for both Alibaba and JD, consumers outside megacities such as Beijing, Shanghai and Chongqing are opening their wallets more.

Once known mainly as a source of labor for city factories, China’s sprawling countryside has about 618 million people who call it home, and they are coming into their own as incomes rise and education improves. Alibaba and JD are spending billions of dollars to extend their reach in far-flung provinces, and smartphone brands Vivo and Oppo are surging into the top five globally on their ability to capture sales from rural consumers.

Alibaba has committed to spending at least 10 billion yuan in rural areas, making it easier for customers to order and deliveries to be made. JD is fighting to catch up to its larger rival and says it has a presence in about 90% of the nation's counties and districts. That means new warehouses and almost 2,000 regional sorting centers as well as an army of drivers and other workers to full deliveries. "We have somewhere around 200,000 agents and representatives in rural areas," said Shen Haoyu, president of JD's international business. "They help people to place orders and in certain circumstances they help with the delivery as well.'"

With lower living costs, people in the countryside have more money to spend than ever before. Disposable income in rural towns rose by 160% in the decade ending 2014, helping lift many out of poverty and fueling the government’s push to promote domestic consumption. “Rural populations, especially the young rural population, are not what we knew before,” said Wang Feng, a professor of sociology at the University of California at Irvine. “They are the best-ever educated rural youth in Chinese history. Their parents—as migrants or farmers—worked hard, and then they gave the young people the capacity and resources to be able to consume.”

In Yanglou, a speck of Henan province in central China, Yang Jifang can get Danone SA’s premium baby formula delivered within three days from JD. A decade ago, that purchase would have required an hours-long bus ride with no guarantee the milk powder would even be on the store shelves. “You can’t buy Bullpen milk formula from shops here,” she said, balancing her daughter and two tins of powder on her knees.

(Source: BLOOMBERG NEWS)