For two years Alibaba has gone on about its push to create rural e-commerce villages in the Chinese countryside. In late 2014, it announced a five year plan to invest $1.6 billion to create 100,000 so called Rural Taobao centers—hubs for its e-Bay-like e-commerce site. These hubs would connect some 600 million of the country’s poorest residents residents into one of the county’s fastest growing industries—e-commerce.
The strategy has attracted mostly positive press and feedback from Wall Street investors.
But the first cracks in the upbeat story are beginning to emerge.
Farmers who joined the service are complaining about meager incomes and Alibaba’s scaling back of commissions last year. There’s a growing cynicism about Alibaba’s intentions of helping rural villages sell their wares to the richer cities. Rural Taobao is looking more like a way to connect city sellers to the countryside than the other way around. That could make it harder to recruit users in the future.
“For me, Rural Taobao started to lose its luster once I realized that it has never been serious about connecting rural sellers with the cities,” Yu Xueyi, a rabbit farmer in poor Anhui province west of Shanghai, wrote last week in an essay explaining why he just quit the Alibaba service despite ranking as a top-performer. Others have similar complaints.
For its part, Alibaba says that the program is a sign of the company’s commitment to rural areas.
“Through our Rural Taobao program, we are pioneering a two-way distribution infrastructure to connect commerce between cities and rural areas in China,” a company spokesperson said in a statement to Fortune. “We believe Rural Taobao brings significant benefits to rural residents by improving their quality of life, and to brands and manufacturers who wish to extend their reach by accessing China’s vast rural population.”
In the Anhui province, Yu, the rabbit farmer, describes his local government two years ago leaping to work with Alibaba (baba). They created banners advertising the service. Yu served as a delivery logistics partner, helping Alibaba deliver its packages to his rural neighbors. Yu says he was one of the top three delivery partners out of more than 100 in Alibaba’s rural service.
His rural neighbors received their packages faster than ever before. But when it came to selling their own products to wealthy city buyers, Alibaba fell short in helping them, Yu said.
“Even though the platform would advertise examples of villagers making stacks of cash by selling tea, oranges, or herbal medicines to the cities, in reality, most of these examples were mere publicity stunts concocted by local governments with the tacit approval of Rural Taobao,” he wrote.
Rural Taobao generated such meager salaries that many villagers quickly left the service.
Yu says he made $4,350 last year as a top performer. His neighbors made less, which compared terribly to salaries even in poor Anhui, where migrants returning from the city brought back $7,350 annually.
Says Yu: “Neither Alibaba nor the government seems concerned with rural sellers’ profitability. Instead of helping farmers establish themselves in the market, they just want to see countryside customers buy products that were too hard to get hold of before. As outlet proprietors, even our training sessions were geared toward bringing expensive industrial goods to the countryside. Very few of us indeed charted the difficult course of rural-to-urban commerce.”
According to Alibaba, however, the new program has provided a valuable service to rural areas. “The business was started just three years ago, already it had helped 832 of China’s most impoverished counties sold a combined 1.06 billion yuan of goods on Alibaba’s platform in the first half of 2016, up over 40% compared to a year ago,” a company spokesperson said in a statement.
Alibaba and competitors’ push into China’s countryside won’t end anytime soon. The promise of connecting hundreds of millions of future customers is too great. Alibaba says the total sales market for rural areas could hit 1 trillion yuan ($140 billion) by 2020. Even the government is supportive: the ruling State Council said e-commerce was a key component of alleviating poverty.
But Alibaba’s customers are growing wary of its pitch. Yu, the farmer, left Rural Taobao last month to go back to raising rabbits. He says Alibaba’s optimistic message about farmers becoming Taobao’s successful sellers falls flat.