China 'Taobao Village' warmed by winter coat business

Hongxing Village in east China's Jiangxi Province is far from the coldest place in China, but it has become an e-commerce mammoth thanks to warm winter gear.

Every morning, Zha Daixiong sits in front of his computer to take orders for down jackets produced in the village.

"The annual net income of my company has topped one million yuan (154,400 U.S. dollars) since I began selling online in 2012," said Zha.

In Zha's village, home to only 821 families, more than 420 down jacket manufacturing companies have appeared in recent years, with more than 1,000 people employed in online jacket sales.

The story of Hongxing Village's booming jacket industry was first reported by web portal Sohu.com last week.

According to statistics released this week, the village took in 2.5 billion yuan in revenue from jackets in 2015, with more than 1 billion yuan from online sales.

On e-commerce platform Taobao, Hongxing's jacket revenue stood at 500 million yuan last year, qualifying it as a "Taobao Village" as defined by Alibaba, the e-commerce giant that runs the site.

Alibaba defines a village where more than 10 percent of households run online stores and with annual online revenue of 10 million yuan as a "Taobao Village." By the end of 2015, China had 780 "Taobao Villages," according to Alibaba Vice President Gao Hongbing.

FROM SCRATCH TO BOOM

Hongxing's enormous online success started from scratch.

The village's down jacket industry started to take shape in the 1980s. For years, the local jacket industry was dominated by big companies due to the heavy costs of running brick-and-mortar stores. Smaller workshops in the village found it hard to market their products without the logistics and sales support of larger companies.

"When my grandfather was running the jacket business, he took the clothes across the country in a big van, which was time-consuming and tiring," said Xu Ziyang, who now runs an online store. "When my father took over the business, he struggled to find sales agents to help sell the clothes."

"Now it's all online," said 27-year-old Xu.

After graduating from Guangzhou University in 2010, Xu returned to Hongxing to market children's down jackets manufactured by his family's company, Chengzhi Clothing Factory. He designed the product page on Taobao and promoted the products.

Hard work paid off. Online sales topped 6 million yuan in 2014, accounting for more than 60 percent of total revenue that year.

"One of the best things about e-commerce is the slashed costs," a manager of a jacket company with the surname Liu told Xinhua.

Liu opened three brick-and-mortar stores in 2011, which generated about one million yuan in revenue that year, but profits were a tepid 150,000 yuan.

In 2012, he started selling the clothes online, and by 2013, the annual revenue soared to 2 million yuan. His profits also went up by 20 percent year on year, prompting Liu to give up the three stores and concentrate on online sales.

The jacket sales boom also spawned several related industries, including logistics and button production, according to Guo Weishan, Hongxing's village head.

In villager Zha Xiaomao's house, samples of buttons, down collars and other accessories hang on the wall.

"I make more than 100 types of buttons," he said. "Anything you need for down jackets, you can find it here."

The lucrative industry has also attracted some out-of-towners seeking fortune.

Yu Xianyun, a resident of neighboring Gongqingcheng City, came to Hongxing in February last year. He rented a house to design down jackets in the village, where competition is heating up.

"There are four clothing design companies in Hongxing," he said.

Yu said he designs more than 1,000 clothing styles each year for the local garment industry.

A fabric company headquartered in southeast China's Fujian Province also set up a branch in the village to cash in on the industry.

"We provide more than 100 types of fabrics," said branch head Zeng Huaxian. "Profits from a single piece of fabric are not very high, but we have very high sales volume here."

Currently, a total of 85 companies specializing in e-commerce, clothing design and button-making are operating in Hongxing. More than 20 companies were set up by people from neighboring Zhejiang and Fujian provinces, and even some from the northern province of Hebei. The companies have hired some 30,000 locals.

Logistics companies have also been popping up. Before 2010, only one company delivered goods to customers. Now there are 12.

Outside a Xiongdi Logistics warehouse, Xinhua reporters found a group of employees packing more than 40 parcels.

"All of these are down jackets," said the company head. "We deliver about 600 of these parcels each day."

Another logistics company, Tiantian Express, delivers more than 1,000 parcels to customers nationwide every day.

OBSTACLES AHEAD

Despite the flourishing business, industry insiders see obstacles for Hongxing's future development.

"Our biggest concern is a lack of talent," said village head Guo Weishan.

Located in rural Jiangxi, Hongxing's living conditions are less desirable than those in big cities, making it difficult to hire qualified people, Guo said.

"We are in desperate need of people with expertise in photography and online operations, but it's hard to hire people to work in this remote village," Guo said. "Even though the companies here are willing to hire, it's hard to keep them working here for long."

In addition, many of the manufacturers in Hongxing are small, home-based studios, with parents making and processing garments, and children in charge of online sales. Many of these people, Guo said, have no expertise in online finance and marketing, which will harm their future development.

Lack of marketing talent has made brand building another issue. In Hongxing, there are more than 100 down jacket brands, but few have much brand recognition in the market, Guo said.

In order to address the human resources problem, the village sends young people to big cities such as Beijing and Hangzhou to gain experience. After learning about management and fashion, they return to Hongxing.

Local authorities are also helping by setting up industrial parks in cities near the village. Many of the company heads in Hongxing are considering moving to the parks, which have more support facilities.

"This way, we will have more talent to help businesses," one company head said.