ZHENGZHOU, China, Dec. 8, 2015 /PRNewswire/ -- It is no secret to business leaders that rural China represents a huge potential market for their consumer goods. It seems that everyone is seeking the right formula to reach more than 600 million rural consumers across the country.
According to data provided by the State Statistics Bureau in October of this year, retail sales of consumer goods in rural China have increased by 11.7%, reaching RMB 3,023.7 billion (USD472.6 billion) in the first three quarters. This is 1.4% higher than urban retail sales. To capture the immense growth opportunities in rural China, many retail and e-commerce companies are trying to meet the challenges of the current rural distribution system and the "last mile" to the customer. To date, most have failed.
Until now.
A Sino-foreign joint venture, starting in Henan, with a team of modern management experts and a unique partnership model, has created a blueprint for a new distribution platform to realize the vast potential of rural China. The name of that company is Post Mart.
Win-Win Partnership Creates a New Approach to Rural Market Distribution
To build an effective and extensive retail distribution network to reach rural consumers, China Post, the world's largest postal network, and U.S.-owned China Horizon Investments Group formed Post Mart five years ago and their official joint venture was licensed in October 2015. The company has launched its innovative business model in Henan and plans to expand to nine more provinces over the next five years.
"The strength of our far-reaching partner China Post enables this powerful new distribution model to serve the growing retail sales demand in rural markets," said Alan Clingman, Chairman of China Horizon Investments Group, which owns 50% of Post Mart.
China Post operates 146,000 routes covering over 5.8 million kilometers, delivering more than 6.4 billion items a year. While most brands still struggle to reach consumers in rural areas, China Post maintains long-established connections to the most remote corners of the country through its all-encompassing network, including locations where Post Mart serves or will soon reach.
On Time, In Full -- Distribution With a Difference
Retail outlets in urban markets are accustomed to receiving their goods ordered the next day, but rural-market shops have had to wait up to 20 days to have their orders delivered. The basic urban delivery requirement of "On Time, In Full" is difficult to achieve in the countryside due to the lack of modern distribution services and management efficiencies. By adopting a modern logistical management system, Post Mart has solved the "Last Mile" problem with the creation of a comprehensive rural distribution network.
In Henan, Post Mart has adopted a "hub-and-spoke" approach, building a system of modern distribution depots, each with a service radius of 40-45 kilometers. Leveraging China Post's logistics network, Post Mart's sales and customer-service team is extending the distribution network into townships and rural areas, ensuring the supply of authentic and safe products with on-time services. To achieve full coverage of Henan, the Post Mart team is consolidating more than 100 warehouses into 30 modern distribution centers across the province. Feeding this network of local distribution centers is a large provincial distribution hub.
By creating this highly efficient distribution network, Post Mart has reduced the delivery time of rural outlets' orders from nearly three weeks to one day. In the Henan pilot areas of Xinzheng and Luohe, Post Mart is already realizing almost 100% "On Time, In Full" service levels for rural customers.
Post Mart Emerald Club Means Sparkling Service for Rural Consumers
Adding value to Post Mart's distribution capabilities is an advanced loyalty program that caters to the unique characteristics of rural consumers. Called the Post Mart Emerald Club, the program enables the company to create consumer profiles, collect data and analyze members' consumption patterns. By collecting this information in real time, Post Mart provides timely benefits to consumers, while creating the first big-data platform for China's rural retail market.
The program also enables brand owners to better understand rural consumer preferences, allowing brands to customize their campaigns and share tailored promotions directly to consumers through Emerald Club e-communications, saving time and marketing costs.
"The Post Mart Emerald Club enables us to better serve rural consumers, while enhancing the business of our shopkeepers and participating brand owners," said Mr. Clingman. "Creating this tailored consumer experience also provides us with valuable business insights. Furthermore, this is a huge benefit for our rural outlets as we not only provide them with an appropriate assortment of products but we are also able to promote those products by directly communicating with our loyalty card members and drive traffic to the outlets."
On Track to Reach More Than 280 million Rural Consumers
"Post Mart is the first company in China to build a scalable, modern distribution platform that can reliably reach rural consumers, who are recognized by the government as a future high-growth engine of the Chinese economy," said Mr. Clingman.
"We are already improving the quality of rural life by providing high quality, authentic and affordable consumer goods and services to more people every week and expect to reach more than 280 million rural consumers within 5 years. Our ultimate goal is to expand nationally to serve all 600 million rural consumers."
