If pricing corresponds to territorial expansion, then the support based on a comprehensive supply chain corresponds to industrial clusters genuinely boosting the upstream supply for e-commerce platforms. That is, through comprehensive support, industrial clusters help businesses form regional and digital brands, thereby embedding them into the entire e-commerce fulfillment system, truly satisfying the platform's pursuit of low prices, speed, and high quality, and enhancing its e-commerce capabilities.

Today, this virtuous cycle of 'e-commerce - industrial cluster - e-commerce' has taken shape.

Author| Si Hang

Editor| Pi Ye

Produced by| Industrialist

The elderly man gazed at the golden orange grove, where he had been involved with navel oranges for 54 years.

In 1970, 200 navel orange saplings were introduced from Shaoyang, Hunan, to Gannan, Jiangxi. After three years of care, 156 of them survived and bore fruit, earning Yuan Shougen the title of 'the first person to introduce navel oranges to Gannan'.

The world looks to Gannan for navel oranges. It is reported that in 2023, the cultivated area of navel oranges in Ganzhou City reached 129,300 hectares, restoring the historical peak before the outbreak of citrus greening disease in 2012; navel orange production reached 1.8649 million tons, a record high.

However, over these 50 years, tremendous changes have taken place in the production, storage, logistics, distribution, and other aspects of navel oranges. Today, every navel orange goes through automated and intelligent grading and sorting systems, such as automatic cleaning and drying, automatic weight, size, and sugar content differentiation; even for fresh fruit, today's logistics system can achieve 'next-morning delivery' speed.

A merchant from Jiangxi's navel orange industrial cluster stated that they sold 20,000 tons of navel oranges in just half a year.

In fact, Jiangxi's navel orange industrial cluster is merely a microcosm of today's industrial cluster digitization. For China's 281 industrial clusters, digitization offers clearer production and distribution paths, as well as higher production efficiency.

Behind this, e-commerce platforms led by JD.com and Pinduoduo have been making industrial clusters their core market fulcrum over the past few years. This layout not only deepens their supply chain penetration on the industrial side but also leverages industrial clusters to unleash the true value of the e-commerce industry.

So, where has China's industrial cluster digitization progressed in today's more intelligent era? And for agriculture, the core pillar industry for people's livelihood, what real changes have occurred?

I. From Manual to Intelligent, From Offline to Online

China's ceramics are synonymous with Foshan, where 50% of the country's ceramics come from Guangdong's Foshan, accounting for over 30% of the global market;

China's jewelry is synonymous with Guangzhou, where 70% of the country's jewelry comes from Guangdong's Guangzhou, accounting for over 30% of the global market;

China's toys are synonymous with Chenghai, where 50% of the country's toys come from Shantou's Chenghai, accounting for over 33% of the global market.

Of course, there are also Huaqiang North's 3C electronics, Yiwu's small commodities, Huizhou, Guangdong's guitars, and more. Today, these well-known industrial clusters are becoming even more eye-catching with the power of digitization.

Statistics show that as of November 2023, China had 281 industrial clusters, primarily concentrated in Zhejiang, Guangdong, and Shandong, with Zhejiang having 66 and Guangdong having 43.

China Industrial Cluster Development Report (2023)

It can be seen that the number of industrial clusters gathered in coastal areas is significantly higher than that in central and southwestern regions. However, beneath the surface, the output and market share of different industrial clusters vary widely.

So, how did this gap arise?

Excluding natural advantages like geographical environment, from a digitization perspective, how do different industrial clusters construct their production, storage, sales, and logistics links?

Imagine the variety a pear orchard can offer.

In Lishui, Zhejiang's Yunhe pear industrial cluster, from cultural exhibition halls to cultural experience parks, from Su's pear orchard to pear blossom festivals, from germplasm resource nurseries to picking festivals, throughout the year, Yunhe's pear industrial cluster alone generates over 200,000 yuan in income for the people and attracts over 30,000 tourists through various events.

Yunhe's annual pear production is astounding. Statistics show that the current planting area throughout the county is 12,500 mu, with an annual output of nearly 6,000 tons and a production value exceeding 100 million yuan.

Su's pear orchard

The integration of industry, tourism, and culture is only one external manifestation of Yunhe pears' digital innovation. What truly drives their production and sales value is the underlying digital system.

It should be noted that this 'Famous Fruit of China,' Yunhe pear, only generated an annual income of 10,000 yuan for pear farmers in 2007. So, how did today's achievements come about?

Starting from 2022, Yunhe pears completed a comprehensive digital transformation, building an intelligent 'brain' for the pear industry, constructing an intelligent supervision platform focusing on traceability, supervision, and qualification management; moreover, there are intelligent monitoring platforms for planting, production, services, culture, and tourism. Finally, focusing on sales channels, Yunhe's pear industrial cluster has also created a live streaming team to assist farmers, established live streaming studios, etc., achieving over 30 million yuan in e-commerce platform sales in 2022.

In fact, besides Yunhe pears, industrial clusters in other regions of China have also experienced exponential growth. In Weihai, Shandong, a small city with a population of less than 3 million, there were over 4,500 fishing tackle enterprises in 2022 alone, with an annual output value exceeding 50 billion yuan.

Another example is Chenghai, the 'Toy Capital of China,' a coastal town that has nurtured over 50,000 toy production and management units. In 2023, the industry's revenue exceeded 50 billion yuan. Besides its astonishing annual revenue, its IP and patent licensing volume also ranks first nationwide.

From pears to fishing tackle and toys, what role does digitization play behind these real growths?

It can be said that in the past two years, e-commerce platforms' digital support for industrial clusters has ventured into deeper waters. From past financial and policy support and market development to today, the digital support provided by e-commerce platforms to industrial cluster businesses includes digital operation and management at the technical level, such as providing marketing and analytical digital tools to help industrial clusters enhance operational efficiency.

Furthermore, digital or AI methods are used to increase industrial cluster businesses' exposure, such as leveraging platform advantages and algorithms.

In marketing and sales, e-commerce platforms can now also provide in-depth analysis of industry trends and market demand for industrial cluster businesses, helping formulate marketing strategies. Additionally, in supply chain and logistics, e-commerce platforms have also penetrated these areas, such as JD.com providing intelligent supply chain systems for industrial cluster businesses to achieve production and sales collaboration; Pinduoduo helps industrial cluster businesses integrate upstream and downstream resources in their industry chains, reducing procurement costs and improving production efficiency.

II. From Point to Chain: E-commerce Penetrates the Heartland of Industrial Clusters

Efficiency and growth have become the focus of industrial cluster businesses.

For a long time, in the face of fierce competition from various big brands, how to increase exposure and obtain more 'opportunities' was the focus of industrial cluster businesses. However, with e-commerce platforms' continuous investment in industrial clusters, from financial support to store opening training and content operation, these have now become the 'baseline' for industrial clusters.

However, starting from the past two years, there has been a slight change in the wind – a phenomenon where some industrial cluster businesses have now built comprehensive and intelligent supply chain systems. In other words, if previously e-commerce's support for industrial clusters was based on point-level expansion, now this support is thickening – spreading from points to chains.

It can be seen that today's e-commerce platforms are penetrating into the supply chain systems of various production links, from simple store opening training and financial support to content operation for increased exposure, anchor training, and even cultural promotion.

Taking JD.com as an example, during this year's Double 11, JD.com upgraded its logistics operations again, introducing several different models for different types of industrial cluster businesses.

One is the self-operated model, where products are shipped directly from JD.com warehouses; another is the cloud warehouse model, where products, although not in JD.com warehouses, still enjoy JD.com's supply chain management system; the last is the factory direct sales model, where products neither depend on JD.com warehouses nor JD.com logistics and other supply chain systems from the source.

Among JD.com's various support plans, the 'Spring Dawn Plan' is the most popular among industrial cluster businesses. For instance, the navel orange industrial cluster mentioned at the beginning is supported by JD.com. The industrial cluster business that sold 20,000 tons of navel oranges in half a year is one of the beneficiaries of the 'Spring Dawn Plan'.

Moreover, at this year's World Robot Conference, Industrialist learned on-site that JD.com Logistics has built an integrated intelligent logistics system from warehousing to storage to outbound, which is currently being marketed.

Besides JD.com, Douyin and Kuaishou are also continuously increasing their support for industrial cluster businesses. Their respective systems have become increasingly mature in the past two years. From past guerrilla warfare-style industrial cluster support models, these e-commerce platforms have now explored a path more suitable for themselves and industrial cluster businesses.

Taking Douyin as an example, starting from this year, Douyin upgraded its support policies for industrial cluster businesses. It is understood that this year, Douyin's GMV incentive is straightforward, directly offering GMV cashback to some businesses, with a maximum ratio of 50%. This means that after businesses complete a certain sales volume, the platform provides a maximum of 50% GMV cashback subsidy. Accompanying the GMV cashback are a series of traffic incentives and promotion of SMEs' digital transformation.

This digital marketing and operation service combined with digital support is also Douyin's latest upgraded support policy for industrial cluster businesses this year.

Data shows that over 90% of Douyin E-commerce's enterprises are SMEs, with over 1.5 million industrial cluster SMEs transacting on the platform daily on average. For Douyin, which has natural advantages, more direct GMV cashback may be the most effective method in the short term.

When mentioning subsidies and low prices, Pinduoduo must also be mentioned.

According to Caijing, a person from an industrial cluster business calculated their annual profit and found that if calculated using Pinduoduo's latest support policy, over 300,000 yuan could be returned in a year. This is precisely Pinduoduo's latest policy for industrial clusters this year, namely, directly returning part of the advertising fees.

In fact, the 10 billion support plan has always been Pinduoduo's main support method for industrial cluster businesses. In today's consumer downgrade era, Pinduoduo has added many new benefits for industrial cluster businesses to its '10 billion reduction' plan, such as adjusting multiple service fee benefits, waiving logistics transit fees for merchants in remote areas, reducing merchants' store deposits and cash withdrawal thresholds, etc.

Through the above policies, a clear signal can be seen: industrial clusters' emphasis on e-commerce platforms has risen to a certain height.

III. In Industrial Clusters

Understanding the Smallest Touchpoint for China's Industrial Digitization

Different production processes, cost concerns, and unclear digitization paths are the three major pain points for industrial cluster digitization raised in the China Industrial Cluster Development Report (2023 Edition).

Although the digital figures from various platforms indicate that the penetration rate of industrial cluster businesses is indeed doubling.

However, if one looks closely at these support policies, it can be found that many platforms' support for industrial clusters mostly stays at the price level. An undeniable fact is that in today's consumer downgrade era, profit is the best leverage in the short term; but in the long run, this 'giving a man a fish' approach is neither sustainable nor conducive to e-commerce platforms maintaining their support system for industrial clusters.

Store opening training – financial support – traffic incentives – brand empowerment – content operation – supply chain upgrade – intelligent logistics, this step-by-step process is the complete path that industrial cluster businesses need to take for comprehensive digital transformation.

In other words, in today's wave of China's industrial cluster digitization, the best way for e-commerce enterprises to intervene is no longer simply based on the tip of the iceberg or a single point to provide the most direct support to industrial clusters, but rather to help them build a complete industrial supply chain system, based on which they can then help them build a self-evolving digital and even intelligent system.

This is the true path to digitizing industrial clusters.

This virtuous path also nurtures e-commerce platforms. If pricing corresponds to territorial expansion, then support based on a comprehensive supply chain corresponds to industrial clusters genuinely boosting the upstream supply for e-commerce platforms, that is, through comprehensive support, enabling industrial cluster businesses to form regional and digital brands, thereby embedding them into the entire e-commerce fulfillment system, truly satisfying the platform's pursuit of low prices, speed, and high quality, and enhancing its e-commerce capabilities.

It can be seen that today, the virtuous cycle of 'e-commerce - industrial cluster - e-commerce' has taken shape. Behind the increasingly systematic products on JD.com, Douyin, and Pinduoduo, they all correspond to the exploration of this model, such as JD.com's Dounan flower industrial cluster and Pinduoduo's upward movement of agricultural products. These industrial cluster strategies are truly transforming into high-quality consumer goods that consumers can clearly perceive on e-commerce platforms.

At the same time, this is another strategic point for e-commerce platforms in empowering industrial clusters. Whether it is JD.com's self-operated e-commerce system or Pinduoduo's shelf e-commerce system, their essential competitiveness lies in adding value to products, including reducing circulation costs, ensuring quality, ensuring fulfillment speed, and thus gaining stronger platform competitiveness.

The most effective and direct path is to build a benign industrial chain supply through comprehensive support in sales, marketing, logistics, finance, and other aspects.

However, there are still many contradictions to resolve. For example, different retail channels for different industrial clusters or products, as well as corresponding marketing and branding; furthermore, different offline warehousing and logistics requirements for various industrial clusters, such as cold chain transportation, air freight, etc., are all real issues in industrial clusters.

However, for e-commerce platforms, doing difficult but correct things is precisely their value.

From a broader perspective, as the smallest touchpoint in the entire digitization of China's industry, industrial clusters are also one of the mirrors that can truly highlight the digitization process of SMEs today.

This is the new era mission for e-commerce platforms and their new value in today's wave of China's industrial digitization.