How China Post’s Ule Is Building the World’s Largest Retail Network

Ule“, which translated roughly as “happy post”, is an e-commerce joint venture by, mainly, the China Post. Ule is many things:

  • It shows how China needs online retail to bring rural and urban regions together. (And to let the rural regions prosper too.)
  • It shows what postal services can build.
  • It may, at first, look like the multichannel wet dream of Western consultants. But..
  • ..Ule also shows what is possible in China (and maybe similar markets like India) which does not make that much sense in Western countries with a more robust retail and logistics infrastructure.
  • Still, there are some things here to learn from for postal services worldwide.

So, let’s look at Ule. Wired UK recently published a long portrait on Ule. We’ll start with some context and an anecdote:

“[…] he’s run the store for 21 years and lives upstairs with her farmer husband, his father, and their 21-year-old son. “When we first opened, business was good, as people didn’t often go to town to buy things,” she says. “But in recent years it’s got much harder. It’s [e-commerce website] Taobao. People started learning how to buy online around 2014; their kids taught them. Then the smartphone arrived. They just stopped buying daily goods. We felt the pressure: it was only old people coming in to the store. If we didn’t change, we would be eliminated by the internet.”

​Alibaba’s Taobao is changing small local retail in China’s rural regions. In the process, Taobao’s pressure opened the door for Ule. It made local shop owners more receptive to Ule’s offerings.

Then, in July 2015, the local postman offered to turn Lou’s simple store into a data-enabled, real-time-responsive, globally connected e-commerce hub of its own. With help from the postman, she plugged an electronic point-of-sale laser scanner, a till-receipt printer and a digital weighing scale into a new Asus laptop that sits between a router, a cash register and a landline towered over by western and Chinese cigarette packs. Now whenever a customer pays for a Funkid Grapefruit Juice or Hazelive Soap, their purchase is tracked instantly on a central database. It is linked to both the shopkeeper and that particular customer, whose membership card is then credited with loyalty points that can be redeemed for a purchase of blueberry juice or rice wine.

A wall-mounted 42″ Sanyo TV displays the WeChat group that Lou maintains for the stor

The small rural stores get turned into a POS and service point and local representatives for the China Post, making them the go-to place in their villages for many things:

Ule’s point-of-sale device lets customers pay utility bills in the store and manage their Postal Bank accounts, further boosting Lou’s income. A quarter of her turnover is now online, with a growing trade in outbound sales of local farmers’ shredded bamboo, fungus and dried vegetables. There are so many products that she’s had to rent the warehouse opposite to store them.

​With the connection to smartphones, promotions can be send out to local people. And, interestingly, the counterfeit problem on online marketplaces has already reached China’s rural regions (or the talking points have been delivered and memorized beforehand):

“It may be a bit more expensive than Taobao, but you don’t have to worry about fake products. I take care of everything. It’s a long, hard day but I feel fulfilled. With the mobile, we’re very busy. Before it was so boring that I wanted to cry.”

​Samson Yeung, Ule’s chief operating officer, on the goal for Ule:

“China has 700,000 villages, and we are planning to have one Ule store per village, plus 20 or 30 per city. Then we’ll cover all China’s rural areas and the best parts of the city,” […]
In August, when WIRED tours the villages of Zhejiang province, there are 250,000 stores on the Ule system; by late December, that will rise to 330,000.

With Ule being the online platform AND the POS system for (previously completely offline) in-store purchases a unified system is raising up here that can provide unmatched market data insights.

That level of near-real-time data from stores across China opens doors that western consumer-insight businesses can only dream of. By recording millions of daily purchases and linking them to individual customers via loyalty cards or phone payments, Ule is building an unprecedented view of Chinese consumer purchases. […]

Kerry Liu, founder of a Toronto analytics company called Rubikloud, which is working for Ule:

“you can influence brand and product development – we did a pilot for a big pharmacy chain – and can influence consumer spending, say, to encourage healthier foods. And third, you can shape new product launches. A razor company wanted to launch a new product without cannibalising sales, so we found the 25,000 most likely customers from the retailer’s database, scraped online price data, used reinforcement learning. The result was a 42 per cent rise in product spend.”

​Chen Qing, founding member and chairman of Ule, as well as China Post’s general manager in the province, on what this means for China Post:

“Ule is a major weapon, a catalyst, for China Post renewal,” Chen, 50, continues. “To change a culture, you need to use innovative tech and a market-driven mindset. Our parcel business has grown 450 per cent in this province because of Ule.

​The Chines government is endorsing Ule, because it significantly helps rural villages. With seventy percent of the population being rural, that matters.​​

“Our transactions on Ule will soon exceed 200 billion RMB. The farmers get more business, which creates more logistics volume for us and more cash on deposit for the postal bank. In 2015, the postal bank had 150 billion RMB in cash deposits. In 2016, it was 200 billion. Ule has contributed half of that growth.”

In 2017, he says, the goal is to connect 500,000 rural stores. “After that, the next 500,000 will be urban. Imagine anyone in a city being able to order organic greens from farmers via Ule. We have cold storage – so we’ll deliver to the neighbourhood shop in the city. And think of the benefit to the farmer.” In the city today, Chen explains, ginger is selling for 6RMB per half a kilo, of which the farmer gets 1.5RMB. “We will pay the farmer 3RMB and then sell it on Ule for 4.5RMB. China Post provides the lending capital, Ule provides sales and we all share the profit.” […] ​

Ule’s gross merchandise value in the first half of 2016 was 28.2 billion RMB, a threefold increase on the previous year.

​Alibaba, which is investing 10 billion yuan to build 100,000 Taobao service centers in remote areas, seems to have its work cut out for it.

​More on this topic:

​* Taobao Villages: Alibaba Is Deeply Entrenched in More and More Rural Regions in China
​* How Wish Grew to 2 Million Orders Per Day
​* Alibaba, Amazon, Startups, Everyone Wants to Disrupt Global Logistics
​* Alibaba’s On-Demand Services Unit Koubei to Raise $1.2 Billion
​* Alibaba: “Our Ultimate Strategy Is to Build the Future Infrastructure for Global Commerce”
​* Global Scale Strategies: Amazon Providing Ocean Freight Services Is At First About Chinese Sellers


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