Alibaba Moves To Bring Smartphones To Rural China

China Telecom – the nation’s largest telecom operator – has officially teamed up with Alibaba to roll out low cost ($48) smartphones to citizens in rural China. The deal with China Telecom – and access to its 186 million subscribers – is part of a two pronged attack for Alibaba. The eCommerce giant has increasingly come to view smaller cities as a key to the growth of both its retail business and its operating system, YunOS.

YunOs will come preloaded on the Uniscope, Ctyon, and Kingsun smartphone models. Six pricier models from less obscure makers like Coolpad, Hisense, and TCL will not have YunOS, but will have Alibaba’s shopping app Mobile Taobao pre-installed.

Alibaba had developed YunOS to serve as a competitor to Android in China, which currently holds a 80.4 percent market share in Chinese cities, reports according to a release.

Alibaba has invested in YunOs heavily, but as of yet, the operating system hasn’t taken off and had just 10 million users as of October 2014.

And while it is not known if an expansion among rural Chinese users will bolster the fortunes of YunOS, the small city expansion may have a more direct impact on Alibaba’s core eCommerce business. An internal report released by Alibaba indiactes a $75 billion economic opportunity in the rural Chinese eCommerce market in 2016. The report further estimates that rural residents spend $80-$300 per year online and that rural merchants have opened 480,000 stores on Alibaba marketplace Taobao.

Rural buyers and inhabitants of  “third-tier” and “fourth-tier” cities tend to buy less than their counterparts from larger metropolitan areas like Shanghai and Beijing, but when taken as an aggregate, they represent a strong potential for growth – if capitalized on properly. Moreover, Alibaba is betting that rural and small city participation in eCommerce can likely be stimulated to grow by putting more Internet-ready devices in the hands of consumers.

In China, mobile enabled buying already accounts for 42.6 percent of sales.