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Tuesday, July 31, 2018

How E-Commerce Is Transforming Rural China

JD.com is expanding its consumer base with drone delivery and local recruits who can exploit villages’ tight-knit social networks to drum up business.

In isolated regions, JD.com is expanding its reach, creating on-the-ground jobs and testing drone delivery. Will villagers be less tempted to leave for the big city?

Xia Canjun was born in 1979, the youngest of seven siblings, in Cenmang, a village of a hundred or so households nestled at the foot of the Wuling Mountains, in the far west of Hunan Province. Xia’s mother was illiterate, and his father barely finished first grade. The family made a living as corn farmers, and had been in Cenmang for more generations than anyone could remember. The region was poor, irrigation was inadequate—the family often went hungry—and there were few roads. Trips to the county seat, Xinhuang, ten miles away, were made twice a year, on a rickety three-wheeled cart, and until the age of ten Xia didn’t leave the village at all. But he was never particularly unhappy. “When you are a frog at the bottom of the well, the world is both big and small,” he likes to say, referring to a famous fable by Zhuangzi, the Aesop of ancient China, in which a frog, certain that nowhere can be as good as the environment he knows, is astonished when a turtle tells him about the sea. As a child, Xia said, he was “a happy frog,” content to play in the dirt roads between the mud houses of the village.
In 1990, in sixth grade, Xia saw a map of the world for the first time. Of course, Cenmang wasn’t on it. Neither was Xinhuang, the city that loomed so large in his imagination. “The world was this great beyond, and we were this dot that I couldn’t even find on a map,” he told me. The same year, the Xias bought their first TV, a black-and-white set so small that it could have fit inside the family wok. Market reforms were transforming China, but in Cenmang changes arrived slowly. It was several years before another appliance, a washing machine, entered the household.
Still, rather than becoming a manual laborer, like his parents and siblings, Xia was able to go to technical college, and afterward he got a job at a local company that produced powdered milk. He married a girl from a nearby village and had a son. In 2009, he bought his first smartphone. Not many of his friends knew much about the Internet in those days, but Xia’s eyes were opened: “Everything that was going on in China could be squeezed onto that screen.” When the powdered-milk company downsized, he decided that it was time to look farther afield. He moved to Shenzhen, a sprawling coastal city, and found a job as a courier, becoming one of China’s quarter of a billion migrant workers.
Life in the big city was at once overwhelming and colorless. Work consumed most of his days, and people were aloof, with none of the warmth he’d known back home. Whereas Xia had some connection to nearly everyone in Xinhuang and its surrounding villages, Shenzhen was an anonymous jumble, in which he felt like “a tiny, undifferentiated dot.” Then, eighteen months in, an unexpected opportunity arose. Xia had been making deliveries for JD.com, the second-biggest e-commerce company in China, and he heard that the business was expanding into rural Hunan. A regional station manager would be needed in Xinhuang.
JD.com, or Jingdong, as the company is known in Chinese, is the third-largest tech company in the world in terms of revenue, behind only Amazon and Google’s parent company, Alphabet, Inc. In the Western press, JD is often referred to as the Chinese Amazon, but unlike Amazon, which has all but saturated the American e-commerce market and therefore has to expand by moving into new sectors, such as entertainment, JD still has ample room to extend its customer base—thanks to places like Cenmang and Xinhuang. Although China has the most Internet users of any country and the largest e-commerce market in the world—more than twice the size of America’s—there are still hundreds of millions of Chinese whose lives have yet to migrate online. Analysts predict that China’s online retail market will double in size in the next two years, and that the growth will come disproportionately from third- and fourth-tier cities and from the country’s vast rural hinterland. At a time when the Chinese government has instituted monumental infrastructure programs to develop these regions, companies like JD are providing a market-driven counterpart, which is likely to do for China what the Sears, Roebuck catalogue did for America in the early twentieth century.
Today, Xia oversees deliveries to more than two hundred villages around the Wuling Mountains, including his birthplace. But, in line with JD’s growth strategy, an equally important aspect of Xia’s job is to be a promoter for the company, getting the word out about its services. His income depends in part on the number of orders that come from his region. Across China, JD has made a policy of recruiting local representatives who can exploit the thick social ties of traditional communities to drum up business. Xia himself is not unaware of the irony: after venturing out to the great beyond, he discovered that the world was coming to Cenmang.
The JD depot in downtown Xinhuang is on a side street, wedged between a curtain shop and a small convenience store. When I arrived, early one Sunday morning in November, Xia was rolling up the building’s metal grille with one hand and holding a steamed pork bun in the other. Xia is solidly built, with a heavy, square face made ruddy by years of outdoor work. He wore the standard uniform of a JD deliveryman: a red-and-gray windbreaker with a matching red polo shirt underneath. He liked the uniform, he told me, because customers immediately knew why he was on their doorstep. In much of China, the livery has become as recognizable as that of U.P.S. workers in the U.S.
Three younger men soon arrived, also in uniform, and Xia called a meeting to run through arrangements for what was sure to be their busiest twenty-four hours of the year: November 11th, when people all over China celebrate Singles’ Day, taking advantage of deep discounts to lavish gifts on themselves. Since 2009, the e-commerce behemoth Alibaba, drawing inspiration from Black Friday and Valentine’s Day, has made the holiday an annual nationwide shopping spree.
“Brothers!” Xia bellowed, looking down at a crumpled sheet of notes. The men stood up straight, with their hands behind their backs. “If June 18th”—the anniversary of JD’s founding, now promoted as a shopping binge to rival Singles’ Day—“was our midterms, then November 11th is the final exam! We must not lose face for JD!”
The men listened expressionlessly while Xia spoke, and, when he had finished, gave soldierly assent. All three were born and bred in the villages surrounding Xinhuang. When I asked why they had decided to work for JD, each of them replied with some version of “E-commerce is the future!” A vapid slogan, perhaps, but one that nonetheless reflected their awareness of a changing landscape that would define the course of their professional lives. Working for JD gave them a level of security that starting a small business, say, never could. You wouldn’t wake up to find that a multibillion-dollar company had suddenly been shuttered, one of the men said. I asked if any of them were tempted to try their luck in a big city someday, as Xia had done. “What for?” another replied. JD was going to expand, he told me, and the implication was clear: soon they could all be managing underlings of their own.
Later, I asked Xia about his recruitment process, and he gave me an odd look. “I already knew who I wanted,” he said. The men were friends, or friends of friends, who’d submitted no paperwork. Résumés and references were for strangers, and nobody was a stranger in Xinhuang. Xia’s work as a promoter for JD followed the same principle. Advertisements had little effect in Xinhuang. People believed you because they knew you, Xia told me. That’s how a deliveryman earns trust.
A mother and her skinny teen-age daughter wandered in to fetch an order of the daughter’s favorite pan-fried instant noodles. The daughter liked to snack on them as she studied, and the local grocers didn’t offer the unusual flavors she preferred. Soon afterward, a shy fourteen-year-old came in to pick up a pair of Adidas sneakers. At ninety dollars, they were cheaper than in the stores. I asked Xia if he earned most of his salary from the wallets of teen-agers. “They are the ones who teach their parents how everything works,” he said. “And the parents then teach the grandparents.”
After an hour or so, Xia and I set out to make deliveries to nearby townships and villages, driving along curving, mountainous dirt tracks marked with potholes. Rice paddies and soybean fields glided by, and construction sites with wobbly-looking bamboo sticks for scaffolding. We got stuck behind a truckload of squealing pigs whose rickety pen threatened to spill them onto our windshield. An elderly couple walked by, pulling a cart piled with timber, on which a small child was precariously perched. At regular intervals along the way, billboards exhorted people to “overthrow poverty!” and told those who “got rich first” to “help those who will later become rich.” The tone of old Communist maxims was effortlessly adapting itself to a vision of social change powered by market capitalism.
Frequently, we would lurch to a stop on the shoulder of the road so that Xia could make a call or answer one from a customer. JD requires deliverymen to phone ahead and check that a recipient is at home. There’s no point in scheduling a set delivery time, he explained: “Compared with cities, there isn’t as much a sense of structure.” People phoned to ask him to drop a package off at the local market or post office or medical clinic.
At one point, he stopped to ask directions from an acquaintance who was squatting outside her home in plastic slippers, washing cabbage leaves with a hose. She pointed to a narrow path that turned out to snake on for two more miles of hairpin turns, revealing vistas of farmland dotted with thatch-roofed houses, and gray-green mountains in the distance. Old women bent over large trays of dried chili peppers. Children played on the open road.
“Wa! You actually came all the way out here,” a woman in her mid-twenties, balancing a toddler on her hip, said when we eventually arrived. She opened the package and gently stroked the purchase that had occasioned our odyssey: a five-dollar pink baby towel. Over the years, Xia has found that baby goods—clothes, formula, diapers—make up a considerable proportion of his deliveries. “I ordered my son’s diapers on JD, too,” he told me. “Everyone wants the best for their kids. For a long time, there wasn’t any choice. Now there is.”
After several more deliveries—a pair of pants, a cell-phone case, bedsheets—we headed back to Xinhuang. Xia returned to the depot to pick up more packages, and I wandered into the old town—tiny, serpentine alleys with sagging wooden Qing-dynasty houses that didn’t look much different from the way they might have two centuries ago. No one bothered to close their doors in the daytime, and inside I saw elders playing mah-jongg in unlit parlors next to altars for deceased relatives, often watched over by faded portraits of Chairman Mao.
At the entrance to one alley, middle-aged men chain-smoked and played cards at round tables outside a restaurant. Everyone looked up as I entered, and I thought for a moment that I must be trespassing. I asked the proprietor, an aproned woman in her forties, if there was a menu, and she nodded, moving to the back of the room, past baskets of unwashed leafy vegetables. She yanked open a refrigerator door to display plastic containers of pig intestines, ears, and other offal. A pig’s head rolled slightly on the bottom shelf. After a somewhat confusing exchange, I was made to understand that this—the bloodied porcine array before me—was the menu. Whatever I picked she was happy to toss into the wok. (There was only one sauce.) Twenty minutes later, a steaming casserole appeared, for which, I later learned, I was scandalously overcharged. But that made sense: it was likely that everyone who had ever entered the restaurant was a local who knew the owners and knew exactly what would be served and how much it would cost. A menu assumes the availability of choices and the existence of strangers. Both were concepts that Xinhuang was only just beginning to embrace.
The headquarters of JD, in a business park in the southern suburbs of Beijing, is a colorful warehouse of trendy, playful futurism—with common areas resembling beehives or bamboo glades; tables and benches hanging from the ceiling on chains; tents; podlike chairs; and gigantic sets of chess and Go. Outside, in the parking lot, the company tests its fleet of self-driving cars. On my way into the main building, I caught sight of a glass box the size of an airport newsstand: a cashless, self-service convenience store. Employees walked in empty-handed and walked out with snacks, their purchases logged by face-recognition technology. The transaction was entirely elided, in keeping with a favorite pronouncement of retail gurus: “When checkout is working really well, it will feel like stealing.”
JD’s founder and C.E.O., Liu Qiangdong, has his office on the eighteenth floor. In contrast with the postmodern riot elsewhere, everything in his suite is blindingly white, the walls bare except for a single gargantuan calligraphy painting that spells out the saying “Tranquillity yields transcendence.”
Liu is forty-four, with a round, fleshy face and a practiced, confident demeanor befitting the eighteenth-richest man in China. (The current estimate of his wealth hovers just below ten billion dollars.) His fame has grown in step with his wealth; on subways and sidewalks, he gazes out from posters with energizing patriotic slogans. Recently, China’s social-media scene has been rife with speculation about Liu’s increasingly toned and trim physique, and whether it was an attempt to keep up with his wife, Zhang Zetian, who is twenty years his junior. (An Internet celebrity, Zhang is universally known as Milk Tea Sister, for the photograph of her posing with a bubble tea that launched her stardom.) The couple have a daughter, and Zhang, who is the country’s youngest female billionaire, tirelessly promotes a portfolio of luxury brands carried by JD. Fashion is among the company’s fastest-growing areas, and when Liu extended his hand I glimpsed a watch by Audemars Piguet, which recently partnered with JD to launch its first online boutique.
In interviews, Liu is eager to emphasize the humbleness of his origins. Born near Suqian, a fourth-tier city in Jiangsu Province, he grew up in a village not much more developed than those where Xia makes his deliveries. His parents worked as merchants, plying their trade up and down the Yangtze River, selling coal to the south and produce to the north. Because they were away on business much of the time, Liu was often in the care of his maternal grandmother—“the epitome of a rural village woman,” he said. He likes to tell the story of leaving his home town for Beijing, after his stellar performance on a national exam earned him a place at the prestigious Renmin University. His family did not have enough money for his trip to the capital, so the rest of the village chipped in, and those who didn’t have cash donated eggs to sustain him on the long train ride. During his first week in the capital, Liu recalls, he ate only eggs.
Liu started his first business—a restaurant—while still in college, with his wages from a part-time job. It went bankrupt within eight months. When he tells the story, it comes out as a parable about the need for integrity: dishonest employees sneaked money from the till and inflated their expense claims with faked receipts. His second business was the foundation of all his success: in 1998, he opened a stall, Jingdong Century Trading, at a Beijing consumer-electronics market. Liu stresses that he took a different tack from that of his competitors, whose solution to the problem of how to turn a profit while competing on price was usually to sell substandard goods. He made it an article of faith that no product would ever be counterfeit and no price tag would ever be negotiable—a novel concept in China, where haggling is the norm.
The business prospered, swelling in five years to a chain of electronics stores across Beijing, and it earned him his first million. But the emergence of JD as an online brand was a fluke. In 2003, the sars pandemic struck, and Beijingers hunkered down in their homes. Liu had to temporarily close his stores, and, casting around for a way to continue selling, he began to offer his products on online bulletin boards. In a marketplace where everyone was a fraud until proven otherwise, the anonymity of the Internet only magnified the sense of suspicion, and no one responded to Liu’s posts. But then an old customer, whom Liu had never met, posted on a board, vouching for the authenticity of the goods, and orders began to come in. Within a couple of years, the online sales had reached a level that enabled him to close all his brick-and-mortar stores. In Liu’s telling, JD’s birth is bound up with a lesson about the importance of trust in business.
“Chinese people don’t easily believe the good will of strangers,” Liu told me. “Why do you think Chinese fight tooth and nail to get on the bus and subway?” He shook his head and laughed. “It doesn’t matter that it’s less efficient or unnecessary. It’s a complete reflex for them, because it’s what they’ve been taught since they were young.”
Though the origin story might strike some as self-serving, Liu’s diagnosis of “a fundamental lack of trust in Chinese society” does relate to qualities that make JD distinctive. Rather than competing on price, in a marketplace steeped in counterfeit goods and shoddy service, JD has focussed on developing a reputation for dependability. It maintains a much publicized “no-fakes” guarantee, and works hard, if not quite infallibly, to keep its site free of them. “One transaction can’t earn trust,” Liu told me. “But over time people come to rely on you.”
Establishing this reputation has required JD to adopt a strategy radically different from that of its greatest rival, Alibaba, which is essentially the eBay of China—a platform connecting customers to a vast network of third-party sellers. Although there are an increasing number of third-party sellers on JD’s site, the core of its business, like Amazon’s, involves managing the entire supply chain. It buys from manufacturers, stocks inventory in warehouses, and invests billions of dollars in development, including a kind of in-house FedEx, called JD Logistics. There are now nearly eighty-five thousand delivery personnel like Xia, and several thousand depots, from large hubs to tiny outlets like the one in Xinhuang. “The couriers are the faces of JD,” Liu said. “They come to your home. You have to trust them.” The success of this network, combined with the notorious unreliability of the Chinese postal service, means that JD Logistics is now itself a product—a service that other e-commerce players pay to use.
Viewed in a certain light, JD can be seen as a privately financed national infrastructure project. “JD has brought the entire nation closer together and made it more close-knit,” Liu told me proudly. Although the company’s infrastructure investments make plenty of business sense—its stock, which is traded on the Nasdaq exchange, reached an all-time high at the start of this year—it is not incidental that the vision underlying them is completely in harmony with that of the government. In recent years, China has built roads and high-speed rail links to bind the country’s least accessible regions more closely to the big cities that are the engine of its economic growth. And the tech sector has emerged as a centerpiece of the country’s global ambitions.
For the country’s leading tycoons, keeping in the government’s good graces is a well-established habit. During our conversation, Liu repeatedly spoke of company strategy in terms of deeper ambitions for the country as a whole, framing economic advancement as a civic virtue. A thirty-year economic miracle was not enough in itself, he said; one also had to “lead society in the right direction and bring in positive energy.” “Positive energy” is a phrase much used by President Xi Jinping, and my conversation with Liu took place less than two weeks after the Chinese Communist Party’s Nineteenth National Congress, which had signalled a tightening of Xi’s grip on the country. It has become evident that, compared with his predecessors Hu Jintao and Jiang Zemin, Xi demands more direct and explicit fealty from corporate titans. Recently, he stipulated that all publicly listed companies must establish a Party branch in the workplace.
Ryan Manuel, a political scientist at the University of Hong Kong, told me that, until recently, there was a cautious symbiosis between the government and Chinese tech giants, an outgrowth of forms of Internet supervision dating back to the early nineties, when the Web first came to China. But Xi, Manuel said, is now “putting the onus of censorship on the companies themselves, and dealing with them the way he managed his anti-corruption campaign.” The message is clear: as long as executives follow the Party line and police their ownorganizations, companies will be given permission to thrive, and championed as evidence of China’s soft power. But if there are transgressions the Party will target company leaders, even people as famous as Liu or Alibaba’s founder, Jack Ma—or Wu Xiaohui, the billionaire C.E.O. of Anbang, one of the largest insurers in the country, who, in May, was sentenced to eighteen years in prison after being convicted of fraud and embezzlement. Manuel said that, in such cases, the charges are frequently opaque—“corruption,” “ideological failings”—but the fates of the company and of its top executives are sealed.
As a result, the recent public utterances of business leaders have displayed a new caution, coupled with an extravagant eagerness to demonstrate loyalty to the Party. A couple of weeks after I met Liu, he was named the head of a poor village south of Beijing, and he quickly unveiled a five-year plan to increase its wealth tenfold. Last year, he made a remarkable announcement on TV. “Our country can realize the dream of Communism in our generation,” he said. “All companies will belong to the state.”
On a brisk autumn morning a few days before my visit to JD’s headquarters, I stood in the courtyard of a former glassworks in Zhangwei, a village in Jiangsu Province, expectantly waiting for diapers, shampoo, and other sundries to fall from the sky. A drone, which was ferrying the goods, was due to arrive at any minute. A few villagers—mostly grannies and toddlers—milled about, careful not to stray too close to a circular green-felt landing pad. Beyond the sloping red-tile roofs of the surrounding houses, I could see silk squashes drooping from vines slung between utility poles.
I was waiting with Li Dapeng, the principal scientist at JD-X, an in-house research lab that oversees JD’s drone development. JD uses seven types of drones, some for long-distance deliveries and others to carry heavier packages over short distances. The one we were expecting carries around thirty pounds up to a dozen miles from its base, at a top speed of forty-five miles an hour. Zhangwei is on the outskirts of Liu Qiangdong’s native city, Suqian, which is also a hub of JD activity. Zhangwei was one of the first villages to be serviced by drone, starting in early 2017, and now gets an average of four deliveries a day.
Li pointed to a whirring speck in the sky. As it drew closer, the first thing I could make out was a red box under the belly of the drone. A minute later, I saw three spinning propellers, which seemed improbably small for the size of their load, like the wings of a bumblebee. The children pointed their fingers upward, faces lifted, and cheered for the “toy plane.” But no one else seemed terribly excited. A young man with gelled hair, who arrived as the drone was descending, said that, for a few weeks, these landings had drawn big crowds, but that people soon had got used to them: “Things change so fast around here, there’s no time to be surprised about anything.”
The young man, who introduced himself as Zhang Xiaoyan, turned out to be the village JD promoter and deliveryman. As he stood near the drone, which hovered a few inches from the ground, it automatically released its cargo box and zipped off into the sky. Zhang cut open the box and began organizing the seven packages that were inside according to their destinations.
Li and I went with him as he made his rounds, setting off past an abandoned outhouse and a tumbledown barn with hay bursting through its doors. Like Xia, Zhang had been born in the region he now served and had graduated from a local technical college, before heading for a larger city—in his case, Suzhou, where he did grunt work in factories and restaurants. And, like Xia, he’d jumped at the chance to return home with a stable JD job. As a local, he had an intimate knowledge of Zhangwei’s social demographics. To him, it didn’t seem strange that people should still be digging wells for water even as they set up Wi-Fi in their homes. Only the very richest inhabitants, perhaps fifty people, owned cars. Almost everyone had a TV, but no more than half the villagers had a refrigerator, because people mostly ate vegetables that they grew themselves and chickens that they kept running around in their yards until the moment they were needed for the pot. A tiny minority had computers. Everyone had a cell phone.
In China, what is sometimes called “the shift to mobile” never happened—hasn’t needed to happen—because the country’s wealth is too recent for people to have been swept up in the PC revolution, the way Americans were. Instead, they went straight to phones, an example of a phenomenon known as leapfrogging, in which non-participation in an older technology spurs early adoption of whatever innovation comes next. Jack Ma, of Alibaba, has argued that the entire e-commerce sector in China exemplifies this pattern: people happily shop online because there haven’t been Walmarts everywhere. In the U.S., “e-commerce is a dessert,” he said. “In China, it’s become the main course.”
The bulk of Zhang’s orders had been placed online with phones. Mostly people bought electronics, household goods, and snacks. But recently a big shipment of king crabs had arrived. I wondered whether the villagers had been skeptical about the freshness of the crabs, and Zhang explained that JD had given an explicit guarantee. “I opened up the box right then and there so everyone could see,” he said, miming the motion of lifting the cardboard flaps. “If the crabs did not move, the buyers would get their money back.” To everyone’s delight, the crabs were even bigger and livelier than the ones at the fish market.
After Zhang had finished making his deliveries, he took us to the village’s lone convenience store. “Big Auntie!” he said, greeting the owner, a woman in her early fifties with bouffant hair. Nodding and smiling, she welcomed us in, and talked about the waning fortunes of her shop, which she’d run for decades. People were ordering online more, but that was only one of many causes. “All the young people have left, and the old people never buy much,” she said. A government program to encourage resettlement in denser urban areas had offered people housing in Suqian, prompting a minor exodus. Her own children had left some time ago, and Big Auntie expressed uncertainty about the future. She gestured toward a construction site that I couldn’t quite make out in the distance, and said that developers had come in to assess the possibility of turning farmland into apple and peach orchards, “where city folks can come and pick fruits and have a picnic.”
After leaving the store, Li and I got in a car and headed for the drone control center in Suqian. On the way, our driver pointed to a pair of cylindrical glass buildings, with clusters of young people hurrying in and out. “JD’s main call center,” Li said, and told me that it handled trouble-shooting calls for the entire country. Liu built it in 2009, providing jobs for more than nine thousand people in his home town. Throughout Suqian, Liu is spoken of in tones that suggest a mythic hero or a minor deity. If it weren’t for Old Liu, people say, who would have heard of us in this drab, no-name city?
At the drone center, Li led me to a control room, where a screen covering an entire wall showed the routes of all the drones and pinpointed their current locations with blinking lights. Next door was a glass-enclosed space that looked like a gaming café—rows of computers with dozens of young men squinting intently at the screens. It turned out to be a training center for drone pilots. The screens displayed animations of quadcopters that looked vaguely drunk as they wove through the sky toward landing pads.
JD’s drone classes last three months, and each student pays ten thousand yuan (around two thousand dollars)—“a small price,” an instructor in the room made sure to inform me, considering how much they stood to earn. I asked him if they were guaranteed a job, and he shook his head and said, rather grandly, “We keep only the very best students.” But there was no shortage of other opportunities for the rest. In China, drones are rapidly invading just about every industry where they can plausibly be deployed. They are used to spray crops, to monitor pollution levels and disaster zones, to create fireworks displays and produce photojournalism, and even to catch schoolkids cheating on the standardized tests that, in the Chinese education system, assume life-or-death significance.
I chatted with some of the students, few of whom were native to Suqian. One, from Shanxi Province, had recently served in the Army; another had been selling life insurance; and another, from Inner Mongolia, had worked in interior design. Not many had been to college, and some hadn’t even graduated from high school, but the instructor said that you didn’t need any technical or scientific knowledge to fly a drone, just as you didn’t need to know about fabric or design to be a clerk in a clothing store. Like Xia’s deliverymen, the trainees evinced confidence about the opportunities that technology would confer on relatively unskilled workers like themselves. Drones, one declared, provided a job that “pointed toward the future.”
A man let me try flying the virtual drone on his terminal. I couldn’t keep it in the air for more than a few seconds before it nose-dived to the ground.
“You’re pressing too hard on the gas,” someone said in exasperation, after my third suicidal plunge.
“This is harder than driving a car,” I said, attempting to deflect embarrassment with humor. But no one laughed, and it emerged that none of these drone-pilot trainees had ever been behind the wheel of a car.
In the late nineteen-eighties and early nineties, in Chongqing, where I was born and lived until the age of eight, I knew only two types of retail arrangement: small-time venders who spread their wares out on sidewalks or in carts hitched to the backs of bicycles; and state-owned brick-and-mortar stores, where everything sat on shelves or lay under glass counters, guarded by legions of clerks. In the Army-hospital compound where I lived—my mother was a doctor—there was exactly one convenience store, for twenty thousand residents. It was known as the fuwushe, or service agency, and in many ways it resembled Big Auntie’s shop in Zhangwei. It sold everything from soap and toilet paper to pickled plums and foreign-brand Cheerios. If you got a soft drink, it came in a spindly glass bottle, and even after you paid for it you couldn’t take it with you; you had to drink it on the premises, and a clerk watched to make sure you returned the bottle to a plastic crate.
Customers were never permitted to touch any item, even a pack of gum, until the clerk had retrieved it for them. If you asked for something and then decided not to purchase it, you got a dirty look, and, if the clerk thought you were shopping around for the best price, you were shown the door. The fuwushemanager was a powerful figure, someone you wanted to ingratiate yourself with in the hope of having the chance to buy rare items. My mother assiduously cultivated his good will so that she could buy imported cigarettes and brand-name alcohol as holiday presents for her father. The idea that the staff of a shop might try to ingratiate themselves with the customers occurred to no one. The government owned everything, so what would be the incentive?
I never questioned the system—none of us did. We couldn’t have fathomed an alternative. And, because we knew nothing else, there was no vantage from which to consider what the system implied about our society, or what assumptions about human nature were folded into these everyday transactions. For instance, there was always a lurking sense that any commercial establishment that permitted customers to touch the merchandise would be all but looted. There was a social implication, too, in the very name “service agency.” It suggested a place that you visited out of necessity. The notion that shopping could be a leisure activity, something you actually enjoyed or even explored your identity through, would have been absurd.
Thinking of shopping in this way would also have been bourgeois individualism, of course. And yet there was nothing inherently Communist about the setup. A century earlier, in the capitalist West, people were requesting items at the counters of groceries and dry-goods stores in much the same way as we did at the fuwushe. Indeed, when, in 1916, Clarence Saunders opened the first self-service grocery store, the Piggly Wiggly, in Memphis, Tennessee, stocking a thousand products—four times as many as the average store—for customers to pick out themselves, the idea was mocked for its sheer outlandishness.
It’s easy for me to imagine how ridiculous the Piggly Wiggly would have seemed back then, because I can still remember the first visit my mom and I made to a Stop & Shop in New Haven, Connecticut, soon after we moved to the U.S., in 1992. I interpreted the unguarded aisles of open shelves as a sign that everything was free. I’d never heard the word “supermarket” before, and it seemed likely that “super” indicated a market where no money was necessary. My mother was awed that store employees, instead of trailing our every move as they did in China, seemed indifferent to our presence. How had shoplifting not bankrupted the establishment? What sort of society would allow such a risk? She could never have guessed that, within three decades, in China, there would be highly paid retail executives working out ways to make shopping more like theft.
No one warns you that immigrating to a more-developed country can feel like time travel—even though, insofar as we moved partly in the hope of a better standard of living, modernity was exactly what we were after. Yet, shortly before leaving China, I had experienced time travel in the other direction, when my parents sent me to live with my father’s relatives, in rural Shanxi, for three months. If Chongqing in 1991 was, in retail terms, stuck in 1916, Shanxi was perhaps still in 1830. I didn’t know before I arrived that I wouldn’t see meat for three months; that the idea of easy access to a store, even a modest fuwushe, would be risible; or that hunger could feel like a demon clawing at your stomach. The only place to buy anything was at a weekly bazaar held in a village some distance away. When my cousins and I were hungry, which was always, we stole drying dates from a neighbor’s yard and climbed persimmon trees.
My father’s birthplace wasn’t just poor. It was to a large extent pre-economic. People foraged, farmed, mended, bartered, exchanged favors. This gave the place a particular feel—foreign to me at first—which my aunt called “interwovenness.” The whole village behaved as one, because you needed the strength of the whole village simply to survive. “Everyone in the village is related to one another, once you go back enough generations,” my aunt said, with satisfaction. “We are one family.” That web of relationships became your identity.
What does it mean when this kind of social network becomes something that a villager like Xia is paid to monetize? Capitalism, of course, has been steadily eroding that traditional sense of identity in China since the early eighties, but for a long time change did not reach the countryside, whose brutal poverty made it immune to the tide of obsessive consumerism sweeping through the cities. E-commerce, though, with its ability to penetrate deeper and faster into the hinterland, brings with it a new sense of personal identity—one less tethered to the group and, arguably, freer, but also more vulnerable to social atomization. A generation back, when everyone in my father’s village was mired in the same kind of deprivation, the name of the village was his most significant marker of identity. But Zhang told me that, in the places where he delivered, people were increasingly forming subgroups determined by their possessions. The car owners fraternized with other car owners; the computer owners with other computer owners; and those who had little of anything were now a society unto themselves.
In New Haven, my mother and I revised our mode of thinking slowly, tenuously, and those changes informed our evolving sense of self. Malls and supermarkets—where we encountered, and later purchased, our first bread-maker, an apparatus as absurd as it was wondrous—became places for teaching ourselves a new, aspirational identity: what to buy and where. Yet, for a country of 1.4 billion people, time travel is very different. You don’t so much assimilate into the dominant culture as create an entirely new one.
In the world of Chinese retail, the area where you most strongly feel the absence of older forms of identity, and the frenetic impulse to reinvent oneself, is the luxury-goods market. The Chinese are the most prolific consumers of luxury items globally, accounting for thirty-two per cent of sales last year. And, because habits of consumption are less ingrained—no one’s granny shopped at Bergdorf’s—people have been notably willing to buy, say, twenty-thousand-dollar watches with a mere tap on a phone. Unsurprisingly, retailers have poured into the sector, and Jeffrey Towson, a business professor at Peking University, suggested to me that JD may be particularly well positioned for the current moment, because of its reputation for dependability and its no-fakes guarantee.
At JD’s headquarters, after my meeting with Liu, I had tea with Belinda Chen, the director of fashion merchandising. Born in Beijing, Chen, who speaks accentless English, attended Berkeley and Wharton, but then turned down a job at Amazon to come back home, believing that China’s tech scene offered more opportunity than Silicon Valley. (This is a common view: JD’s chief technology officer, a former Yahoo employee, assured me that the American tech industry is “on a downward slope.”)
Chen explained that JD’s burgeoning focus on luxury was a consequence not only of the rise of a moneyed middle class but also of the middle class’s relative youth. Buyers of big-ticket items are five to ten years younger than their Western counterparts. “Most of them experience, and learn about, luxury brands over the phone,” she said. “So digital becomes increasingly important.”
But selling luxury goods online presents challenges, as Liu had explained: “When you are selling products for thousands of dollars, you aren’t only selling the product, you are selling an experience. We have to make sure that consumers are getting a premium experience—otherwise, what’s the point of bringing luxury online?” Perhaps JD’s most striking solution is its so-called white-glove service: in certain cities, buyers of fancy items can have their purchase chauffeured to them by a smartly dressed driver sporting white gloves. It has proved popular, partly because people like to show off for their friends. “The Chinese are increasingly status-conscious in an already very status-conscious society,” Chen said.
In Beijing, I accompanied a white-glove courier, a twenty-seven-year-old named Shang Kai, on his rounds. He’d been a regular JD deliveryman in the city for five years when he heard that the company was recruiting workers for the new service. He fit all the requirements for the job: male, under thirty-five, able to drive, five feet ten or above, with a good physique and “proper facial features.” He talked it over with his wife, and they agreed that this was the kind of opportunity they’d moved to the capital for.
Shang makes his deliveries in a small electric car painted with bursts of JD red. He wears a made-to-measure business suit and a tie. As we set off on his first delivery, a package sat between us: judging by its weight, he guessed it to be a digital camera. He’d noticed that, when he started his job, some customers insisted on opening their package right away to check for problems, but increasingly people seemed to trust the JD brand. Shang took pride in being part of that brand—part of the luxury package that the customer was paying for. Not long ago, a young man who’d ordered an iPhone X for his girlfriend was so impressed by Shang’s appearance that he rushed back to his apartment and grabbed his camera to take a picture of Shang next to his delivery car, box in hand.
This was something that had never happened to Shang before, being admired, and he had the odd, exhilarating feeling that he had “miraculously ascended to the white-collar class.” Before this job, Shang had never worn a suit and tie, and, back when he trudged around town in his red uniform, no one even said “please” or “thank you.” Now young women flirted with him, striking up conversations when he brought them their packages. A waiter in a restaurant he frequented, who used to bark at him impatiently, now bowed and said, “Sir, please follow me.” On one delivery, I saw two older women watch intently as he pulled on his white gloves, a step he saves till last, so as not to dirty them. A few days before, he had delivered solid gold bars, worth tens of thousands of dollars, to an investment bank that was apparently giving them out as bonuses. Shang felt as if he were discovering a new stratum of life. “I had gold bars in my hands!” he marvelled. He’d never been inside an investment bank before—hadn’t even really known what one was. “To be honest, I still don’t really know,” he admitted. “But now I can say I’ve been in one, you know?”
Shang was from a family of peanut farmers in rural Henan, and found village life slow and constricting. Men married at eighteen and became fathers at twenty. “You can see the end of your life at its beginning,” he said. As soon as he finished high school, he left to join the Army. One of his teachers had given him a valuable piece of advice: “The future belongs to those who know English, computers, and their way around a vehicle.” Shang knew that his English was hopeless and his computer skills average at best. That left driving, without which his new career would have been out of reach.
On the sidewalk, Shang’s phone rang. Someone who had been planning to pay in cash had suddenly realized that he didn’t have enough on hand. Shang arranged to make the delivery another time. This wasn’t unusual with younger customers, he said, adding that almost everyone he delivered to was under forty.
The next destination on the list was an office building that gleamed like black obsidian. In the lobby was a marble security counter and turnstiles for badge-wearing employees. Shang gazed up at the soaring ceilings. Then he straightened his back, brushed something invisible from his lapel, and told the security guard that he was a JD employee making a delivery. The man gave him a once-over, called up to the recipient, and waved us toward the elevators. It wasn’t until we arrived on the fifth floor that I realized we were in a law firm. Men and women carrying briefcases or hugging stacks of paper hurried to and fro. We waited by the elevators for a considerable time, while they stepped around us. I asked Shang if he ever counted up how much of his day was spent waiting, and he shrugged to indicate that he didn’t mind it much. Although he typically worked twelve to thirteen hours a day, six days a week, he liked how relaxed his schedule was; driving around in a sporty, temperature-controlled car was much more congenial than Army life, which was in turn less arduous than working in the fields all day. Still, he and his wife now had a one-year-old son, and he wanted to teach the boy about the value of time—a commodity that, he’d noticed, the most important people had the least of.
As we spoke, a thirtyish lawyer in a pencil skirt approached us with a timid smile. It was the third time she had come out to the elevator bank. “Hello, Ma’am,” Shang said, with a decorous nod. “I’m the messenger from JD.” The woman smiled with embarrassment and explained that she’d been looking for someone in the usual red uniform. “I thought you were either a client or a colleague here that I didn’t recognize,” she said. As we rode the elevator back down, there was a quiet satisfaction in Shang’s manner: being mistaken for a lawyer was another exotic adventure to add to the list. The white-glove service, designed to satisfy the aspirations of the wealthy, had an equally aspirational aspect for him.
Recently, Shang made an expensive purchase of his own: an iPhone 7 for his wife. It cost a month’s salary, but he was pleased. The next time his wife and his son made the thirteen-hour train ride back to Henan, she’d likely be in possession of the only iPhone 7 the villagers had ever seen. Shang himself could get back only once or twice a year, but video chats on his smartphone made it seem as if his parents weren’t so far away. He and his wife wanted to have one more baby, and the plan was to raise the children in the city. “Going back to the village now,” he said, his voice softening as he looked for the words, “it’s like an ocean trying to flow back into a stream.” As we got back in the car, I asked if he was sure he’d never want to live in Henan again, and there was a pause as he checked the coördinates of the next delivery. “In forty years, maybe,” Shang said, tucking his gloves into his breast pocket. “I’ll be a grandpa, or maybe a great-grandpa. But I guess it would still be the place I came from, the place I have called home.” ♦

Monday, July 30, 2018

How CEOs Actually Spend Their Time: It’s Not How You Think

Legendary Harvard Business School professor Michael Porter and the dean of HBS have a new must-read article out; we have a summary and our take below. The topic: how CEOs actually spend their time. It’s not how you think...
When we came across a new study in the Harvard Business Review on how CEOs spend their time, we took notice. Time is especially scarce for CEOs after all, and how they use it sends a message about their priorities and can have a direct impact on their company’s performance.
This 12-year study is particularly important because it is the longest and most comprehensive analysis on CEOs’ time allocations to date and its authors are both rock stars. Starting in 2006, researchers Michael E. Porter (of the famous Porter Model) and Nitin Nohria (the dean of HBS) tracked the activities of 27 CEOs in 15-minute increments, 24 hours of the day for three months each. Most of the companies were public and had an average annual revenue of $13.1 billion.
Here’s how many hours CEOs at these companies worked:
  • They worked 9.7 hours per weekday on average, or 48.5 hours a week
  • Each day on the weekend, they worked about 3.9 hours
  • They also worked 2.4 hours a day on vacation
  • 47% of their work was done at headquarters, with the balance at other “company locations, meeting external constituencies, commuting, traveling, and at home”
  • Grand total: 62.5 hours a week
What they did while working (75% of which was planned and 25% spontaneous):
  • They spent 25% of their time developing people and relationships
  • 25% on functional and business unit reviews
  • 21% on strategy
  • 16% on matching organizational structure and culture with the needs of the business
  • 4% on M&A
  • 4% on operating plans
  • 3% on professional development
  • 1% on crisis management
Time spent with those inside the organization:
  • 33% on direct reports
  • 22% with other senior managers
  • 10% with other managers
  • 5% with other employees
  • The balance they spent with business partners or board members
How they communicated:
  • 61% face-to-face
  • 24% electronic
  • 15% phone and letter
  • 72% of the time they were in meetings vs. 28% alone
As for when they’re not working:
  • They slept for 6.9 hours a night on average
  • They exercised for 45 minutes a day
  • They spent about 3 hours with family and 2.1 hours on downtime for things like watching TV, reading, or hobbies
Overall, CEOs have a lot on their plate and only have a limited amount of time to get everything done.Learning how they delegate their time is an underappreciated window into how a company may perform.


We’ll end with a few takeaways from the article:
  • “How a CEO spends face-to-face time is viewed as a signal of what or who is important; people watch this more carefully than most CEOs recognize.”
  • CEOs had 37 meetings a week on average that took up 72% of their total work time. Therefore, the study noted that they need to shorten meetings from their default lengths, such as down from an hour, to increase efficiency. Email also wastes time: "CEOs should recognize that the majority of e-mails cover issues that needn't involve them and often draw them into the operational weeds."
  • CEOs need to spend more time with lower managers and rank and file employees to “keep them in touch with what is really going on in the company.” It will also help “them model and communicate organizational values throughout the workforce”.

    Additionally, CEOs in the study were surprised by how little time they spend with customers. The study highlighted how customers are a “key source of independent information about the company’s progress, industry trends, and competitors”, after all. One solution: some CEOs “systematically schedule” time with their customers.
As for CEOs’ off time, the study said “most had learned to become verydisciplined” about spending time with their family. They also needed activities to “preserve elements of normal life” to keep them “grounded and better able to engage with colleagues and workers”. Moreover, CEOs “also have to make time for their own professional renewal and development (which our data showed was often the biggest casualty of a packed schedule)”. This is important advice for any professional to remember.