The deal with China Telecom, which has 186 million users, is part of a two-pronged strategy for the e-commerce giant, which sees smaller cities as key to its growth plans for its e-commerce business and operating system YunOS.
A line of eight inexpensive smartphone models from obscure brands like Uniscope, Ctyon, and Kingsun will come loaded with YunOS, the operating system developed by Alibaba to compete with Android. Six pricier models from better-known makers like Coolpad, Hisense, and TCL, on the other hand, will have Alibaba’s shopping app Mobile Taobao pre-installed.
The smartphones will be sold in China Telecom stores. The telco had 15,000 retail outlets in rural China at the end of 2015 and is planning to add more locations.
The company wants to position YunOS as an alternative to Android, which holds a 80.4 percent market share in Chinese cities according to Kantar.
Despite moves like a $590 million investment in smartphone maker Meizu, which uses YunOS on some of its handsets and a partnership with Quixey to power YunOS search, however, the operating system has yet to take off and had just 10 million users as of October 2014.
Alibaba may have better luck expanding its e-commerce business by targeting rural areas. A report by Alibaba research unit AliResearch estimates that China’s rural e-commerce market will hit 460 billion RMB ($75 billion) by 2016, with rural residents spending an average of $80 to $300 online each year. Furthermore, merchants living in rural areas have opened 480,000 stores on Taobao.
The online marketplace is so important to the economy of some farming communities that they’ve been dubbed “Taobao Villages.”
Founder and executive chairman Jack Ma has said that Alibaba’s near-term expansion plans will focus on smaller Chinese cities instead of overseas markets.
Though buyers from so-called “third-tier” and “fourth-tier” cities tend to make smaller purchases than their counterparts in larger cities, like Shanghai and Beijing, they are still an important growth driver, and helped push the company’s sales on last year’s Singles’ Day online shopping bonanza to a record $9.3 billion.
Buyers using mobile devices accounted for 42.6 percent of sales, underscoring why it’s important to get smartphones and Alibaba’s shopping app into the hands of potential customers.