Monday, January 29, 2018

The Chinese rural e-commerce story

Fascinating set of articles in China Daily (even with the inevitable positive spin) about the role that e-commerce is playing in rural areas. It is described as part of a government plan to achieve "rural economic transformation with Internet plus".

e-commerce firms have established rural sites like Alibaba's Taobao, with marketing agents with the responsibility of creating trust among rural folks to use Taobao to both sell their farm and other products as well as buy things for consumption. Consider this,
The number of "Taobao villages," in which at least 10 percent of the population sells goods on Alibaba's online platform with revenues of at least 10 million yuan, has soared from 20 in 2013 to more than 2,100 (out of more than 600,000 administrative villages across the country) in 2017... The company's Rural Taobao arm is training Taobao assistants in villages and building logistics branches in rural areas, says Li Tianyu, a project manager at Rural Taobao. It is also promoting agricultural products on the front pages of online shopping websites, providing unsecured loans for farmers and analyzing big data to provide feedback to help farmers to improve production efficiency, says Li. As of March last year, the company had established a presence in 600 counties, covering 30,000 villages in 29 provinces or provincial-level regions. 
The penetration of e-commerce into rural areas depends on the availability of digital infrastructure and related platforms, willingness of the rural folks to transact on such platforms, physical transport infrastructure, and a credible standards and certification system. The government has played the important role of addressing the last two issues (1.28 million km of rural roads built in last five years, new food safety law in 2015), allowing the market to expand geographically as well as in terms of scope. In fact, market participants are now investing in the development of cold-chain infrastructure, offering extension services to improve farm productivity, and primary processing facilities.

Sample this about the government's role,
In 2014 and 2015, 256 counties were selected by the Ministry of Commerce for piloting of e-commerce in rural areas. Pilot counties received, on average, 18.75 million yuan from the central government for rural logistics, e-commerce service stations and primary processing facilities, as well as quality control systems and help with brand establishment.
Nearly 60,000 Taobao assistants such as Zhong are working in nearly 30,000 villages around China, helping millions of farmers not only get to know more about purchasing online, but also sending their products to hundreds of millions of buyers from cities... It's part of a project to promote the rural service of Alibaba Group... Cooperating with local governments and based on internet infrastructure, Rural Taobao, a branch of Alibaba, is building the bridge for products and information between urban and rural areas, taking industrial products to the countryside from the cities, and providing agricultural products from rural areas to cities. In addition to training Taobao assistants in villages, measures taken include building logistics branches in rural areas, promoting agricultural products on the front pages of online shopping websites, providing unsecured loans for farmers to improve production, and analyzing big data to give feedback to farmers on how to boost production.
One of the less discussed things about Chinese capitalism has been the important complementary role of its companies in transformational development. Just take the area of finance and technology. The likes of Huawei helped achieve world class connectivity in less than a decade, Xiaomi and Oppo brought affordable and high quality instruments to the masses, and Tencent, Alibaba, and JD.com promoted financial inclusion (Alipay, WeChat Pay etc) to credit scoring (Alibaba's Sesame Credit and JD's ZestFinance) and regular e-commerce to rural e-commerce (Alibaba's Taobao). 

It's time for Indian digital economy firms to step up and go beyond being just me-too e-commerce and digital finance platforms and complement the government's role in the promotion of inclusive growth by helping with the development agenda like rural transformation. Digital systems like Aadhaar provide an excellent opportunity. 

1 comment:

GSP said...

The effort of Alibaba in developing Electronic markets in Rural areas and for farm produce seems to be yielding much better results than what we could achieve in eNAM.