By Ishant Gupta
Chinas E-commerce market is one of the largest platforms in the world. It caught the attention of the world by growing at an alarming rate of 43 percent in 2015. The rural area, referred as the ‘unmined goldmine’ of China, is a completely different market requiring a completely different model targeted at the gamut of challenges. Its challenges and success can best be understood by the following example.
The transformed village
Dinglou Village went from a stagnant land with scarce economic opportunities to a costume market of $26.2 million per year (as per 2016). No one would have believed a village area, seeing which only one word comes to the mind remote, will become a hub of E-commerce in China. The credit for this success goes to Alibaba. Their initiative Taoboa villages (a group of rural e-retailers which sells their product via online marketplace Taoboa provided Alibaba).
Ding Peiling, a resident of Dinglou Village, was unlike other adult residents. He never left the village. He was a poorly paid teacher. One day, he came across an artist who was facing a problem of selling his paintings as he was busy making them. Ding along with his cousin sold the paintings door to door. From selling the painting they shifted to photo costume and then to performance costume. The performance costume not only provided a higher pay but also a larger market. Soon Su Yongzhong, secretary overseeing Daiji, heard of his endeavour and saw a development opportunity. He approached the government, which resulted in better roads, optic fibre internet and most importantly all introduced them to E-commerce. This led to the miracle we talked about earlier.
Seeing its success, the Chinese government released guidelines for a massive expansion of E-commerce in rural areas to fight against poverty. E-commerce is now an integral part of Chinas plan to eradicate poverty by 2020.
Rural sector in China: The way ahead
With urban economy developing exponentially, the Chinese government shifted its focus to the rural economy. The rural sector comprises about 46 percent of the population of China i.e. 622 million approx. The average annual expenditure of rural economy stands at $56 billion. Approximately 77,000,000 rural Chinese shopped online in the year 2014 and various companies seeking this opportunity to expand their domain plans on covering 100,000 villages by 2020. The giant amongst these being Jingdong and Alibaba. The Government is further helping these firms by increasing its expenditure on the rural sector. It spent almost $22 billion just on the rural internet. In a speech to the National Peoples Congress, Chen Xiwen, former deputy head of the partys Central Rural Work leading Group said that China is renowned globally for their developmental activities and if they are able to alleviate poverty by 2020, 10 years before the sustainable development goal concerning it. They will set an example for the whole world. Whereas failure to do so will lead to people raising questions and doubting their effectiveness. Subsequently, the central government in the year 2016 increased its funds for the alleviation of poverty by 43 percent to greater than 66 billion yuan. This figure was further increased by the contribution of provinces which amounted to 40 billion yuan leading to a total of 106 billion yuan.
Referring to initiatives taken by private e-commerce firms, the government had partnered with these companies in their plan to alleviate poverty by 2020. Alibaba and Jingdong both have different approaches when it comes to the Rural sector. Alibaba plans on further expanding its initiative Taoboa village. It plans on covering 100000 villages from 1000 counties which accounts for one-third of all counties and one-sixth of villages in China. They plan on boosting online consumption in the rural area to the RMB1 trillion by 2020. They plan on investing on $1 billion over these 4-5 years. The key advantages to the rural populace are increased access to a variety of authentic goods and it also provides a platform for farmers to directly sell their output at a higher price to the urban consumers. Apart from these, Alibaba professes to serve the rural area by infrastructural development and digitization, Urban-Rural integration and by generating entrepreneurship and employment opportunity. While the infrastructural aspect is more skewed towards government partnership, the latter is facilitated by Alibaba.
Jingdong, on the other hand, focuses more on the logistics part. Under its new ventures JD logistics and Jingdong bang. It plans on using drones to deliver products weighing up to 2200 pounds. Jingdong already has around 4000 drones serving urban customers in major cities like Beijing. Jingdong bang, on the other hand, a home alliance delivery and maintenance teams which operates with the help of local shops. The key difference in the approach of two companies is that Alibaba focuses more on overall development whereas Jingdong focuses on logistics and urban-rural integration.
Despite the boom in rural e-commerce, China is still facing huge challenges in the rural sector. Lack of digital penetration, lack of know-how of e-commerce platform etc. But some of the gigantic blockers are lack of connectivity and brain drain. Exodus to the urban area for seeking better opportunities vanishes the rural area of the budding entrepreneurs, leaving the rest of the people in misery. On the other hand, some rural areas are located in remote areas such as in between valleys or amid a forest, making it integrate with urban markets. But with big players like Alibaba and Jingdong, the Chinese government can easily overcome these obstacles. But only time can tell whether it will be able to achieve its target of poverty alleviation by 2020.
Rural sector in India: Can we do it?
Millions of Indians moving to cities in search of better jobs is the stark reality of rural sector. The dogma of being farming oriented or engaged only in agriculture sector is far from true for the rural sector. A paper written for NITI Aayog blows the veil over the same. According to an academic paper, rural area accounts for more than 50 percent of Indian industrial production. Even rural constructions are nearly half of the total constructions activities of India. Whereas the value of rural services output is only quarter of the total services output. In totality, agriculture accounted for less than half of the total rural output.
Although the contribution of the rural sector to overall output doubled between 1972 to 2012 the share of industrial employment to total employment remained stable. According to some experts, this symbolizes better capital utilization than the urban sector. But what is more astonishing is the fact that constant job creation in the rural sector. The rural wages are lower in the rural sector and credit availability is scarce when compared to the urban sector but the construction sector in rural India is keeping the job creation at the right levels.
Saving construction sector from the additional burden
The next big question now is till when the construction sector can sustain its current position. The government needs to come up with a plan to generate even more jobs and opportunities in the rural sector. The e-commerce might be the answer to the governments problem. If the government plans on replicating Chinas success it needs to overcome few challenges:
1) Internet penetration: The internet penetration in the rural sector is mere 17 percent. The government needs to ensure last mile connectivity with internet else the trickledown effect of e-commerce would be dissatisfactory. The government needs to increase its spending and connect villages with the high-speed optic fibre connection.
2) Internet security: Government needs to protect the populace of rural India against the cybercrime and spams by educating them. To ensure this, the government must collaborate with local and national giants as the china did with Alibaba and Jingdong.
3) Increase in infrastructure expenditure: Government needs to increase its expenditure on infrastructure especially in the rural sector. They need to replace seasonal and muddy roads with all metal roads to ensure that logistics of trading goes smoothly.
4) Advertising and awareness: Government needs to create awareness amongst the urban populace and ensure a movement to discourage the migration and brain drain in the rural sector. Instead of a reversal movement encouraging industries and local factories to shift from Urban to the rural market.
5) Providing educational opportunities in the rural sector: In order to ensure long-term retention of human resource. The government needs to provide educational opportunities in the rural sector. So that youth doesnt move out to seek higher education. Plus, it will lead to more complex profession opening up in the rural sector in future.