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Why India should learn from China’s Taobao villages

Did you know that China’s e-commerce transactions were less than 1 per cent a decade earlier? Over the last 10 years, China’s worldwide e-commerce transaction value grew from less than 1% to over 40% now, exceeding that of France, Germany, Japan, the United Kingdom, and the United States combined, according to a McKinsey study. The growth of China’s vast online economy has been the result of massive drive by e-commerce giants like Alibaba and JD.com to tap into the country’s gargantuan rural market by working with the government. 
 
This initiative of creating “Taobao villages” has transformed poverty-stricken villages into a lifeline for rural Chinese people. As defined by AliResearch, Alibaba’s research division, a “Taobao Village is a cluster of rural e-tailers where at least 10% of village households engage in e-commerce or at least 100 online shops have been opened by villagers; and total annual e-commerce transaction volume in the village is at least RMB 10 million ($1.6 million)”. In the Taobao model, small and medium e-tailers from these villages source food produce locally and sell it online on taobao.com. 
 
Early findings from the Taobao example have indicated that e-commerce in Taobao villages fosters entrepreneurship and creates flexible and inclusive employment opportunities, including for women and youth. According AliResearch study, the number of Taobao villages have exceeded 70,000 and provided 280,000 job opportunities in rural China in 2014 alone. Since then, the number of such communities are growing rapidly. In fact, Alibaba is planning to invest $1.6 billion in the effort to spread rural e-commerce through 2019, with the ultimate goal of opening 100,000 Rural Taobao centers.  
 
As e-commerce is showing a promising role in alleviating poverty and improving people’s lives in China through Taobao, this could be a huge lesson for India. With around 500 million internet users, the Indian e-commerce market is expected to become worth $200 billion by 2025. This huge market offers immense potential for rural e-tailers to become entrepreneurs just by harnessing digital technologies in the right way. While PayTm, Snapdeal and Flipkart have been trying to introduce a similar model in India, they have not had much luck, despite charging low fee for merchants. 
 
Traditionally, self-help groups (SHGs) and governments along with NGOs have encouraged rural artisans, homemakers and other skilled workers to sell their works online. However, these efforts have to be directed towards helping rural sellers get online. For instance: A women-run SHG like Lijjat Pappad or Amul has been successful because of its commercial stand. Similarly, sellers have to be trained to use the platform effectively, for commercial purposes. Additionally, sellers should also be given loans by the government with lesser rate of interest and be empowered by marketplaces. 
 
“Creating infrastructure for storage is another crucial step that the government has to ensue, along with marketing and necessary financial linkages. On the other hand, marketplaces should make their websites open to rural sellers and create opportunities for them to tap into global audience,” says a World Bank Consultant who is working with SHGs in Andhra Pradesh. This will not only expand their horizon but also create numerous employment opportunities by bridging the digital divide, empowering rural India as well as restricting largescale migration from rural to urban areas. 

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