E-Entrepreneurship in a Contracting Economy
Published on : Monday 05-10-2020
We need the Indian counterpart of Alibaba, to promote E-commerce of unorganised retail, says Rajarshi Ghosh.
We were shaken by the images of migrant workers returning home on foot, cycle, trucks during the lockdown induced by Covid-19 pandemic. The Census of 2011 1 puts the number of internal migrants to be 450 million, or about 37% of the population. The sector-wise major employment of migrant workers 2 falls in the categories of: construction (40 million), domestic work (20 million), textiles (11 million) and brick kilns (10 million). While their remittances are essential in running the village economies, it denies them of economic emancipation and keeps them at subsistence level. Can we think of a big push, to keep these people in their homes and move them out of the low level equilibrium trap? We can, by encouraging small rural entrepreneurs, by helping the present job workers to scale up and directly use the internet to sell in the market and do away with intermediary exploitation.
This is what China did, by encouraging a handful of villagers of Taobao to sell handicrafts online. The revolution started by Alibaba in 2003 has become a global revolution as Taobao has become the world’s largest E-commerce site and has generated scores of rural entrepreneurs and has transformed their lives phenomenally. The core theme was Consumer to Consumer (C2C) retail in China, through online payment, followed by express delivery, cutting out the intermediary and helping women and men entrepreneurship to grow. From 20 villages in 2013, it has risen to 4,310 Taobao Villages in 25 provinces in August 2019, where 250 million out of China's total 564 million rural villagers reside, according to data from Ali Research. Some of the famous villages are Qingyanliu, Junpu, Dongfeng, Dinglou, Zhangzhuang, Xishan, Wantou, Beishan, Zaomei, Peixei, Yangcheng Lake Town, Bainiu, Xindu, Xi’ao, Yanji, Baigou, Heibei and there are many more. Taobao has become the global leader in E-commerce, headquartered in Hangzhou and owned by Alibaba. With over a billion product listings, total transaction value for the fiscal year ending 31st March 2020, was 3.4 trillion yuan or US$ 471 billion. Internet and E- commerce have changed the lives of the farmers of these villages. For the year ended 31st March 2020, Alibaba had B2B transactions worth US$72 billion.
What is the relevance of this today? In some ways, today’s crisis is similar to the SARS epidemic of 2003, which also saw a disruption to travel, work and the economy. During the SARS outbreak, because everyone was afraid to go outside, the founder of Jing Dong (JD.com), one of China’s largest online retailers, moved his physical stores in Zhongguancun to an online store. The demand for E-commerce also saw the set-up of Taobao in 2003, which was confined to a few counties then. SARS created the perfect storm for Chinese E-commerce to change Chinese consumption forever.
Today Covid can change Indian consumption forever, it is a matter of connecting the dots. Directorate General of Supplies and Disposal, with technical support of National eGovernance Division (Ministry of Electronics and Information Technology) has developed GeM (Government E-Marketplace) portal for procurement of both Products and Services in 2016. Presently around 20 lakh products and services in more than 5000 categories are available on GeM Public Procurement portal 3 . Transactions for around Rs 50,000 crore have already been processed through GeM in last 4 years.
India’s Taobao could be the GeM, what we need is the buyers and the sellers in it. At present the buyers are slightly over 43,000 Government offices and Government companies. Right now the GeM is confined to Wholesale Market only and the solution proposed is a paradigm shift. It could be done by promoting GeM Retail as an addenda to GeM Wholesale and promoting the unbranded and unrecognised through it. Annual retail transactions on famous sites like Amazon and Flipkart are around Rs 20,000 crore. Transactions in GeM Retail could be double, as the price differential between organised E-commerce and the unorganised proposed E-commerce would be huge, as sampled in the table.
We need the Indian counterpart of Alibaba, to promote E-commerce of unorganised retail. It could be the Government of India; it could also be done by Reliance Retail who have the strength and wherewithal to give tough competition to the global retail giants. The ideal solution would be a Public Private Partnership (PPP) in retail, to ensure the implementation of best business practices.
While the selling platform is there, along with encouraging retail sellers, we need to think of driving retail demand too. For retail driven E-commerce to grow, the job market has to revive. According to the private think tank Centre for Monitoring Indian Economy (CMIE), around 1.89 crore salaried persons were let go since April 2020, a consequence of pandemic induced lockdown. This has to be reversed in full and can only be possible, if Government of India leads a demand drive in the economy. They would be followed by India Inc’s investments and the present contraction would soon be followed by recovery.
Rajarshi Ghosh is an Economist from JNU, an Analytics Expert from MICA and an MBA (Finance) from CMD. Currently he is a FPM Research Scholar of IMI Kolkata. He has many publications on Poverty and Unemployment to his credit. His area of Research is on Use of Technology to maximise Employment. In a career spanning 25 years, Rajarshi Ghosh has a rich work experience, having served in various capacities in different companies in diverse sectors. This paper is his personal opinion only.
