Welcome to my Taobao village: how rural e-commerce growth is helping to empower isolated communities

The new e-commerce on Taobao brings social gains along with new income for neglected communities in rural China

PUBLISHED : Friday, 20 May, 2016, 8:43pm
UPDATED : Monday, 23 May, 2016, 11:31am

What is striking about the emergence of local leaders and grassroots movements in mainland Chinese villages where many residents trade online - the so-called Taobao villages - is that quite often small e-commerce merchants have started a movement away from government assistance.

Instead the managers of the online traders - who quite often started the company - have a unique management style, where they get on with the job, do all the tasks themselves, and learn how the technology works, instead of relying on someone to teach them.

Certainly e-commerce in China is dominated by Alibaba .... Three out of four online sales in China now occur on Taobao

Our rural-empowerment study at UNSW Australia is part of our ongoing investigation of digital enablement in social innovation.

We examined how information technologies provide new means of income generation for disadvantaged groups, improving their standard of living and creating a number of important social benefits.

However it has evolved at a different rate in different parts of China.

E-commerce in Suichang for example is dominated by agricultural products, such as bamboo shoots, tea, sweet potatoes and wild herbs.

However, Jinyun villagers sell outdoor gear, including backpacks, sleeping bags, walking shoes and barbeque pits, which leverage neither the natural resources nor the traditional skills of the villagers.

E-commerce is helping to revitalise Chinese rural villages, home to half the population. The use of internet trading as a way of developing impoverished communities has come into the spotlight with the spectacular stock exchange float of Alibaba, the Chinese wholesale version of eBay.

Certainly e-commerce in China is dominated by Alibaba since it drove eBay out of business through its own cheaper and safer version, Taobao. Three out of four online sales in China now occur on Taobao.

And Alibaba is encouraging underprivileged villagers into micro and small businesses on Taobao and has coined the phrase “Taobao villages” – where 10 per cent of the population are involved in e-commerce, which grew in rural China by 25 per cent last year.

Despite the generally poor education standard among villagers, e-commerce allows for quick experimentation and learning by doing. The low entry barrier allows them to explore ideas on website design, establish a brand and to easily substitute products they sell. Sales volume and customer feedback captured on the Taobao platform tells them how they are doing.

This efficient learning process leads to a quick diffusion of knowledge in the ecosystem, bridging the capability gap in a rural community.

Long distances to market and poor infrastructure are overcome by e-commerce delivering a bigger market, with higher prices and direct access to consumers without layers of middlemen. As e-commerce grows, participants in the ecosystem can take up new or different roles. For example we have found that the e-tailers evolved into a grassroots leaders and goods manufacturers when the number of e-tailers reached a critical mass.

Impoverished rural villagers can be resistant to change, due to little exposure to the outside world, but presented with a new opportunity from e-commerce, they are encouraged by the transparent success of others to have a go.

However the research does indicate that internet technology is not as much of a passive force as might be expected. Instead it acts on other resources to create value.

The other surprise in our study is that leading players in the process are not only information coordinators, but also the source of motivation.

It demonstrates that e-commerce is not just a relatively fixed bridging device linking buyers and sellers, but provides a space for common actions that mobilise local village participation.

The new e-commerce on Taobao brings social gains along with new income for neglected communities. In effect, a belief in self-sufficiency germinates, and weakens the learned helplessness in some rural parts of China.

Shan-Ling Pan is a professor of Information Systems at UNSW Business School.