The World Bank is reporting that e-commerce can prosper in developing countries and in rural areas, as well as become a powerful tool to create employment for semi-skilled workers, women and other groups.
The new research, E-Commerce Development: Experience from China, published with the Alibaba Group last week, combines empirical data from China as a whole with data from a specially commissioned survey of Taobao Villages — rural villages in China heavily engaged in e-commerce.
Further, the review details the patterns and transformation of e-commerce in China and the specific government policies and private sector initiatives; identifies the preconditions needed for its successful development; and examines the links between e-commerce development and household welfare improvements.
“China’s experience shows that developing countries can harness digital technology and e-commerce to create jobs and improve people’s lives,” said Victoria Kwakwa, World Bank vice-president for East Asia and the Pacific, “We hope this report will contribute to discussions on ways to support inclusive growth through digital technology and e-commerce.”
According to the report, e-commerce can potentially eliminate market barriers and connect consumers and businesses. In addition, it can create jobs directly and indirectly — through logistics services and other parts of the wider e-commerce ecosystem; improve household consumption; and reduce inequality by delivering to people in rural areas the convenience, variety, and low prices enjoyed by urban dwellers.
E-commerce therefore contributes to economic growth by improving the flow of information between consumers and buyers and increasing economic efficiency.
“The rapid development and prosperity of rural e-commerce in China has proved that innovative business[es] started by grass-roots entrepreneurs in rural areas of developing countries can thrive via the e-commerce platform under the right conditions.”— Wen Jia, partner and president of the Public Affairs Division at Alibaba Group
With one of the largest and fastest-growing e-commerce markets in the world, China accounts for more than 40 per cent of the total value of e-commerce transactions worldwide. In fact, more than five per cent of total employment in China comes from e-commerce, and online purchases have become part of daily life for many Chinese households.
“The rapid development and prosperity of rural e-commerce in China has proved that innovative business[es] started by grass-roots entrepreneurs in rural areas of developing countries can thrive via the e-commerce platform under the right conditions,” said Wen Jia, partner and president of the Public Affairs Division at Alibaba Group.
Highlighting the positive correlation between e-commerce and household welfare improvement in rural China, the report noted that in Taobao Villages, households that participate in e-commerce earn 80 per cent higher incomes than households that do not participate. What’s more, e-shop workers earn wages equal to or higher than their counterparts in urban private industries.
The report also indicates that women and younger, better educated households benefit more from e-commerce in China.
However, the World Bank identifies the risks and challenges that need to be tackled in e-commerce development. These include regulatory challenges, such as how to regulate platform providers to ensure a level playing field for comparable digital services, protect consumers, and ensure fairness between online and physical vendors.
Some of the special online risks of e-commerce stem from cyber security, privacy, fraudulent or defective/counterfeit products, technical concerns regarding electronic payment, and the imbalances in competition among platform providers.
On the other hand, the report highlights three enabling factors for e-commerce development: investments in training and skills building to increase human capital; proper infrastructure and logistics; and a conducive business environment.
“The achievements China has made in e-commerce can be explained by the country’s substantial investment in infrastructure over decades and the rapid improvement of its business climate in recent years,” said Gong Sen, executive vice-president of China Center for International Knowledge on Development, which co-hosted the launch.