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Role of E-commerce

There are around 638365 villages¹ in India. Most of these rural people engage themselves in farming, food processing, agro-based products, hand-looms, handicrafts and cottage industries. The goods or products they produce are sold to local people in the same market.
If they need to sell outside their locality, they need to know about the prevailing market conditions and have to depend on number of intermediaries. The average area of land per farmer in the rural areas is around 2-3 acres. Whereas in case of developed countries, the average land in rural area ranges between 10-15 acres. E-commerce can help to bring down the velocity between urbanization and industrialization. It facilitates the rural people to address these issues in various forms. They are: -

Aggregation

The per capita agricultural land possessed by the Indian farmer is comparatively meager as compared to the per capita agricultural land possessed by the farmer in the developed countries. Thus, the Indian farmers are not able to put forth their voices in the market. E-commerce can knit the farmers together to see the best prevailing market conditions and they aggregate their produce to get a better price for their product. Thus, E-commerce can help to overcome the size barriers and allow them to enjoy the bargaining power of sellers.

Integration

Information is power. In a country like India, the scattered nature of the rural economy has to be integrated by a network. The network here refers to the linking of rural producers and consumers by providing the required information that will help them earn fruitful returns. E-commerce enables smooth flow of processes and information across the rural boundaries. Internet with appropriate software enables easier connectivity. The cycle time of the business operations can be reduced. Since the cycle time is reduced, the farmers are no longer restricted by the credit constraints imposed by the local money-lenders. Thus, E-commerce can automatically reduce the role of unorganized moneylenders. But integration becomes highly complex as a result of aggregation. (The integration of people by electronic media also requires a high cost).

1 Data taken form ITC vs. E-Choupal: A Cover Story, Business World, 2nd May 2005.

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* Contributed by -
Krithika R. & Thiruvathal M.,
MBA - II Year,
Thiagarajar School of Management, Madurai.