Digital public infrastructure backed by social investment can democratise handicraft e-commerce

 

Parul Gupta and Abhishek Modi

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The global handicraft industry is valued at nearly $750 billion but worldwide, the creators of handmade products are denied fair compensation or recognition for their work. It is a similar story in India, where more than 60 per cent of Indian handloom weavers earn less than $63 monthly[1] or $2.10 a day, surviving just below the international poverty line of $2.15 a day. According to some estimates, artisans and weavers form the third largest segment among the poor in India. The handicrafts sector suffers from neglect by the government and philanthropists alike, with budgetary allocations to the handloom sector reduced by almost 40 per cent between 2014 and 2018, and less than 2 per cent of domestic corporate social responsibility (CSR) funding going towards the art and culture sector (FY 2020-21). Given the impoverished status of Indian artisans, innovative solutions are urgently needed to uplift the craft sector. 

Online selling can benefit artisans, but the exclusionary e-commerce ecosystem throws up challenges

E-commerce for handicrafts may be a possible answer to artisans’ woes. Historically, agents and traders in the traditional value chain have appropriated a large portion of the premium from handicraft trade by squeezing margins for artisans. Direct online retail by artisans can reduce their dependence on middlemen and open up an additional sales avenue for them.

However, e-commerce is not a panacea for artisans’ concerns: even though social enterprises and government agencies have catalysed an online presence for artisans by listing handmade products on e-marketplaces, presently less than 1 per cent of handloom weavers and craftspersons sell online, according to survey data.

The extant siloed platform paradigm of digital commerce marked by a few dominant sellers is one of the reasons behind the low adoption of online selling by artisans and craft collectives. Such an ecosystem introduces entry barriers for smaller sellers, preventing their broader participation. Three key concerns faced by the sellers are:

  • Multi-platform onboarding which raises costs: For better reach, sellers need to list on multiple online platforms which involves duplication of tedious registration processes and onboarding fees.
  • Dominance of e-commerce giants which reduces seller autonomy: E-commerce players with a dominant market share often impose unfavourable terms on small sellers, ranging from unlimited liability to lengthy payment cycles and high commissions. 
  • Locked-in platform ecosystem which curtails choice for ancillary providers: E-commerce giants aiming to lock sellers into their ecosystem offer a limited suite of integrated fulfilment services (such as logistics and delivery), often on unreasonable terms.

Digital public infrastructure can democratise e-commerce for handicrafts

To address these concerns and make e-commerce more inclusive, the Indian government has built the Open Network for Digital Commerce (ONDC), a digital public good which adopts a network approach to online selling. The pioneering initiative offers a digital solution to address the problem of siloed marketplaces and seeks to ease the digital initiation for small sellers, such as artisans. In contrast to the siloed platform architecture, open standards and protocols are the core building blocks of the ONDC which operates on the principles of interoperability and decentralisation, thus making e-commerce more transparent, democratic, participatory and inclusive:

  • Cross-platform listing reduces seller costs and improves seller autonomy: With the ONDC, a seller needs to register only once through an online marketplace or a self-managed digital storefront to be discoverable to all buyers on the network. Artisans can thus save on registration fees and commissions. The sellers will no longer be dependent on online marketplaces for reach or discovery, hence will enjoy greater autonomy. 
  • Unbundling of the value chain gives a wider choice to sellers: The ONDC’s architecture delinks allied services (such as logistics and delivery) from the platform. Artisans can ‘purchase’ microservices such as warehousing, logistics and delivery from the service providers registered on ONDC. Thus, sellers can easily choose a viable and affordable combination from various providers to get better control over the value chain.

With easier integration into the e-commerce ecosystem enabled by the ONDC, artisans and craft cooperatives can aspire to bolster their earnings and tap into a wider customer base at a lower cost. 

Investing for social good: how funders have brought ONDC’s vision to fruition

Various Indian organisations have aided in making the dream of inclusive e-commerce into a reality, by providing funding and knowledge support to the ONDC. Catalytic institutional capital has backed the ONDC’s journey – from designing through deployment by supporting knowledge sharing and advocacy. Here are three key areas where such investments have played a pivotal role:

  • Conceptualisation and vision: Experts from non-profit entities such as the Quality Council of India, Retailers Association of India, and Digital India Foundation (backed by donors) led the Advisory Council and Steering Committees to examine the potential and impact of ONDC. They were instrumental in assisting the government to set up the Project Management Unit to take the concept of ONDC towards reality. The expertise lent by these leaders fuelled the initial tailwinds for this visionary idea. 
  • Co-developing the digital infrastructure: The ONDC’s technological architecture is built on the Beckn Protocol, which is supported by the Foundation for Interoperability in Digital Economy. Early investors such as NABARD, Protean and SIDBI funded the body of research and evidence by supporting hackathons to spur innovation. Such catalytic investments crowded in larger financial flows (from banks and other financial institutions) which supported the pilot testing and beta launches of the ONDC.
  • Creating pathways for adoption of ONDC: The ONDC, in association with network partners, is conducting outreach programmes to invite small and medium sellers for interactive sessions. These events are expected to drive adoption of ONDC and create awareness of the network’s benefits. 

The Indian government-backed initiative is demonstrating to the world how digital public goods can be designed and deployed to solve complex problems at the population scale, with the help of catalytic capital from donors, impact investors and other funders. The time is opportune for philanthropists to replicate such solutions elsewhere in the world by supporting knowledge sharing, advocacy and adoption of digital public goods which are aligned with national priorities. The Gates Foundation and Rockefeller Foundation who are supporting the Digital Public Goods Charter are leading by example in these efforts. Ramping up such initiatives can harness the power of digital technology for social development. 

Parul Gupta and Abhishek Modi work with the Sattva Knowledge Institute. Meenakshi Iyer also contributed to this article.


Footnotes

  1. ^ The Handloom Census (2019) collected formal income data on weavers but not on other craft forms. Survey data collected by the Digital Empowerment Foundation (2020) in 9 Indian states reports that nearly 80 per cent of weavers and 40 per cent of artisans live below the poverty line.

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