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Business Models for E-Commerce

By Mohanbir Sawhney

October 15, 2002 — CIO — We naturally assume that industrial enterprises are the most fertile grounds for e-business implementation. And we assume that conducting e-business requires communications infrastructure and a minimum level of computer literacy. On a recent trip to India, I discovered how wrong those assumptions are. A quiet digital revolution is reshaping the lives of farmers in remote Indian villages.

In these villages, farmers grow soybeans, wheat and coffee in small plots of land, as they have for thousands of years. A typical village has no reliable electricity and antiquated telephone lines. The farmers are largely illiterate and have never seen a computer. But farmers in these villages are conducting e-business through an initiative called e-choupal, created by ITC, one of India’s largest consumer product and agribusiness companies.

Think of an e-choupal as an Internet kiosk, village gathering place and e-commerce hub all rolled into one. In fact, the word choupal means "village gathering place" in Hindi. The e-choupals are run by an operator called the sanchalak, who is himself a farmer recruited by ITC to be the interface between the computer terminal and the farmers.

Low Tech, High Impact

Setting up and managing these e-choupals required ITC to think out of the box. It designed a hardware solution that includes a desktop computer with power backup through batteries charged with solar panels. ITC also convinced 175 local telephone exchanges to upgrade their equipment to support data transmissions, initially at ITC’s expense. To overcome limited bandwidth, they cached static content locally so that only dynamic content needed to be streamed. And to overcome illiteracy, ITC made the transactional capabilities of the site available to farmers through the registered sanchalaks.

The results to date are impressive. Within two years of its launch in June 2000, e-choupal services reach 600,000 farmers in 6,000 villages through 1,000 kiosks. ITC, which exports $140 million worth of agricultural commodities, sourced $15 million worth of soybeans from e-choupals in the past year. By purchasing directly from farmers, ITC can source better quality produce that commands high prices in the international market. By avoiding intermediaries for conducting the transactions, ITC saves $5 per ton on soybean procurement. The sanchalaks get a commission for every transaction they process, which translates into healthy earnings for them.

The farmers gain from better prices and lower transaction costs. Traditionally, farmers had to wait as long as two days to dispose of their produce at local auctions. They also had to pay for bagging, loading and unloading their produce in the local market. In the e-choupal system, farmers take only a sample of their produce to a local kiosk and receive a spot quote from the sanchalak. If the farmers accept the quote, they can drive their produce directly to ITC’s collection centers and get paid within a couple of hours. The average farmer saves between $8 and $10 per ton of soybeans. Farmers also benefit from improved information and price discovery. With help from their sanchalak, they can access real-time information on crop prices, weather and scientific farming practices online.

 

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