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Improving Rural Livelihoods through E-Commerce: The GoCoop Experience

August 10, 2017 • Emerging Ideas, Entrepreneurship, Social Impact

By Siva Devireddy, G. Sabarinathan, S. Ramakrishna Velamuri and Janine Coughlin

In India’s rural areas live handloom weavers and artisans who have been doing their craft for generations. In this article, the authors elaborate how the company GoCoop has strived to weave together fragmented systems and accessibility challenges in order to help the artisans bring their craft to urban markets and abroad. The article is both a learning experience and an inspiring story that every entrepreneur must read.

 

Ever since C. K. Prahalad published the path-breaking book “The Fortune at the Bottom of the Pyramid”,1 the role of commerce in improving the livelihoods of the poor has been receiving increasing attention. Later work has underscored that the poor have to become producers first in order to generate the higher incomes that can then turn them into consumers.2 Siva Devireddy set out to do precisely that, by leveraging technology to connect weavers and artisans in rural areas to urban markets in India and abroad. 

The Entrepreneur: Devireddy completed his Masters degree in Industrial Engineering and Management Systems from Arizona State University, and acquired 11 years of corporate experience in Silicon Valley startups such as Exemplary Inc. (a spinoff of Hewlett Packard) and multinational enterprises such as Accenture. One of the projects he worked on in the Bay Area was to create a B2B marketplace for semiconductors to connect suppliers in Taiwan and China directly to buyers in North America.

The Company: GoCoop (www.gocoop.com) is India’s first online and mobile-based two-sided platform that connects the highly fragmented rural handloom weavers and artisans, who typically function within cooperatives, to urban markets in India and abroad. GoCoop’s mission is to enable sustainable livelihoods for the rural artisans and at the same time ensure the supply of high-quality, authentic handlooms and handicrafts to customers. Soon after founding the company, Siva found that using tested technologies and business principles with far flung rural artisans was far more difficult than he had anticipated. The industrial engineer-turned-consultant-turned-entrepreneur struggled with the typical survival issues faced by a startup while also worrying whether his decisions would truly benefit the artisans he was trying to help; more often than not the two were at cross-purposes.

The production of handloom textiles in India is almost entirely done by individual self-employed weavers, most of whom have been practicing this as an artisanal craft for many generations.

The company has developed a reliable and well-diversified supplier base in India’s handloom textile sector, and today has relationships with 4,500 cooperatives, 80,000 artisans and 11,000 registered buyers. It also assures full traceability of the product’s origins to ensure authenticity.

Its business model evolved through two rounds of funding: angel funding of US$ 270,000 in 2013, and a Series A round of about US$ 1.5 million in 2015. GoCoop caters to both domestic and foreign individual customers (B2C) as well as wholesale customers (B2B). It is the most successful such initiative in India, and recently received the first Government of India national e-commerce award. It is also one of the first e-commerce platforms to sign a Memorandum of Understanding with India’s Ministry of Textiles.

The Product & Business Environment: The production of handloom textiles in India is almost entirely done by individual self-employed weavers, most of whom have been practicing this as an artisanal craft for many generations. Its origins go back almost 6,000 years, and both the production and marketing of handlooms have remained largely untouched by modern technology and management systems.

According to the 2015-16 Annual Report of the Government of India’s Ministry of Textiles, the handloom sector is one of the country’s largest employers, with around 4.3 million weavers and labourers. Handloom textiles worth US$ 360 million were exported in 2015-16 (representing less than 1% of India’s textile exports) and the sector produced 7,203 million square meters of cloth in 2014-15, which was around 15% of India’s total cloth production.

The artisans generally have low levels of formal education, have very low exposure to technology, are unaware of market demands and lack access to capital and infrastructure. Artisans have exceptional skills to weave the cloth. However, their product has standardisation issues, since no two handmade products could ever be the same. The model of the entrepreneurial weaver worked well as long as production and consumption were located within the same limited geographical area such as a village or cluster of adjoining villages. However, over time, the local markets have been replaced by new and remote markets within India as well as outside, and therefore the distance between production and consumption of the handlooms has grown. This has led to the need for aggregation of demand and supply, and thus for intermediaries between producer and consumer.

A collateral consequence of the entry of intermediaries is that the connection between the producer and the consumer has been lost. This connection is essential to the consumption of artisanal products. This is an important challenge for marketers such as GoCoop as they try to “build value for the human element” in the product, in contrast to the marketing of a mass (machine) manufactured product. One of the key considerations influencing the continued engagement of weavers in the handloom sector is the prospect of earning an adequate and predictable income. The history of handloom in the past century is replete with many weaving traditions falling off the map because the weavers were unable to achieve even minimal economic security.

This is an important challenge for marketers such as GoCoop as they try to “build value for the human element” in the product, in contrast to the marketing of a mass (machine) manufactured product.

In the production of handlooms farmers, dyers, printers and weavers are all connected to each other through social and economic networks which, as one observer points out, “grow with the firm and not within it”. This makes the production distinct from that in a vertically integrated firm.

Master weavers have a group of weavers working under them. They are responsible for procuring yarn, providing the design, marketing the finished product as well as occasionally providing some amount of working capital. As an interface to the market they also provide design inputs for the fabric, at the same time leaving some room for the weaver to exercise his or her creativity and bring out the essence of the craft. Many critics view the master weavers as agents who exploit their informational advantage over the weaver and in many instances it is said they indulge in rent seeking behaviour. Many of these middlemen make significantly more profits from the handlooms than the artisans themselves.

Cooperatives emerged in the 1930s and 1940s, mostly through government initiatives. Unlike master weavers, cooperatives have been able to access formal, institutional sources of credit such as the banking system. Credit financing has been an important requirement for the success of cooperatives. Cooperatives function within a bureaucratic system, with their employees receiving fixed compensation. Thus procurement of yarn, distribution of yarn to weaver cooperatives and payments to the weavers are all highly centralised. The functioning of many of the cooperatives has also been highly politicised with all its attendant negative consequences. One observer notes that “(A)ll successful cooperatives have worked well because they have circumvented government regulations to the extent possible and have managed to market their own output taking advantage of the latest marketing trends”. 

Beginning in the 1970s a few small-scale private initiatives emerged, but without a well-developed capital market they were unable to make a significant impact on the sector. For-profit, not-for-profit (NFP), non-governmental organisations (NGOs) and government agencies have played important roles in the handlooms and handicrafts industries. FabIndia, Mother Earth and Goodearth are among the larger and better established players in the private sector. There are a whole host of other smaller private players as well as several NFPs and NGOs in the industry.



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About the Authors

Siva Devireddy is the Founder & CEO of GoCoop.com. He is passionate about technology innovations that contribute to the social and economic inclusion of people at the bottom of the pyramid. He has a Masters degree in Industrial and Management Systems Engineering.

G.Sabarinathan, PhD is Associate Professor, Finance and Accounting Area, at Indian Institute of Management Bangalore (IIMB). Prior to joining IIMB he held leadership positions in the Indian venture capital industry. Apart from teaching courses in finance he is interested understanding the working of venture capital industries across the world.

Ramakrishna Velamuri is Professor of Entrepreneurship at the China Europe International Business School (CEIBS). He has a research interest in Business Models, and of late has been studying how business models innovations can achieve both social equity and economic efficiency.

Janine Coughlin is Senior Media Officer at China Europe International Business School (CEIBS). Prior to joining CEIBS she was the Executive Editor of China International Business Magazine. Before coming to China she was Senior Vice President, Content at Alliance Atlantis and Associate Publisher, Mass Market at St. Martin’s Press in New York.

References

1. Prahalad, C. K. (2006). The Fortune at the Bottom of the Pyramid. Pearson Education India.

2. Karnani, A. (2007). The mirage of marketing to the bottom of the pyramid: How the private sector can help alleviate poverty. California Management Review, 49(4), 90-111.

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