Over a decade since, Piyush Goyal has, yet again, highlighted his government’s concerns over the growth of ecommerce in India – that there will be social disruption, there is predatory pricing in ecommerce, and the number of mobile stores in the country has declined over the past 10 years. He is concerned – and rightly so – about the fate of millions of small retailers and kirana stores in the country.
The point that I made to Kant in 2014 still stands: ecommerce offers consumers a much wider variety of products, whether coloured socks, numbered swimming goggles or air-purifiers. It benefits both sellers and buyers. Customers in Tier-2 and -3 towns access a wider variety of products online, without relying on someone to go to a metro to purchase it. Sellers find buyers across the country.
Without ecommerce, you won’t be able to buy Solapuri Shengdana Chutney in Lucknow, and someone in Solapur won’t be able to buy a Lucknowi Chikankari kurti. eCommerce has also spawned an entire industry of D2C online-only brands that, in many cases, ‘make in India’, and have spawned a supporting infrastructure of storage, packaging, delivery and online advertising, and, hence, substantial employment.
Goyal should back his conjecture regarding employment with data. On his comments about cloud kitchens as a threat for restaurants, let’s not forget that food delivery services like Zomato and Swiggy actually allow many restaurants more than what their seating capacity allows. It’s not like people aren’t going to restaurants any more.
Goyal’s right that we don’t see many physical mobile stores in India as we did 10 years ago. But consider this: we didn’t have as many mobile stores 20 years ago either. Retailers evolve their product range to meet customer needs. Just as they added mobile phones to their shelves 10 years ago, they need to adapt and find other products and services.Many kirana stores actually offer greater discounts today than ecommerce stores do. It’s just that on ecommerce, products are often shown as overpriced, and then discounted. Some Indian retailers have addressed this anomaly by allowing customers in-store to check prices online, and price-match. This is actually great for customers.We do need to be careful about a few things:
- Ensure that there is never a market monopoly in ecommerce.
- Make sure that ecommerce companies don’t profiteer at the cost of sellers and customers.
- Concerns in ecommerce about the sale of fake or spurious products from sellers need to be addressed.
- There needs to be transparency in pricing and commissions, and we need to address fake-discounting. However, offline retailers also frequently sell products below cost to clear unsold inventory.
- Predatory pricing should be addressed, although this is tricky since companies portray discounts as marketing expenditure in their financial statements.
There were concerns regarding lack of competition in ecommerce, until a few months ago. The apparent duopoly of Flipkart and Amazon now faces competition from two Indian quick-commerce companies in Blinkit and Zepto, which are swiftly expanding their catalogue to target the high-volume and high-margin urban ecommerce segment.
There is a draft ecommerce policy that has been revised several times over the years, and there were murmurs that it might be released soon, following Goyal’s statement. Perhaps given how much ecommerce in India has evolved over the past year alone, it’s time to start again from scratch. Any ecommerce policy should be for the benefit of consumers, and not for creating a regressive environment for businesses, foreign or Indian.
Additionally, India needs to address an archaic restriction that prevents foreign ecommerce companies from selling products from third-party brands as retailers, though they may operate as an online mall, rather than a store. They’ve found legal loopholes around this, and it’s time we ended this facade by either clamping down on such practices or by allowing FDI in multi-brand retail to enable further investment in the Indian retail market, especially in terms of setting up offline stores.
Goyal is right that these companies haven’t invested billions of dollars in India for philanthropy. However, they’ve invested because they intend to stay in the market, and aren’t fly-by-night operators. That investment has generated skilled employment and built infrastructure.
A regressive policy environment will only harm India’s economy. Earlier this week, Walmart sold its entire stake in China’s JD.com and exited the country. That reflects poorly on China as an investment destination for technology.