These small retailers are also significant employers, providing jobs to millions across the country. It is estimated that small retail shops employ around 40 million people, contributing substantially to local economies and community welfare. Their role in creating jobs, particularly in rural and semi-urban areas, underscores the importance of protecting this segment from the disruptive forces of large e-commerce players.
Piyush Goyal has recently stressed the need to protect these small retailers from the potentially disruptive effects of e-commerce. While online platforms offer consumers convenience and lower prices, they also pose a significant threat to traditional brick-and-mortar stores. The rise of e-commerce in developed countries, has led to the decline of traditional small businesses, and similar trends could emerge if the sector is not carefully regulated.
To ensure the survival and growth of micro and small retailers in India, a multi-faceted approach is needed, combining financial support, technological integration, and regulatory oversight.
Despite being crucial to the economy, a significant portion of these retailers remains underserved by mainstream financial institutions. With the right financial products and services, there is an enormous potential to not only bridge this gap but also to support the growth and modernization of this sector. Banks should work closely with NBFCs to develop lending products tailored for small retailers, such as short-term working capital loans and cash flow-based lending. By providing credit based on alternative data, such as digital transaction histories, banks and NBFCs can better serve retailers who may lack conventional credit records.
Government-backed credit guarantee schemes can encourage more lending to this sector. A significant portion of these small retailers operates on thin margins, with limited financial reserves. NBFCs, with their deep understanding of local markets and customer needs, are better positioned to identify and serve these customers. QR code-based lending, in partnership with payment aggregators, offers a modern solution for identifying and assessing the creditworthiness of small retailers.By analysing digital transactions in real-time, lenders can provide more accurate credit assessments and offer tailored financial products to retailers who may not have traditional credit histories. This innovative approach can significantly enhance the financial inclusion of small retailers. This aspect was referred to, by Nirmala Sitharaman in her budget speech.Small retailers must be equipped with the digital tools and skills necessary to compete in the modern marketplace. Initiatives like the ONDC provide digital literacy training and subsidized access to e-commerce platforms, digital payment systems, and online marketing tools. This will enable small retailers to expand their reach and compete more effectively with larger online platforms.
Tech startups can help small retailers pool resources, negotiate better terms with suppliers, and collectively market their products. These networks can also provide access to shared technology and infrastructure, helping small businesses achieve economies of scale and improve their operational efficiency.
To protect small retailers from the overwhelming competition posed by e-commerce giants, it is essential to implement and enforce policies that ensure fair competition. This includes regulating predatory pricing practices and ensuring that small retailers have equal access to online marketplaces. Additionally, promoting local products and brands through government campaigns can encourage consumers to support neighbourhood stores.
A strong regulatory framework is necessary to prevent large corporations from engaging in practices that could harm small retailers. This includes strict enforcement of anti-predatory pricing laws and ensuring transparency in the operations of e-commerce platforms. Moreover, policies that limit the market power of large corporations and provide incentives for small retailers to modernize will help create a more balanced retail ecosystem.
While the benefits of ecommerce, including convenience and access to a wider range of products, are clear, the long-term impact on India’s small retailers and the broader economy must be carefully considered. Protecting these retailers requires a balanced approach that includes regulatory oversight, financial support, and efforts to modernize and integrate them into the digital economy. The forthcoming national ecommerce policy, if implemented with these concerns in mind, could play a pivotal role in shaping the future of India’s retail landscape.