Need balance in e-retail debate
Anti-competition concerns are valid, but need to recognise gains for small businesses, buyers
Commerce minister Piyush Goyal’s critical comments on Wednesday on e-commerce (including the charge of predatory pricing and flouting foreign investment laws) underline the government’s unease with the growth model of many e-commerce giants. Their financial heft is undoubtedly worrying given its anti-competitive fallout, even for smaller organised retail players, leave alone so-called mom-and-pop or kirana stores. There have been piecemeal attempts to curb the anti-competitive effect of e-commerce giants, but the general perception is that a National E-Commerce Policy, in the works since the first draft released in 2019 proved too unwieldy to be actionable, may be the deliverance needed.
A report by the Boston Consulting Group and the Retailers Association of India released earlier this year shows that online commerce’s customer-addition growth has slowed from the Covid years, with lower discounts, a move towards premiumisation and, most importantly, shifting customer habits as offline regained lost favour. The e-commerce space will see sharp growth over the next few years, but this must be read against the healthy growth projected for the entire retail sector over the next decade. This would indicate that both online and offline players will have ample room to prosper — provided the playing field is level. That is where much of the problem lies, as Goyal explained on Thursday as he clarified his comments, even as he doubled down on them. For instance, there are significant anti-competition issues involving large e-commerce firms, from predatory pricing to platform neutrality. But while Goyal’s warning about e-commerce’s impact in terms of driving out kirana stores and causing “huge social disruption” is justified, it needs to be weighed against a clutch of considerations, as the minister admitted on Thursday. After all, ecommerce has expanded reach for millions of vendors, small manufacturers, and other small businesses, allowing them to access a far larger market than offline stores could ever promise. At the consumer end, there is much broader choice than before. And the space has also contributed significantly to employment generation over the last decade or so.
It’s important to recognise that the technology adopted by e-commerce firms allows for far greater streamlining of operations, and thereby cost savings. That said, this advantage is not likely to spell doom for the offline players, given kirana stores have survived organised retail’s innovations and advantages of scale. The debate on e-commerce needs to consider both perspectives. For starters, a well-considered policy will help.