Regulate e-commerce with foolproof policy
INDIA’s online retail market has not expanded as rapidly as that of other countries despite the growing levels of Internet penetration. The share of e-commerce in the total retail market is a paltry 8 per cent compared to nearly 40 per cent in China, 22 per cent in the US and 16 per cent in the European Union (EU). It is in this backdrop that one must view the criticism of the widening role of e-retail by Commerce Minister Piyush Goyal at an event recently. Though he softened his stance subsequently, the initial comments indicated deep concern over the impact of online sales on brick-and-mortar shops, especially the country’s widespread network of kirana stores.
The stress on operating within the provisions of the law is unexceptionable.
He was also unhappy over the findings of a report presented there about the relatively low impact of e-commerce on offline stores. In contrast, he felt the economy could be heading for up to 50 per cent share of e-commerce in the retail segment. Other studies, however, corroborate the findings that online sales are a marginal player in the economy, at least for the time being. A study carried out by the Boston Consulting Group (BCG) and the Retailers Association of India (RAI) earlier this year noted that the share of e-commerce in the total retail market has grown from 4 per cent in 2018 to 8 per cent in 2023. It forecast that this would reach 13 to 15 per cent by 2028.
The potential, as is often pointed out, remains huge in this country but the e-commerce growth rate declined slightly last year. From 22 to 55 per cent rise over the period from 2019 to 2022, it fell to 10 per cent in 2023, according to the BCG-RAI study. Even so, it is clear that e-retail has not had the expected disastrous effect on traditional brick-and-mortar shops. No wonder there has been little comment on the issue either from the Swadeshi Jagran Manch or the Confederation of All India Traders in recent times, barring the latest statements of support for Goyal’s stance. Both the manch — an RSS affiliate — and the traders’ body were at one time vociferous lobbyists seeking protection for the country’s physical retail markets.
The fact is that kirana stores or the neighbourhood grocery vendors still have a pre-eminent place in the country’s retail arena. The study by the Pahle India Foundation that was contested by Goyal found that the advent of e-commerce has reinvigorated the growth of traditional retail. It noted that e-retail has spurred the move towards digital sales, increasing customer satisfaction, home delivery and after-sales service. Many stores are looking to expand their footprint. The study projects that e-commerce will touch 32 per cent of total retail sales by 2030, a far cry from the 50 per cent envisaged by the Commerce Minister.
Yet, he cannot be faulted for expressing concern over predatory pricing and B2C (business to consumer) sales by online platforms in violation of existing guidelines. The former issue has been raised earlier as well in regard to deep discounts offered on marketing platforms like Amazon and Flipkart. The question of predatory pricing has gone up to the Competition Commission but could not be resolved since companies must have a dominant position in the market to be considered in this light.
As for B2C sales, this is prohibited for online marketplaces which are meant to be platforms for sale of products made by other companies. The unfortunate reality is that online entities had created their own subsidiaries and were selling in violation of guidelines. Though such firms have apparently now been delinked from the online platforms, there is still concern that their products are being given undue prominence on the sites.
The entire gamut of these issues needs to be clarified in the proposed new e-commerce policy, which has been in the works for several years now. The proposals are being debated by at least three ministries as well as the Niti Aayog. The Department of Industrial Promotion, the Consumer Affairs Ministry and the Ministries of Electronics and Information Technology are all involved in the process. The discussions have gone on for far too long. A final view must be taken soon, especially since the World Trade Organisation (WTO) is also holding talks on global e-commerce.
One of the critical aspects being discussed at the WTO as well at the domestic policy level is the issue of data protection and privacy. This country has been seeking that the algorithms behind e-commerce websites be made available to it. This has been raised at the WTO too where India has sought data localisation and technology transfer.
Other countries have moved much more quickly to take a view on the issues of market dominance and data protection. The EU has been the leader in this regard. It adopted the Digital Markets Act last year to curb the market dominance of Big Tech with violations punishable with fines up to 10 per cent of a company’s global sales. It also laid down the General Data Protection Regulation in 2018. Companies must now ask for consent when they collect personal information and may no longer use data from several sources to profile people against their will.
It is for the government to focus on ways to make e-commerce companies more accountable to consumers as this is a sector that is going to expand rapidly. Fears over the impact on the enormous physical retail network of this country — valued at roughly $850 billion — need to be finally kept aside. There is no reason that both the brick-and-mortar infrastructure and e-retail cannot grow together in this extremely large marketplace. It is reassuring to know that Goyal has also commented on the beneficial aspects of e-commerce in terms of improving technology and innovation as well as providing quick delivery and convenience to consumers. The stress on operating within the provisions of the law is unexceptionable. The onus is on the government to provide detailed rules and guidelines for this sunrise sector in the form of a comprehensive e-commerce policy.
