E-commerce Industry in boiling waters?

A few days ago I wrote on retail industry and how well it is penetrating in Indian market. The introduction of E-commerce prompted increase in MSMEs and spike in recognition of unorganised retail sellers. India switching to digitisation period had changed the scenario for consumers as well as producers over the years. But with the given economic slowdown, the sustainable relationship has turned out to a stiff completion between E-commerce giants and MSME retailers. 

Jeff Bezos, CEO of Amazon recently visited India and predicted 21st century to be “The Indian Century”. He announced an investment of $1 Billion which will be geared towards ‘digitising small and medium businesses’. Further he claimed that Amazon aims to export $10 Billion worth of Indian goods. However, his claims were met with protests from thousands of small business owners in around 300 Indian cities, alleging ‘Amazon has used its enormous size to undercut small businesses on the price side’. In response to Bezos statement, Piyush Goyal, Minister of Commerce and Industry, Government of India said that, “They may have put in billion dollars, but then if they make a loss of a billion dollars every year, then they jolly well have to finance that billion dollars.  So it’s not as if they are doing a great favour to India when they invest a billion dollars.” 

A national agitation led by Confederation of All India Traders (CAIT) against unfair practices of e-commerce companies claims, E-commerce giants (Amazon, Flipkart) to be the new East India Company. Rajeev Khandelwal, Secretary General of CAIT refuses to see the investment by Amazon as investment and said, “It is a promotional finance to encourage Amazon India to expand their share in retail trade. As far employment is concerned seven crore traders provide employment to 45 crore people. So if these companies are allowed to go on like this, then they will kill that employment generating space to a large extent.”

It is believed that, Mr. Bezos is trying to create an inclusive model in India and there is no intention to affect small traders and enterprises. According to Mr. Khandelwal, one lakh shops have closed down as of 2019 due to uneven competition with E-commerce giants and the government is trying to create a false narrative that online retailers are encouraging small retailers. The massive discounts offered needs to be checked since, it has affected the small retailers adversely over the years. Many have pointed out that with the investment from Amazon, the retail market will be transformed to organised market (90% is unorganised at present) which will help the dwindling economy. 

The fact that with annual growth rate of 51%, the sector has revolutionised the retail industry and according to India Brand Equity foundation (IBEF), the Indian e-commerce market is expected to grow to $200 billion by 2026 from $38.5 billion in 2017. The booming smart technology and internet penetration is responsible for such spike in the industry. As of now, Government welcomes all kinds of investment in manufacturing sector, until it proves beneficial for economy as well as job creation.

Shalini Singh

PGDM 2019-2021