Concerns Over the Rapid Growth of E-commerce in India
India’s commerce minister, Piyush Goyal, recently expressed his apprehensions about the rapid growth of e-commerce in the country. While speaking at the launch of a report on the impact of e-commerce on employment and consumer welfare, Goyal highlighted the potential disruption it could cause to small retailers. He emphasized that the projected dominance of online marketplaces in the coming decade is a matter of concern rather than praise.
The e-commerce market in India has been growing at an astonishing rate, doubling in size every four years. However, Goyal raised important questions about the consequences of such growth. He pondered whether it would lead to massive social disruption and expressed his worry about half the market becoming part of the e-commerce network within the next ten years.
India’s retail market, valued at $1.1 trillion, saw e-commerce sales of less than $80 billion last year, indicating the significant room for growth in the sector. HSBC estimates that the e-commerce market in India is growing at a rate of 11% to 12% annually. Moreover, the emergence of quick commerce startups, promising deliveries in 10 minutes or less, is further propelling the sector’s expansion. TechCrunch analysis predicts that BlinkIt, Swiggy Instamart, and Zepto could collectively achieve over $4.5 billion in sales this year, experiencing a year-on-year growth rate exceeding 100%.
Goyal expressed concern that e-commerce firms are targeting high-margin products that are traditionally sold by brick-and-mortar stores, which poses a threat to the survival of small retailers. He highlighted the decline in mobile stores at street corners, questioning the impact of e-commerce on traditional retail. Goyal also criticized the pricing strategies of major e-commerce firms and raised doubts about whether their reported losses indicated predatory pricing.
Referring to Amazon’s major investment in India, Goyal pointed out that people tend to celebrate the financial infusion without considering the underlying story. He highlighted that the billion-dollar investment is not necessarily coming to support the Indian economy or provide great services. Instead, he drew attention to the fact that Amazon had reported significant losses, questioning the sustainability and fairness of their business practices. Goyal raised concerns about the legality of e-commerce platforms engaging in business-to-consumer (B2C) transactions, given that they are meant to operate solely as marketplaces.
Indian law requires e-commerce players like Amazon and Flipkart to function as pure marketplaces and prohibits them from owning the inventory they sell. Goyal noted that these companies have learned this lesson the hard way. This criticism is not the first from Goyal, as he previously expressed his reservations about Amazon’s $1 billion investment in India, stating that it wasn’t a great favor to the country.
While Goyal acknowledged the role of e-commerce, he emphasized the need for cautious consideration of its impact. The concerns raised by Goyal shed light on the potential challenges and consequences of the rapid growth of e-commerce in India, particularly for small retailers. It highlights the necessity for a balanced approach that takes into account the interests of all stakeholders involved.
