Commerce and Industry Minister Piyush Goyal on Wednesday (August 21, 2024) raised pointed questions about the business and pricing strategies of major e-commerce players like Amazon in India, and dismissed a report that concluded e-tailers’ growth did not pose a significant risk to employment opportunities in the county.
Although he acknowledged that e-commerce is here to stay, the Minister stressed that the sector’s growth must be ‘orderly’ and ‘citizen-centric’, and its role must be cautiously mulled over. “…Are predatory pricing policies good for the country?... I don’t see it as a matter of pride that half our market could be driven by e-commerce 10 years from now. It’s a matter of concern,” he said
“Are we going to cause huge social disruption with this massive growth of e-commerce?” he asked, referring to the detrimental effects of online retailers eating into the business prospects of 100 million small retailers across the country. In particular, he said e-tailers are clocking phenomenal growth in sales of items that provide higher margins, and are essential for small stores’ survival.
Speaking at the launch of a report on the “Net Impact of E-Commerce on Employment and Consumer Welfare in India”, issued jointly by EY India and Pahle India Foundation, Mr. Goyal completely disassociated himself from its findings. The report’s conclusions seemed to be driven by the “urge to show” that e-commerce hasn’t had an impact on employment, the Minister said, and repeated Mark Twain’s famous quip about there being three kinds of untruths — “lies, damned lies and statistics”.
Citing the experience of Europe and America, Mr. Goyal noted the advent of e-commerce had endangered the corner shops and Mom and Pop stores there. “Why did Switzerland not allow e-commerce to come in, until very recently, and even now, I think it’s very limited?” he pointed out.
Beyond traditional e-commerce, the Minister also flagged concerns about the impact of cloud kitchens and online food delivery apps on restaurants, the effect of online medicine sales on the five lakh pharmacies, and the emergence of large mobile phone stores by players like Apple and large retailers hitting smaller neighbourhood phone shops.
“There are large sections out there who still deserve our affirmative action, who still need help. Every child in this country has not got the privilege to come to such sessions or interactions. Therefore, even when it comes to jobs, when it comes to opportunities for the future of India, I think all of us will have to play our part,” he remarked.
While technology is a means to innovate and meet consumer requirements with a tad more efficiency, Mr. Goyal said: “We will have to see that this connectivity and convenience is citizen centric, so it democratises or socialises the benefits to larger sections of society, it ensures that in the race for market share with a 27% annual growth, we don’t land up causing huge disruption for the 100 million small retailers across the country who also serve.”
Amazon worries
“When Amazon says we are going to invest a billion dollars in India, and we all celebrate, we forget the underlying story that that billion dollars is not coming in for any great service or any great investment to support the Indian economy, they made a billion dollar loss in their balance sheet… If you make ₹6,000 crore in losses in one year, doesn’t that smell of predatory pricing to any of you?” the minister asked.
Noting that the company apparently spent $1 billion paying professionals in India, the Minister mused that the firm may have spent the money to retain the country’s top lawyers “so there’s nobody left to fight” against them.
“What is that loss? As an e-commerce platform, they are not allowed to do B2C [business to consumer] transactions,” Mr. Goyal said, apparently referring to Press Note 3 of 2016, a regulation that prohibits e-commerce firms holding their own inventory of goods, from receiving foreign direct investment.
“They create entities where Indians contribute to the creation of those entities, then they get caught and shut down those entities. But they only re-route all the business through an entity to show that it’s business to business. But the reality is all of you buy on these platforms. But B2C is not allowed on these platforms. How are they doing this? Should this not be a matter of concern for all of us?” the minister underlined.
While e-commerce firms have rapidly grown, the government has expressed wariness on their power, and potential to do harm to small retailers — a significant bloc of voters. This led to, for instance, an icy reception to then Amazon CEO Jeff Bezos in 2020, when Mr. Goyal made some similar remarks ahead of the executive’s visit to India — he questioned the value of the firm’s $1 billion investment in India, when it had just posted losses amounting to that number.
Since December 2021, the government has pushed the Open Network for Digital Commerce, an initiative to combat the vertical integration of platforms by unbundling various parts of e-commerce to discrete roles like logistics, discovery and sellers.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
