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Address real e-tail issues PDF Print E-mail
Tuesday, 26 February 2019 04:12
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Shobhana edit

One would have expected the draft e-commerce policy paper to have dwelt more on e-retailing per se, especially since the rules and regulations pertaining to the use and storage of data are pretty much taken care of with the government working on a data protection bill. There is little dispute that individual consumers own their data and have privacy rights and that corporations must store data locally in India. We are also agreed that cross-border data flow must be regulated. Reiterating this ad nauseam doesn’t really add value to the debate. Instead, the government needs to focus on the e-retailing piece; by its own estimate, the B2C segment is tipped to grow to around $200 billion by 2026 while B2B e-commerce is estimated at around $300 billion. As we have seen, in the absence of any momentum on Make-in-India, e-commerce is the sector that is throwing up thousands of job opportunities at all levels, from techies to delivery boys.

The government has chosen to crack down on e-retailers funded by FDI; in its December 26, 2018 policy, it barred exclusive tie-ups between marketplace e-commerce firms and vendors using their platform. If a vendor—WS Retail or Cloudtail Solutions, for instance—sells more than 25% of its merchandise through an e-commerce marketplace, it would be deemed to have an inventory model in which FDI is prohibited. The 25% cap is not new but the responsibility of adhering to this norm now rests entirely with the platform. The objective, ostensibly, is to prevent e-commerce firms from influencing the prices of products. Coming as it does, ahead of the general elections, the changes appear to be aimed at placating and protecting local retailers, large and small. But if the government wants to protect very small retailers, like kiranas, it should not be allowing large organised local brick-and-mortar retail players either. And what sense, by this logic of protecting small players, does it make to allow FDI in the food sector, even if the e-tailer if pursuing an inventory model?

So, making it harder for companies like a Flipkart—funded by PEs—will not necessarily help smaller retailers but will certainly help the bigger Indian players. Some of these big local retailers have investments by Foreign Portfolio Investors (FPI). The fact is that, all this while, the government looked the other way when e-retailers like Flipkart were attracting FDI through parent companies based out of Singapore, even though it was not strictly kosher. Again, wanting to regulate advertising charges on search engines and social media platforms is regressive. Pricing should be market-determined as it is for print media in India where new firms and small enterprises find it harder to reach out to large numbers of consumers. Sadly, in election season, populism seems to be driving policymaking, not sound economic logic.

 

 

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