E- commerce
Context:
The Commerce and Industry Minister Piyush Goyal emphasised that while the government supports online commerce for its benefits, it seeks fair competition to ensure small retailers can coexist.
- He clarified that there is no intention to halt online commerce but stressed that predatory pricing and unfair competition should not undermine small businesses. The current FDI policy allowing B2B online services is designed to protect small retailers.
About e-commerce:
- Market Size and Growth:The Indian e-commerce market is projected to grow significantly, with estimates suggesting it could reach $325 billion by 2030.
- Currently valued at around $70 billion, e-commerce accounts for approximately 7% of the total retail market in India.
- Advantages of E-commerce in India:
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- Wider Market Reach: Enables businesses, especially SMEs and rural enterprises, to access urban and international markets beyond geographical limits.
- Economic Boost: Drives job creation in sectors like logistics and IT, and increases tax revenues.
- Support for MSMEs: Provides MSMEs with access to financing, technology, and training, enhancing growth and competitiveness.
- Disadvantages of E-commerce in India:
- Security Risks: Increased online transactions heighten cybercrime risks, such as data breaches and fraud, impacting consumer trust.
- Customer Service Challenges: Online platforms struggle with issues like delayed deliveries and product returns, leading to customer dissatisfaction.
- Regulatory Challenges: Inadequate regulations create uncertainties around consumer protection, data privacy, and intellectual property.
- Impact on Traditional Retail: E-commerce growth threatens traditional stores, reducing foot traffic and potentially leading to local business closures.
Impact of E-commerce on Traditional Retail:
- Decline in Foot Traffic and Sales:
- Reduced Customer Visits: Online shopping has led to decreased foot traffic in physical stores, resulting in lower sales for traditional retailers.
- Increased Competition:
Predatory pricing Examples in e-commerce: Regulatory perspective:Antitrust laws- Many countries have laws against predatory pricing as a form of anti-competitive behaviour.
Intensified Market Competition: Traditional retailers face strong competition from e-commerce platforms offering a wider variety of products and competitive pricing.
- Price Sensitivity: Easy price comparison online increases consumer price sensitivity, pressuring traditional retailers to lower prices or offer discounts.
- Challenges in Supply Chain and Logistics:
- Supply Chain Adjustments: Retailers must adapt to the demand for efficient and timely delivery, which poses logistical challenges.
- Inventory Management: Managing inventory across both physical and online channels requires balancing stock levels to meet demand without excess inventory.
Government Approach to Managing E-commerce and Traditional Retail Competition:
- Regulatory Framework:
- Consumer Protection Act, 2019: Ensures fair trade practices and consumer rights in e-commerce.
- The proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 are designed to enhance consumer protection and promote fair competition in the e-commerce sector.
Important steps in Consumer Protection Rules
FDI Policies: Allows up to 100% FDI in the e-commerce marketplace model while protecting traditional retailers from unfair competition.
- Support for Traditional Retailers:
- Training and Skill Development: Programs to help traditional retailers, especially SMEs, acquire digital skills for online competition.
- Infrastructure Development:
- Digital Infrastructure: Projects like BharatNet improve internet access, enabling traditional retailers to engage in e-commerce.
- Logistics and Supply Chain Support: Policies to streamline logistics, benefiting both e-commerce and traditional retail.
- Encouraging Omnichannel Retailing:
- Omnichannel Strategies: Promotes integration of physical stores with online platforms, offering a unified shopping experience.
Several traditional retailers in India have effectively integrated e-commerce to expand their market reach:
India’s stance on e-commerce negotiations at the WTO emphasises:
- Clear Definition: Advocates for a clear distinction between digital goods and services, arguing that customs duties should apply to goods but not services to protect domestic industries and MSMEs.
- Customs Duties Moratorium: Opposes the continuation of the moratorium on customs duties for e-commerce, aiming to preserve policy space for digital growth and revenue generation.
- Plurilateral Negotiations: India refrains from joining plurilateral e-commerce talks, viewing them as a threat to the multilateral trading system and policy autonomy for developing countries.
- Domestic Regulation: Seeks to retain policy space for regulating e-commerce, focusing on competition, consumer protection, and data privacy while fostering a balanced domestic e-commerce industry.
- Multilateral Engagement: In multilateral forums like RCEP and BRICS, India aims to balance domestic interests with the potential of e-commerce for economic growth.