India’s Forum of Internet Retailers, Sellers and Merchants (FIRST) says its members have “benefited immensely” from e-commerce.
Union Minister of Commerce and Industry Piyush Goyal’s recent comments on big e-commerce players have reignited the debate over their impact on smaller brick-and-mortar retailers.
On Wednesday, Goyal said the rapid growth of e-commerce in India is a “cause for concern” and is eating into the market share of small mom-and-pop stores by offering high-margin products, such as consumer electronics and apparel, at discounted prices.
His comments have polarised opinions among retailers. Small retailers have largely supported Goyal’s remarks, while industry bodies maintain that e-commerce has actually benefited smaller retailers.
India’s Forum of Internet Retailers, Sellers and Merchants (FIRST) says its members have “benefited immensely” from e-commerce.
“Small and medium-sized businesses can reach out to a national and international customer base by leveraging e-commerce platforms, without the need to invest in distribution channels. Without Amazon, Flipkart, Zomato or Swiggy, many of our members would have struggled to do business, let alone grow it,” said Vinod Kumar, President, FIRST.
A report by the Pahle India Foundation, where the minister was speaking, noted that e-commerce currently represents a small fraction of the overall retail market, accounting for just 7.8 per cent of total retail sales in 2022. The sector is growing at a compound annual growth rate of 27 per cent between 2018 and 2030.
Narendra Kumar Gupta, owner of Kirti Collection, a clothing store in New Delhi’s Laxmi Nagar market, reported a drop of nearly 30-35 per cent in sales in the last four years.
“We have seen that consumers are increasingly turning to online retailers, which is negatively impacting our sales,” he said.
The trade minister also suggested that large retailers have an advantage when competing with e-commerce.
“How many mobile phone stores do you see on the corner now? And how many were there 10 years ago? Where are those mobile phone stores? Will only Apple or the big retailers sell mobile phones and their accessories?” Goyal asked.
For consumer electronics retailer Lotus Electronics, while e-commerce websites have impacted sales of smartphones and laptops, the effect on sales of home appliances has been relatively minor.
According to Gaurav Pahwa, director of Lotus Electronics, e-commerce sites have captured 45 to 50 percent of the smartphone market and more than 25 percent of the laptop market.
“However, for high-value items such as refrigerators, washing machines and televisions, their market share is still less than 15% and 25% respectively. Consumers prefer to try these products before buying them, and we can now match the discounts offered by these websites,” he said.
Queries sent to Amazon and Flipkart did not receive an immediate response. However, sources at a leading e-commerce company said the minister’s comments were unexpected.
“The minister’s comments are unexpected and completely contrary to what we are hearing from our small sellers,” said a source at a large e-commerce company.
For example, last June, Amazon CEO Andy Jassy announced that the company would invest $26 billion in India by 2030. The firm also plans to digitize 10 million small businesses, enable $20 billion worth of exports, and create 2 million jobs in the country by 2025.
To date, Amazon has digitized more than 6.2 million micro, small and medium-sized businesses, facilitated nearly $8 billion in exports and created more than 1.3 million jobs in India, according to the company’s website.
Meanwhile, industry bodies like the Confederation of All India Traders (CAIT) argue that foreign companies like Amazon, through their investments, are seeking to capture the Indian market by creating unhealthy competition.
“Foreign investments need to be carefully scrutinized to ensure that they contribute positively to the local economy and do not merely sustain operations that are not yet profitable. Global companies like Amazon often invest heavily to establish a strong market presence through predatory pricing, loss financing and inventory holdings, which violates the government’s foreign direct investment policy,” said Praveen Khandelwal, Secretary General, CAIT.
This debate also coincides with the rapid growth of the fast-growing e-commerce sector, which is accused of driving customers away from kirana stores. Fast-growing e-commerce, a subset of e-commerce focused on delivering goods within 10 minutes, is seen by some as a threat to traditional retailers.
Executives at major fast-track commerce platforms, including Zomato-owned Blinkit CEO Albinder Dhindsa, Swiggy CEO Shriharsha Majety and Zepto CEO Aadit Palicha, have denied that they are taking market share away from mom-and-pop stores.
“We know that we are not taking share from kiranas or large value-focused retailers like DMart. This was also mentioned in their recent conference call. Value-focused items available in these formats are difficult to replicate in our business,” Dhindsa said in a recent letter to shareholders.
However, some investors believe that fast-trading companies have little incentive to admit otherwise.
“Fast-trade companies will likely face regulatory backlash if they admit that they are growing at the expense of kirana stores. These small sellers constitute a big vote bank for the government. Admitting that we are taking market share away from small sellers could backfire on them,” said an e-commerce investor.
First published: August 21, 2024 | 22:06 IS
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