Side effect of e-retail boom: Risk for the traditional market?

A surge of promotions by e-retailers brought out the brick and mortal merchants in full force. They are demanding that the government should do something to make sure that the deep discounts from e-commerce companies are not life-threatening to the old retailers. There is a concern that some of the discounts from deep-pocketed web sites are ‘below cost’ sales, which are anti-competitive.

(a) Direct intervention by government would be wrong. There is a Competition Commission of India, which is the appropriate body to look into unfair trade practices, and it should be left to the CCI to deal with this issue. Indeed, the CCI should take cognizance of it on its own, and not wait for complaints to be brought before it. That will also help preserve its regulatory independence, and not cede that space back to ministries of the government.

(b) Consumers too should be heard, in this dispute. There needs to be some understanding of the economics of warehouse-driven online distribution, and comparisons between it and physical sales in stores. If the former is cheaper, there is no reason why it should be blocked. Consumer interest in lower prices for goods is an important aspect of market regulation. Unfortunately, India has historically ignored this side of things, which is why our consumer courts don’t have a good record.

(c) There is still much to be done in making online purchases more secure, and more uniform in the way merchants operate. Glitches in online deals require very different response mechanisms than similar issues in stores. Merchants are not able to bypass the ‘PIN’ requirements of the new credit and debit cards mandated by RBI. The Reserve Bank cannot make rules in the name of benefiting customers that merchants don’t feel obliged to follow.

(d) At a higher level of the economy, we need to prepare for a different world of commerce. Larger retailers and online stores are surely taking up the battle in a big way across the country. This has implications for self-employment, livelihoods, supply chains, and much more. The government, in different departments, needs to be thinking about this shift and responding swiftly. The usual pace of work will not do as the consumer economy gains momentum.

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