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How New E-Commerce Policy Will Impact Both Offline And Online Retailers

To brighten up the future of e-commerce in India, the government should come up with better policies that can offer both offline and online players the best of both worlds.

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The Indian government seems to have a love-hate relationship with the e-commerce segment. On the one hand, it keeps coming up with newer ways to pull in foreign direct investments (FDI) and empower e-commerce startups. On the other hand, it also enforces restrictions to protect the business interests of local kirana players. The new e-commerce policy marks a clear recent shift in the government’s mood towards the latter.  

In fact, it seems like a statement of the government’s vision of protecting local offline retailers from the dominance of e-commerce giants like Flipkart and Amazon – and creating fair market conditions.

How will it impact online players?

Once implemented, the policy will straight-away put a halt on e-commerce firms in India who trade via companies in which they hold equity. It will also impact the bread-and-butter of smartphone companies such as Honor and OnePlus, who exclusively sell smartphones on e-commerce platforms. Another aim of the policy is to check the concept of unlimited cashback and deep discounting that often drive a disproportionate percentage of customers to online sellers. 

But, before doing so, the government should realize that discounts are not only a part of e-commerce operations. Everyone – from offline sellers and payment gateways to mobile wallets, banks, credit cards – offers discounts. Trying to restrict e-commerce players ends up hurting all of them. 

It is surely not a viable solution. Plus, it is important to note that the new e-commerce policy will lead to a significant fall in online sales, despite the government’s good intentions. The government should comprehend that such policy changes will have a direct impact on the country’s start-up ecosystem, including smaller start-ups that are toiling to thrive and innovate. This move will eventually lower the level of entrepreneurship across the country. 

What else the government should realise? 

The government should look at growing access to the internet and increasing smartphone penetration, which has already created an ecosystem comprising players and customers that love to sell and shop online. A policy cannot – and should not – displace such a strong, high-growth, and revenue-generating ecosystem so easily. 

Discounting has been a growth catalyst for both online and offline players when it comes to generating revenues and earning profits, and cashback is an emerging tool to further it. Besides this, tightening the norms of the e-commerce sector will also impact job creation in India, leading to cost-cutting and job losses across the country.

As well-intentioned as it is, the new e-commerce policy is perhaps not the best thing for the country’s e-commerce ecosystem at present. The Indian consumer has already moved online, and regulations like this will only devoid them of the options that they have become used to. They will still opt for the convenience and seamlessness that online shopping brings. 

This takes us to the all-important question: what can be the possible alternative? 

The viable solution
The government should ruminate on policies that focus on encouraging new-age digital players that combine the best of online and offline channels, instead of restricting the operations of e-commerce players. Doing so will not only further the growth of digital adoption in India, but will also help in creating an ecosystem where customers and smaller offline retailers can interact with each other in a virtual environment that addresses the online-offline divide. This will also level the playing field for offline retailers by giving them access to digital commerce players that prioritise their business growth and operational optimisation over user numbers and platform transactions.

There is no denying that regulating e-commerce giants is vital, but it should be done in a fairer manner. To brighten up the future of e-commerce in India, the government should come up with better policies that can offer both offline and online players the best of both worlds.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Rishabh Mehra

The author is Managing Director and CEO- Digital Mall of Asia

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