E-commerce races ahead despite odds

A unique competitive Indian growth model of e-commerce is fast evolving. This will be supported by e-commerce policy, which is still in the making. India's e-commerce market is among the fastest growing in the world, contributing roughly about 4 per cent of the GDP (from 1 per cent in 2015). It is transforming the way Indian business is done. E-commerce and digital communications - new-age services - dominate conversations about the next curve of growth these days.

E-commerce was progressing even before the onset of Covid-19, thanks to technology innovation, along with a digital push. Covid proved the black swan event that gave it a massive fillip, with the 'work from home' (WFH) concept gaining prominence. Globalisation, notwithstanding increasing protectionism, has given rise to a number of collaborative opportunities within India and abroad. This trend was accelerated, with many foreign businesses wanting to enter or expand operations in India. In the process, SMEs, agricultural enterprises, finance, banking, fashion, beauty, marketing and advertising, FMCGs, general merchandise, trade, health and education, have all started benefiting. It has created employment opportunities at various skill levels in all the above segments. IT companies like TCS, Infosys and Wipro restarted hiring engineers. Decades' worth of digitisation trends have manifested in a short span of time, thanks to the pandemic.

Some prominent collaborative initiatives --- the Atal Innovation Mission (AIM), the NITI Aayog joining CGI India (a large IT and business consulting services firm) to further rev up innovation across schools; the Tata Group in talks with Big Basket for a tie-up that may involve a 20 per cent stake, depicting India’s largest conglomerate’s e-com ambitions; Flipkart bolstering partnership with banks, NBFCs ahead of festive season and preparing its fin-tech constructs for consumers to benefit from easy access of credit and affordability options.

Lessons can also be imbibed from success stories abroad. Dubai’s Tradeling.com, the hyper-growing e-market, signifies the region's first freight-buying integration, helping customers compare, book, manage and track air, ocean or land cargo in real time. With this, its business-to-business transactions, driving more value for MENA businesses benefitting SMEs, now brings another innovative and value-added service through effective and cost-competitive freight booking and management. Another success story - the Swedish apparel retailer H&M, which currently has 48 outlets in 24 cities in India, will continue to expand its physical stores in India although it is closing down 250 stores globally, betting on the long-term potential of the country.

Interestingly, both online and offline retail businesses have started converging, to enhance earnings from the festive season. Only, the working of offline businesses will now become more cost-effective, time-bound and disciplined, to move in sync with the working culture of online enterprises.

Numerous opportunities are also emerging -- e-commerce giants have started eyeing rural India and small towns for growth; the Indian banking sector is using emerging technologies like Artificial Intelligence (AI) and Machine Learning (ML) for corporate loans, for productive lending. Lending to MSMEs remained stagnant for the last so many years but henceforth, banks are likely to develop models to actively support MSMEs, thereby also improving their own balance-sheets. Reliance is foraying into smart electricity meters and exploring offering services such as meter data collection via a Narrow Band-Internet of Things.

India’s online gaming craze has grown into a multi-crore business. Indians, irrespective of age, are turning into avid gamers -- a whopping 365 million players. With celebrity endorsements, regional language interfaces and sponsorship money, the online gaming industry is flourishing; Google Play Store, which works as a virtual mall, has posted $17.3bn revenue in the first half of 2020 and is growing at 21 per cent per annum.

Formidable challenges do prevail, like the constant fear of cyberwarfare; data privacy is another challenge. The SEBI has constituted a committee for market data-sharing. Protecting the data of Indian citizens requires a modern data privacy law, which is being finalised. There are demands for similar laws in the US and other countries.

Another recent challenge was the massive power outage in India's financial capital, impacting businesses across information technology, banking and financial services and fin-tech sectors; then there is the challenge of meeting divergent views brewing over a spectrum band between Telcos (Bharti Airtel, Vodafone Idea and Reliance Jio) and tech companies (Google, Microsoft, Apple, Facebook); the Government pulled up Amazon and Flipkart for not displaying the country of origin of some of the products sold on their platforms, threatening action if they did not explain themselves within 15 days.

Other challenges include regulatory hurdles with different digital platforms requiring distinct regulations; a complex situation relates to -- despite relaxation in the deadline for the applicability of Google’s new Play Store policy, a group of Indian startups started planning to move the Competition Commission of India against the company; yet another challenge concerns the likelihood of a global digital tax war metamorphosing into a trade war that could potentially slash global GDP every year.

Google, Facebook, Amazon, LinkedIn and Netflix could face larger domestic tax liability in the wake of the OECD postponing a common tax framework for global economies, a move that will allow countries like India to have their own plans to tax the digital giants. India has started partly taxing these global giants under the equalisation levy.

Thus, e-commerce carries the potential of making India an attractive Investment and global data hub. India currently enjoys many advantages with respect to e-commerce businesses -- growing demand, attractive opportunities, policy support, increasing investments and the competitive advantage of developing special skill sets for this sector, coupled with vast software technology manpower to implement the same.

Industry, research bodies and the Government need to be mindful of future threats and risks. There is a need for a strong network and sustainable bandwidth. The success of e-commerce is dependent on many variables, like adequate customer support, multi-channel marketing and user-friendly platforms. Users should have appropriate devices, uninterrupted power supply and strong network connectivity.

The writer is an economist and former director of the Economic Research Training Foundation.

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