A fair and essential policy for retailers

E-commerce players must be allowed to ship non-essential items as there is no room for favouritism in govt policy in a pandemic

The second big surge in Covid-19 infections in India has led to various state governments enforcing curfew to restrict certain kinds of activities during different hours of the day and the week. Rules have been framed to list activities that are permitted or prohibited. Among those exempted from the restrictions are retail sellers of essential goods like groceries. 

This is understandable. But what is not understandable are the restrictions that are imposed on e-commerce companies and their supplies of goods to their customers through delivery agents. If the purpose of imposing these restrictions is to prevent the gathering of people in shops or malls and thereby keep a check on the transmission of Covid-19, e-commerce supplies hardly pose such risks. A customer can place her orders online and the delivery person can supply the goods in a safe way at the address provided.

Yet, most states have followed the principle of level-playing field for e-commerce companies. The argument seems to be that if physical retail stores cannot remain open for shopping during the curfew hours, e-commerce companies too should be barred from supplying goods to their customers. Similarly, if physical retail stores can sell essential goods like grocery items, the e-commerce companies may also be allowed to accept orders and ensure deliveries of such items.

There is no logic in such thinking. Every business has certain inherent advantages and disadvantages. Policy must recognise them and tweak their enforcement appropriately. If shopping in a mall is prohibited for any reason, why should an e-commerce supplier be also prohibited even though the conditions under which the latter business operates are completely different? Purchasing your shirt from a crowded mall is completely different from getting it delivered at your home. But the physical retail lobby in this country is so strong and the government seems to be so eager to mollycoddle them that even such basic differences are ignored. The rules that restrict sales of non-essential goods are enforced for both physical retail shops and e-commerce suppliers.

Thus, in Maharashtra, where curfew is enforced till May 1, e-commerce companies can supply only essential goods. In Haryana, e-commerce supplies of only essential items can take place during the curfew hours imposed during night in that state. Similar rules are in place for Delhi as well, where curfew hours have been extended by a week. Apart from needlessly disadvantaging the e-commerce companies, such rules have also posed a complex management challenge before those who supervise online supplies.

Such a classification creates confusion. What is an essential item and what is not? Worse, imagine the plight of a delivery agent convincing the police or the security guard of a housing colony that what he or she is carrying for delivery is an essential item! This distinction between essential and non-essential items could be easily done away with for e-commerce supplies, without risking any spread of the disease and reducing the impact of the lockdown on economic activities, jobs and growth.

Yes, physical retail shops would have lost some business and possibly market share for certain products. But consider the advantages of not enforcing such a classification. Consumers would have gained access to their products without stirring out of their homes. The e-commerce companies would have benefitted and gained business, although at the expense of physical retail stores.

Illustration: Binay Sinha

But then this after all is the market dynamics. The Covid-19 pandemic has conferred certain advantages on e-commerce companies. It would be counterproductive, and indeed imprudent, to neutralise them through policy interventions of this nature. Let businesses take the call. Nothing stops physical retail stores from embracing the e-commerce principles of online acceptance of orders and supplies through delivery agents. Some business-savvy physical retail stores have already started their online sales seeing this as an opportunity.

The irony is that in India businesses have almost accepted that such distortionary policy interventions would be made in response to powerful lobby groups. E-commerce companies in India have already begun to engage with policymakers and small enterprises to strengthen their franchise and deepen their market presence. Amazon, for instance, has just held a summit for entrepreneurs, small businesses and innovators. The apparent idea is to build an Atma Nirbhar Bharat. But the implicit goal is obvious — to engage with policymakers to make sure that their actions do not get more adverse for the e-commerce companies, and they could cement their business relationship with small entrepreneurs and secure their supply sources.

Data for retail supply of goods after the Covid-19 outbreak show how the footprint of e-commerce companies has expanded substantially. Flipkart estimates that its new user growth was almost 50 per cent during July-September 2020, with Tier-III towns recording the highest growth of 65 per cent. E-commerce companies also stepped up the use of technology during this phase to take advantage of the business opportunities. Flipkart introduced interfaces with its customers in regional languages and the number of its customers opting for native language interface jumped two and half times in the January-November 2020 phase over the same period in the previous year.  

Not that e-commerce companies stayed away from supporting the micro, small and medium enterprises (MSME) through procurement of goods from them during the pandemic. Flipkart saw a 35 per cent increase in the number of sellers that came on its platform in 2020, compared to the previous year, and a majority of them came from Tier-II and Tier-III towns like Tirupur, Howrah, Zirakpur, Hisar, Saharanpur, Panipat and Rajkot.

Another data point compiled by Flipkart underlines the need for dismantling the restrictions on e-commerce companies on their supplies of non-essential goods. The growth in Flipkart’s supplies in the March-December 2020 period, compared to the pre-Covid months, was substantially higher for household items, general merchandise, grocery items and mobile phones.

This perhaps also explains why the physical retail lobby is opposed to the idea of exempting e-commerce companies from supply restrictions. What defies logic is the government policy of favouring a segment of business, even though it restricts the consumers’ access to goods because of the curfew. There is a long-pending demand for a review of the government’s policy on e-commerce. Such a review should begin with the assumption that there is no place for such favouritism in government policy. The heart of the problem is that the government must accept that e-commerce is as important as physical retail.