Union Minister of Commerce and Industry Piyush Goyal’s recent comments on large e-commerce players have reignited the debate about their impact on smaller offline retailers.
Photograph: Babu/Reuters
On Wednesday, Goyal said that the rapid growth of e-commerce in India is a “cause for concern” and is diminishing the market share of small, mom-and-pop stores by offering high-margin products such as consumer electronics and apparel at discounted rates.
His remarks have polarised opinions among retailers.
Small retailers have largely supported Goyal’s statements, while industry bodies argue that e-commerce has actually benefited smaller retailers.
The Forum for Internet Retailers, Sellers, and Traders (FIRST), India, claims its members have “benefited immensely” from e-commerce.
“Small and medium enterprises are able to reach a nationwide and global customer base by leveraging e-commerce platforms, without needing 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 of FIRST.
A report from the Pahle India Foundation, where the minister spoke, 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 from 2018 to 2030.
Narendra Kumar Gupta, owner of Kirti Collection, an apparel store in New Delhi’s Laxmi Nagar market, reported a nearly 30-35 per cent drop in sales over the past four years.
“We have observed that consumers are increasingly leaning towards online retailers, which negatively impacts our sales,” he said.
The commerce minister also suggested that large retailers have an advantage when competing with e-commerce.
“How many mobile stores do you see now in the corner? And how many were there 10 years ago?
“Where are those mobile stores? Will only Apple or the large retailers sell mobile phones and their accessories?” Goyal questioned.
For consumer electronics retailer Lotus Electronics, while e-commerce websites have impacted sales of smartphones and laptops, the effect on home appliance sales has been relatively lower.
According to Gaurav Pahwa, director of Lotus Electronics, e-commerce sites have captured 45-50 per cent of the smartphone market and over 25 per cent of the laptop market.
“However, for big-ticket items like refrigerators, washing machines, and televisions, their market share remains under 15 per cent and 25 per cent respectively.
“Consumers prefer to experience these products before purchasing, and we are now able to match the discounts offered by these websites,” he said.
Queries sent to Amazon and Flipkart did not receive an immediate response.
However, sources from a large e-commerce firm 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 from a large e-commerce company.
For example, last June, Amazon chief executive officer (CEO) Andy Jassy announced that the company would invest $26 billion in India by 2030.
The firm also plans to digitise 10 million small businesses, enable $20 billion in exports, and create 2 million jobs in the country by 2025.
To date, Amazon has digitised over 6.2 million micro, small, and medium enterprises, facilitated nearly $8 billion in exports, and created over 1.3 million jobs in India, according to the company’s website.
Meanwhile, industry bodies such as 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 should be scrutinised to ensure they positively contribute 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 funding, and holding inventory, which violates the government’s foreign direct investment policy,” said Praveen Khandelwal, secretary-general of CAIT.
This debate also coincides with the rapidly growing quick commerce sector, which is accused of drawing customers away from kirana stores.
Quick-commerce, a subset of e-commerce focused on delivering items within 10 minutes, is seen by some as a threat to traditional retailers.
Executives of major quick-commerce platforms, including Zomato-owned Blinkit’s CEO Albinder Dhindsa, Swiggy’s CEO Shriharsha Majety, and Zepto CEO Aadit Palicha, have denied that they are taking market share from mom-and-pop stores.
“We know that we are not taking share away from kiranas or from value-focused large retailers like DMart.
“This was also mentioned in their recent conference call.
“The value-focused items available in these formats are hard to replicate in our business,” said Dhindsa in a recent letter to shareholders.
However, some investors believe that quick-commerce firms have little incentive to admit otherwise.
“Quick-commerce firms are likely to face regulatory backlash if they admit they are growing at the expense of kirana stores.
“These small sellers make up a large vote bank for the government.
“Admitting to taking away market share from small sellers could backfire on them,” said an e-commerce investor.
Ear to the ground
- Industry body FIRST claims that its members have ‘benefitted immensely’ from e-commerce
- Electronic product sellers note that while e-commerce has captured 45% of smartphone and 25% of laptop market, impact on home appliances sales has been relatively lower at 15-20%
- CAIT believes that firms like Amazon, through their investments, are looking to capture Indian market by creating unhealthy competition
- Quick commerce players have stated that they are not eating into the share of mom-and-pop stores
