On Sunday, the Ministry of Home Affairs reversed its earlier decision to allow e-commerce companies to deliver non-essential items. Even as Flipkart, Amazon, Snapdeal and others began preparing resume full-scale delivery, the MHA issued updated guidelines and clarified that e-commerce companies can continue to deliver essential goods, but delivery of non-essential goods remains prohibited for the duration of the lockdown.
The government had earlier said that vehicles used by e-commerce companies would be allowed to ply with necessary permissions.
This decision came after offline retailers and trader bodies such as the Confederation of All India Trader (CAIT) lobbied against allowing e-commerce companies delivering non-essentials. CAIT in a communication to the Prime Minister on Thursday urged him to reconsider the decision saying that it would create an uneven level playing field for offline retailers.
In a statement, CAIT President BC Bhartia and Secretary General Praveen Khandelwal said the move came as a “huge shock” to India’s crores of traders. “By allowing e-commerce players to have a free run to deliver non-essential goods for the entire remaining duration of the lockdown period without any competition from the retail outlets is a drastic blunder and will severely dent the hopes and livelihood of India’s retailers,” the statement noted.
The government claims to have taken the decision keeping in mind the interest of small retailers, e-tailers. And while CAIT, other trader bodies and offline retailer associations such as All India mobile retailers association (AIMRA) lauded the government’s decision, several analysts and industry experts say that the reversal of the decision was taken without enough thought, given that e-commerce helps serve the purpose of social distancing and keep consumers from stepping out.
Arvind Singhal, chairman of consulting firm Technopak Advisors, said in a tweet that India needs consumption growth while under lockdown, which can only be supported through e-commerce.
“Government's decision to continue with the restrictions on e-commerce is a very poorly thought-through move for consumers, consumer goods manufacturers, and for the nation's economy,” he wrote.
E-commerce keeps people indoors
The decision to disallow non-essential goods also comes at a time when e-commerce has been seen as a vital resource amid social distancing since it enables people to receive what they need while staying indoors, be it food, groceries or other essentials.
Madhukar Sinha, managing partner at India Quotient, says that Bigbasket alone does around 3 lakh deliveries every day. This means that it is keeping 3 lakh people from coming out. The count for all of the e-commerce industry would be a lot higher.
He feels that the government has taken this decision based on morality and equality to offline traders rather than the real problem at hand. However, this is an usual situation where thinking of a level-playing field may not be the best solution.
“The reason given by the government was that they don't want to hurt small traders by allowing e-commerce. There is no real thought here because their share in the overall Indian retail is 4-5% and 95% is offline, so it won’t really hurt them. And even if it does, e-commerce is the only solution that is possible today because you can’t open stores, that will cause hundreds to come out and risk infection. Right now, we are not dealing with a normal situation where you can think about equality of everyone, so the argument that it will hurt retailers is unfair,” he adds.
The cost involved
The reversal of the decision one day before it was to come into effect, also comes at a cost, since e-commerce companies invested in planning delivery at a larger scale.
Tech industry body Nasscom’s president Debjani Ghosh also said that the decision could have been better thought through.
“A lot of the e-commerce companies have invested in planning for the 20th. And most don't have deep pockets to handle this kind of reversal in decision. The focus, I feel, should have been on ensuring adequate safety protocols,” she said in a tweet.
Madhukar also says that the government cannot take decisions on behalf of companies without consulting with them and needs to think about costs involved.
“This is a lazy government. It doesn’t think through the nuances of its decisions. E-commerce is already reeling and is nascent and loss making trying to make a market for itself. First the government said it (non-essential delivery) is allowed and companies started preparing for it and that comes at a cost. And one day before it says not allowed. No one cares about the cost implication of this,” he adds.
And not just cost to the company, e-tailers argue that there are also a million small businesses that are enabled to sell online, and stand affected by this decision.
“E-commerce in India includes many domestic online marketplaces that enable a million small businesses to sell their products; their livelihood depends significantly on e-commerce. Thousands of homegrown brands that promote 'Make in India' and sell only through their own website,” Snapdeal CEO Kunal Bahl said on Twitter after the government’s decision.
“In summary, there is a massive ecosystem of small businesses (manufacturers & traders) and 'Make in India' homegrown brands that the e-commerce industry enables. An entire generation of India's small business owners, entrepreneurs and their employees depend on e-commerce,” he added.
Increasing the ambit of essential items
Amazon too, expressed its disappointment. An Amazon India spokesperson told IANS that the company appreciates the vision of the government, but also noted that the decision would disappoint the consumers and several small businesses and sellers.
"The new guideline will disappoint not only the consumers whose list of essentials had expanded to work from home and study from home products but also the thousands of small businesses, sellers and manufacturers across the country, who had geared up in the last 48 hours to provide millions of people with safe access to products."
The Amazon India spokesperson further said that on behalf of consumers and sellers, the company hopes that this situation is rectified soon so that the urgent need of consumers is met and that there is revival of economic activity.
With India being under a lockdown for nearly a month now, Srinivas Mothey, Senior Vice President, Paytm Mall said that the ambit of essential goods should be increased.
"We believe that the ambit of essential goods should be increased. India is mostly working from home at the moment, but many are finding it difficult as they are running low on certain items necessary to effectively operate under lockdown."
Laptops, mobile phones and accessories, computer hardware and webcams should be allowed to be part of essential goods, he said, adding that if the lockdown continues, lack of proper technical support would hinder the efficiency of employees which in turn would affect a company's operations.
A missed opportunity?
Apart from increasing the ambit of essential items, some believe that this is an opportunity missed in terms of bringing more retailers online.
“Appreciate the sentiment. But it’s about sharing misfortune instead of opening up opportunities for good fortune. Could physical retailers be permitted to home-deliver ‘non-essentials?’ I’d trust my small neighbourhood stores more than e-comm cos to deliver reliably & speedily,” Anand Mahindra, CEO of the Mahindra Group, said on Twitter.
Murali Bukkapatnam, an angel investor and the chairman of venture development firm Volksy Technologies, believes that whoever advised the government on this has gone wrong.
“Governments and countries like India, where we have a large and diverse population, should embrace newer technologies. They should incentivise local brick and mortar retail stores to come online. Whatever the government can incentivise to get them to do it, they should do. It’s like playing with economic forces — you shouldn’t,” he says.
The Retail Association of India (RAI) too, has called for broad based rules for direct customer delivery, including allowing neighborhood stores to operate.
“This will allow retailers to support smooth implementation of social distancing norms, through contactless delivery, strict hygiene and safety standards, for such work from home essentials as mobiles, laptops, infant garments & household supplies. Neighborhood stores and large essential products chain retailers have done a great service to the nation thus far and widening of the essential products categories will help us support government’s steps to ensure safety of its people while also enabling movement of goods required for economic activity,” Kumar Rajagopalan, CEO of RAI said in a statement.
Murali further says that this is the time to strengthen Indian Postal Service and mom-and-pop stores and enable them to come online.
“I would absolutely say it is a missed opportunity by the government of India. You should take a wider perspective to improve the economy and improve consumerism,” he adds.