Union Minister comes down on Amazon; says it hurts small retailers

Union Commerce Minister Piyush Goyal on Wednesday launched a broadside on multinational e-commerce companies—naming Amazon—saying they indulged in predatory pricing to beat down domestic ‘mom and pop’ stores.

He was speaking at the launch of a report, titled ‘Assessing the Net Impact of e-Commerce on Employment and Consumer Welfare in India’, published by the Pahle India Foundation, a Delhi-based policy research institute founded by former Niti Aayog vice-chairman Rajiv Kumar.

Mr Goyal said e-commerce platforms should not be allowed to disrupt the 10 crore brick-and-mortar stores and small retailers in India. 

`They hurt small retailers'

"When Amazon says ‘we are going to invest a billion dollars in India’ and we all celebrate, we forget the underlying story that these billion dollars are not coming for any great service or investment to support the Indian economy," said Mr Goyal.

“(Do the losses) not smell of predatory pricing to any of you ... what was that loss for? They are not allowed to sell to consumers (directly),” he added.

“There’s a large section out there who still deserves our help. When it comes to jobs and opportunities for the future of India, I think all of us will have to play our part.”

Mr Goyal noted the decline of traditional corner shops – or ‘mom and pop’ stores – in the US and Europe due to the rise of e-commerce. 

"I’m not wishing away e-commerce. It's here to stay," Mr Goyal said, "But we must think carefully and cautiously about its role. Is predatory pricing good for the country?”

The minister expressed his concern about the impact of e-commerce on local businesses and employment, particularly in sectors like pharmacies and mobile phone repair shops.

E-commerce altered retail landscape

In recent years, Amazon and Walmart's Flipkart have radically altered India's retail landscape, investing billions of dollars to expand and attract consumers to their platforms, and offering lucrative discounts.

Their growth has sometimes been controversial, having been met with protests by small traders, who are an important support base for the ruling Bharatiya Janata Party. 

Mr Goyal's remarks come in the middle of a government exercise to draft a comprehensive e-commerce policy that would check unethical trading practices. The policy is under evaluation at the top level of the government.

It's all lies, more lies 

The minister termed the report's projection of a massive 27% annual growth in the e-commerce market as "lies, damn lies, and statistics" – a phrase often attributed to the 19th-century American writer Mark Twain.

"It's not a matter of pride that half of our market could become part of e-commerce in the next 10 years; it's a matter of concern. There are lies, damn lies, and statistics," the minister said.

"From the country’s perspective, based on the little I’ve read and seen of this report, I would like to completely disassociate myself from it. I do not agree with any of these findings." 

The report claimed that the share of e-commerce in retail sales was 4.7% in 2019 and it grew to 7.8% in 2022. The report also stated that e-commerce is growing at 27% annually.

Mr Goyal criticised some of the report's findings but also referred to its data to buttress his point that e-commerce targets high-value items to eat into small retailers' profits. 

"Food and grocery are growing by only 0.4% to 0.5%, with a penetration rate of 66%, which is misleading as many people still visit local shops. Growth in apparel is between 14-20%, jewellery and watches at 4-6%, where the look and feel matter.

“Consumer electronics, another high-margin market, is growing at 26-28%, while home and living products are growing at 8-11%, as items like towels, bedsheets, and mattresses don't have high margins,” the minister said.

Job claims 

As to employment, the report said each e-commerce vendor employs about nine people, two of whom are female, while each offline vendor employs about six people, only one of whom is female.

As per National Sample Survey estimates of e-commerce penetration, about 17 lakh retail enterprises participate in e-commerce.

Reacting to the Commerce Minister’s statement, Praveen Khandelwal, the secretary general of the Confederation of All India Traders (CAIT) and Lok Sabha member from the ruling BJP, said, “Foreign investments should be scrutinised to ensure they contribute positively to the local economy and do not merely serve to sustain operations that are not yet profitable.”

                                                      (By arrangement with livemint.com)