Global e-commerce behemoths jostling for space in India is testament to the importance that India holds as one of the biggest consumer markets. Just the number of smartphone users in India today — more than 350 million — is more than the entire population of US.
The US retailers who are here, and the Chinese ones in waiting, are all eyeing this same pot of gold. A similar rush was witnessed in the 17th, 18th and 19th centuries when the Portuguese, the Dutch, the French and the English raced to forge local alliances, secure resources and carve out India among themselves.
Walmart Goes Go Karting
Flipkart has done tremendous work to help build an ecosystem in this space. Sachin and Binny Bansals, and the entire team deserve our unreserved applause for their accomplishments, grit and hard work. They serve as a huge inspiration for others to become entrepreneurs.
While the Walmart deal is a significant milestone, we are in the early stages of India’s digital commerce growth journey. There has been much discussion about how India should shape its digital commerce sector. Should we emulate the Chinese in restricting foreign competition, lest we become a digital colony like Europe? Or shall we proceed ahead, believing in perfect competition, market forces and good karma?
While the debate rages, India has found the right solution. And as often is the case, we haven’t implemented it.
India’s policies are very clear. FDI in e-commerce is allowed only in marketplaces and not in business-to-consumer (B2C) retailing. These marketplaces are prohibited from acting as sellers — they are not to own or control any inventory or influence the price of goods sold on the platform. They are required to provide a level playing field to all sellers and not offer discounts or warranties from their side.
The policy clearly prohibits FDI in B2C e-commerce, because it recognizes that this will disrupt small Indian businesses. However, it is commonly understood and widely reported that many such marketplaces are thinly disguised inventory operations, especially in the high-demand, high-value segments like mobiles, TVs, home appliances, etc.
Violations of the existing policy are creating disquiet among India’s small enterprises. Entry of new players will accelerate the erosion of space for them. Grocery is slated to be the next price war frontier, bruising and decimating millions of small, neighborhood retail operations. So, what does India need to do?
E-commerce is India’s big opportunity to use its vast domestic consumption to boost employment in the country. As more buyers shop online, the sellers need to come online. Marketplaces with their traffic, technology, logistics and payment solutions are the first point of call for sellers exploring the online world.
Genuine marketplaces can provide easy access to small enterprises to sell across the country and help them grow by discovering new markets and products. They can help millions take their first step in starting their online business. They can enable the smaller ones to grow bigger.
Desi Haat in Your Hand
Nearly 50 million Indians shop online, and with the smartphone data revolution underway, another 100 million will gradually come online in the next 3-4 years, paving the way for more to follow. If India buys online, Indians must also sell online. Invariably, these will be goods made in India as well as goods sourced globally. Consumers, producers, traders, factories and artisans will all benefit from the market growth.
Sellers’ growth and buyers’ benefits are not an either-or option. In fact, they are the two sides of the same coin. We don’t need to sell ourselves short in the timid belief that FDI flows will stop if we implement our laws.
Marketplaces can help boost competition, reduce costs, improve logistics and offer a better experience. But they do not need to cross the line and become retailers. When they do this, they become competitors and not enablers of these small businesses, causing displacement and not growth.
India’s small sellers need a safe online space to grow, without being crowded out by the very platforms they are expected to trust. This is not protectionism and these are not new measures. This is the stated, balanced law of the land.
GoI should act in the interest of the nation and enable growth that benefits the sector. Having enlightened self-interest at heart is good politics, good economics and sound nation building. Using e-commerce as a direct lever to grow small businesses is a once-in-a-lifetime opportunity.
So, what would constitute success for Indian e-commerce in 2025? A troika of Indian Baidu, Alibaba and Tencent would make for good optics. But a flourishing legion of tens of millions of thriving online businesses humming across the country would be real success. – Economic Times