Why India needs to establish strong indigenous e-commerce platforms

It is time to learn from how aggregators in the garb of e-commerce are building monopolies that would limit the choice of both sellers and buyers in India in the long run.

(Sanghnomics is a weekly column that tracks down and demystifies the economic world view of Rashtriya Swayamsevak Sangh (RSS) and organisations inspired by its ideology.)

Union Commerce and Industry Minister Piyush Goyal recently raised the issue of predatory pricing and other undesirable business practices by e-commerce players like Amazon. His response came in context of a report released by Pehle India Foundation on ‘Assessing the net impact of E-Commerce on Employment and Welfare’.

According to the report, the e-commerce market in India is expected to grow to $350 billion by 2030 from $22 billion in 2018. In fact, India is expected to surpass the US and become the second largest e-commerce market by 2034.

This growth is however fraught with serious dangers if mega entities like Amazon are not regulated in India. Swadeshi Jagaran Manch(SJM) co-convenor Ashwani Mahajan says, “We are not against e-commerce but we are against illegal practices adopted by companies like Amazon. They are supposed to act as aggregator platforms, they can’t keep their warehouses or sell their own brands. But the reality is quite different.  Several e-commerce platforms are indulging in predatory pricing making a huge adverse impact on India’s indigenous retail sector.”

Amazon is a typical case study in this context. According to a US House Committee report on “Investigation of Competition in Digital Markets” that was published in 2022, “Amazon has engaged in extensive anticompetitive conduct in its treatment of third-party sellers. Publicly, Amazon describes third-party sellers as ``partners.'' But internal documents show that, behind closed doors, the company refers to them as ``internal competitors.'' Amazon's dual role as an operator of its marketplace that hosts third-party sellers, and a seller in that same marketplace, creates an inherent conflict of interest. This conflict incentivizes Amazon to exploit its access to competing sellers' data and information, among other anticompetitive conduct.”

Based on a survey, another report titled, ‘The State of  the Amazon Seller, 2020’ points out drawbacks  for sellers doing business through Amazon’s online platform. The report says, “While Amazon sellers overwhelmingly state their confidence in Amazon and plan to continue selling on the platform in 2020 and beyond, many also expressed concerns around the power of Amazon.

* 78% of sellers are concerned about increasing ad costs on Amazon.

* 66% of sellers are concerned about continuing to need more capital to sell competitively on Amazon. Competing with Amazon itself

* 58% of sellers say Amazon has made it harder for them to compete in their product category in the past year.

* 53% say Amazon sells its own products that directly compete with the seller’s. Security and “black hat” sellers

* 66% of sellers are concerned about hijackers/copycats on their listings.

* 46% of sellers are concerned about Amazon protecting their privacy and security. Amazon Seller Support

* 76% of sellers are concerned about Amazon limiting or shutting down their account and/or listings seemingly abruptly or without reason.

* 64% have experienced poor seller support from Amazon.

Amazon started its India operations in 2013. Initially it was selling books online. According to a Forbes India report since then, the business for Amazin has grown multi-fold, with presence across sectors ranging from grocery and pharmacy to OTT and music.

“With a 100 million-plus customer base, Amazon has been extremely bullish about the Indian market. In 2020, during Amazon Smbhav’s event, founder Jeff Bezos said, "I predict that the 21st century is going to be the Indian century.” Amazon has committed to investing an additional $15 billion in India by 2030—taking the total up to $26 billion, across all its businesses.”

But as Goyal had pointed out, we have to see how much of this is investment and how much is being used to write off losses. It might be recalled that one of the key reasons for incurring these losses by Amazon is its predatory pricing.

The US House Committee report has pointed out another worrisome aspect of e-commerce platform Amazon which should start the alarm bells ringing in India.

The report says, “Voice assistant ecosystems are an emerging market with a high propensity for lock-in and self-preferencing. Amazon has expanded Alexa's ecosystem quickly through acquisitions of complementary and competing technologies, and by selling its Alexa-enabled smart speakers at deep discounts. The company's early leadership in this market is leading to the collection of highly sensitive consumer data, which Amazon can use to promote its other business, including e-commerce and Prime Video.”

It further adds, “.. Amazon Web Services (AWS) provides critical infrastructure for many businesses with which Amazon competes. This creates the potential for a conflict of interest where cloud customers are forced to consider patronizing a competitor, as opposed to selecting the best technology for their business.”

It is time to learn from how aggregators in the garb of e-commerce are building monopolies that would limit the choice of both sellers and buyers in India in the long run. Thus India needs to promote its indigenous e-commerce platforms like ONDC which neither promote monopolistic practices nor are they exploitative.

Earlier Sanghnomics columns can be read here.