Covid-19 – an inflexion point for e-commerce

Dhanendra Kumar

By Dhanendra Kumar

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E-commerce has been growing rapidly in the world in recent years, taking progressively a larger share of total retail pie in each country. It is facilitated by digital technology and driven by demand with ease and convenience of customers to transact from the comfort and safety of their homes. It also provided tremendous economic growth in several countries like in China, buoyed by global exports, logistics and innovations. Covid-19, however proved an inflexion point and gave it a huge boost with lockdowns, contact restrictions and other confinement measures, disrupting status quo, sometimes creating tensions among affected stakeholders and ingraining new preferences among customers in the new normal.

CCI had undertaken a market study on e-commerce in April 2019. After stakeholder consultations for 9 months, including manufacturers, wholesalers, retailers, hotels, restaurants, payment systems, e-commerce platforms, and conducting market analysis, it released its report in January 2020 (https://rb.gy/qrwvnu). Several facets were brought out and mainly self-regulation was recommended.

Looking at the preamble of Indian Competition Law which mandates, the main objective is ‘economic development of the country’ with the other parameters -‘prevention of practices having adverse effects on competition, to promote and sustain competitionin the market, to protect the interest of consumers and to ensure freedom of trade’- all funneled into achieving it. The architecture of Competition Law is designed for growth, static and dynamic efficiencies in economy and consumer welfare.

CCI as the market regulator has been cognizant of the impact of Coronavirus pandemic on consumers and was among the first globally to issue a mature and nuanced advisory (https://bit.ly/3vtLL9n) to help businesses with needed coordination during the pandemic for maintaining supply lines and helping consumers. The same spirit has been evidenced in their several other orders showing understanding and accommodation. India is considered the fastest growing and most attractive e-commerce economy in the world. According to an IBEF report (https://bit.ly/35unB3X), India’s retail sector is estimated over US$ 883 Bn, ranked 5 th largest globally and expected to cross US$ 1.3 Tn in 2024. Of this, e-commerce is expected to reach US$ 111 Bn by 2024, with speedier growth in tier 2 and 3 towns, aided by explosive spurt in mobile and internet across the country. It is also providing new avenues of employment and innovation, thousands of start-ups are coming up in various segments, attracting massive infusion from global PEs and VCs, churning out a record 14 unicorns (likely 15 soon) in India during 5 months in 2021, despite the pandemic. It is also opening up avenues of access to newer markets, in India and overseas, to small businesses, handicrafts and services. E-commerce in medicines, pharma and healthcare, food and retail, travel, hail ride, fintech, home delivery of services (like electricians, plumbers, barbers, etc), OTT and in-home entertainment, are all proving the savior during Covid-19. In fact, the growth is mainly driven by the consumer preferences and situational needs.

Considering the global trend, there is a need of greater government efforts for accelerating digitalization and e-commerce related infrastructure across the country for an inclusive digital trade, as pleaded in a UNCTAD report (https://rb.gy/ix1bs8). It argues that ‘governments need to prioritize national digital readiness so that more local businesses can become producers in the digital economy, not just consumers’. It also stresses on undertaking a ‘holistic approach, and not in silos’, and policies to reduce ‘digital divide’ intensively promote ‘digital empowerment’, ‘digital entrepreneurship’, ‘digital reskilling’ for smaller businesses and especially of women , all designed to inclusively capture fuller value from ‘digital trade’. This has also been evidenced in marketing support to artisans, and in exports from hinterland supported by e-commerce, and bigger players have also undertaken several innovative initiatives, like ‘samarth’ by Flipkart for the less privileged, or ‘Smbhav’ by Amazon, among others.

Looking at the customers preference in the new normal and repeated waves of pandemic with new variants, there is no doubt that e-commerce has now come to stay, well beyond Covid-19. Customers are now resorting to omni-channel or hybrid marketing, comparing prices and brands on-line and opting to buy on-line or from brick-and mortar stores, who are also developing online websites and home deliveries, both competing with better prices and prompt deliveries, all good for competition and consumer choices. Both are switching to newer methods to attract customers, traditional stores are also going in for digitization, often assisted by e-commerce biggies (https://bit.ly/3q2xrnc) developing linkages in their own interest. There are also innovations, like artificial intelligence-backed consumer experiences to enable remote on-site comparisons, etc. Digitization and integration with omni-channel e-commerce ecosystem may also have huge supportive linkages with sustained economic growth, job creation, gender equality, better access to healthcare, medicines, food, education by the poor and marginalized, and even access to a whole range of government schemes and facilities, especially in rural and remote areas. It is also supportive in agritech and providing new marketing avenues to our farming community.

Victor Hugo, the French Poet and novelist famously said, “nothing is more powerful than an idea whose time has come”. It seems to be perfect description of e-commerce today.

Dhanendra Kumar is formerly India’s Executive Director in World Bank and first Chairman CCI