E-Commerce vs Retailers – The complete debacle explained.

E-Commerce, retailers, industrial revolution

“India missed one bus with the Industrial Revolution – a certain boost in muscle power and we were not able to catch up for 300 years. Maybe, we didn’t jump on the second bus on time and that is – the electronic revolution or the computer revolution. And now we might have to run behind that bus, catch up to it and jump on to it. I think we are capable of doing this,” said Rajiv Gandhi while speaking at a conference of ‘All India Manufacturers Organisations’ during his tenure as Prime Minister from 1984 to 1989. India bought its first digital computer, a British-built HEC 2M computer, which was imported and installed in the Indian Statistical Institute, Kolkata in 1955, by paying a hefty price of INR 10 lakh. Although India progressed with the formation of various IT companies and other developments, it wasn’t until Rajiv Gandhi became the Prime Minister that the Government started supporting and promoting the use of computers nationwide to catch up with the Computer Revolution that led to the beginning of a digital revolution in India. Even in those early days, many people protested and argued that computers are ‘job-killers and would lead to unemployment. Interestingly, even after decades, although India has become the global market for internet and e-commerce, the situation and the hesitancy amongst many remain the same.

On June 28, the Confederation of All India Traders (CAIT) sent a letter to Prime Minister, requesting the Government to ensure mandatory compliance of rules in case of E-commerce business in India and that there is no dilution in the draft e-commerce rules in favour of the E-commerce companies. The letter seemed reasonable until it went on to remark “It is regretted to note that these E-commerce companies are treating India as a banana republic having weak laws and rules. It appears that their objective is to become the second edition of East India Company with a defined mandate of emerging as masters of economic slavery which can not be accepted under any circumstances.” Well, firstly, that is some enthralling analogy – ‘Second edition of East India Company’ and ‘Masters of Economic Slavery’, even if the E-commerce companies are on the wrong side of the laws. Secondly, it reminds us of how we lag behind the world and even today, ‘have missed a bus and need to catch up.’

Draft Amendments

Earlier on June 21, the Ministry of Consumer Affairs released draft amendments in the Consumer Protection (E-commerce) Rules, 2020 which tighten various norms for the e-commerce companies. While the E-commerce companies affected by the amendments have expressed their concerns, the trader’s body jumped on to grab the opportunity and express their concerns as well, although the amendments have no bearing on the retailers. Before you try to understand the long-standing battle between the e-commerce giants and retail traders, and the underlying reasons for the same, let us first get acquainted with the latest amendments in the e-commerce rules.

The changes proposed by the Department of Consumer Affairs have a wide-ranging effect on the way the e-commerce business conduct their business, as the rules cover multiple aspects and sectors beyond just e-commerce platforms like Amazon and Flipkart but also covers the food delivery apps like Zomato and Swiggy.

Flash Sales

Flash sales are usually pre-decided sale events for new products, usually smartphones, with limited units up for sale and may or may not be offered at a discount.  Smartphone companies often use such flash sales as a marketing strategy when the product is new and to create unrest amongst those looking to buy smartphones, as something going out of stock, usually appears to the audience as something in high demand. The original proposal submitted by the Government seemed to have introduced a blanket ban on flash sales, however, clarification was given later said that it won’t apply to ‘conventional’ flash sales. Now what comprises a ‘Conventional flash sale’ is defined nowhere.

Promotion or Advertisements

E-tailer companies should not display ‘misleading’ ads which potentially affect the understanding of pricing, quality and guarantee. The platforms are expected not to advertise specific sellers offering discounts. E-commerce platforms often display the same product offered by one company in highlight or on top of search results or with something specific to identify differently. The E-commerce platforms charge for the same as a part of their advertising business, however, the same may no longer be possible under new rules.

Country of Origin

E-tailers are expected to ensure that the product listed on their website has the details of the country of origin in the details. This has been an arduous task for E-commerce platforms, as they have millions of products listed on their websites. Further, it would be a more difficult task to recommend a local alternative whenever the consumer looks to buy an imported good or service.

Cancellation charges and explicit consent

E-commerce platforms usually highlight various products on their websites as non-returnable while looking at the product details and description, and also offer free exchange or refund to consumers, depending on the product. The platforms are now expected to explicitly ask for consumer consent while buying non-returnable products and concerning cancellation charges. This is a good move as it will strengthen the online shopping experience for consumers.

No mis-spelling goods or services

Often products listed on various E-commerce websites are deliberately misspelt to make them look similar to another popular brand. This happens because the product listing process involves the input of the product details by the seller which is verified by the platform before uploading the same and making it available for buying. However, various sellers produce fake, duplicate or low-quality products and have packaging or name with close resemblance to the popular product. Now, the e-commerce platforms are expected not to allow the sale of such products, identify such products and delist them. Strangely, such products are openly sold in real markets, however, the e-commerce platforms are expected to provide oversight and compliance.

No manipulation in search results

In India, a few popular e-tailers have been accused of promoting brands owned by them and group company sellers by tweaking search results. As most consumers are keen on the product details and the pricing, the seller of the product is of least importance. However, for e-commerce platforms, it has been a means of earning profits. The platforms are equipped with a large database of past purchases and can easily determine which products sell the most. Further research into the product profitability and margins and with the power of bulk buying, the companies can make more profits than other sellers, while the competition seems all fair. This is not just the e-commerce platforms as the departmental stores and chain stores also apply the same technique – placing products of brands owned by them next to popular products, and offering a discount on the same, makes it easy to sell products and earn profits at the expense of other brands. Thus, the search results or the shelves are manipulated and own brands receive a preference over the others. However, now the e-tailers are expected not to indulge in any such practices.

Usage of brand name

Private brands E-commerce platforms if having the name of e-commerce platform attached to their name will now be under scrutiny if it results in anti-consumer interest and anti-competitive.

Data to agencies within 72 hours

The E-commerce platforms are now expected to provide information to the investigative agencies within a certain period, provided there is adequate reasoning for the same. Social media platforms were also recently brought under similar rules and expected to provide the data requested by Indian agencies within time limits. While the rules ask for adequate reasoning before opting for such measures, what amounts to adequate hasn’t been specified anywhere.

Differential treatment by the logistics service provider

The logistics service provider of the e-commerce platform is also now expected to ensure that they do not provide differentiated services to the e-commerce platform’s preferred sellers or group companies. Often e-commerce platforms partner with the seller for quicker delivery of products. While such a partnership may not be affected by the new rules, the parties involved are expected to ensure that the logistics services are not differentiated against the other sellers.

Fall back liability

E-commerce platforms selling goods and services have maintained that the liability concerning the goods and services is of the sellers while the platforms will continue to have their internal checks. However, the new rules now expect the platforms to face the repercussions for the product and services, if the seller fails to address the same.

A long battle ahead

There’s no doubt that e-commerce platforms have become the first choice preference of many urban consumers, as they provide the convenience of choice along with discounts and home delivery. E-commerce platforms have also achieved a breakthrough in small villages, thanks to the rapid spread of the internet reach. This has resulted in consumers becoming more aware of the product they purchase and are choosing before buying, as compared to the traditional habit of buying whatever the shopkeeper has got to offer, as the product of choice may not be available within a few kilometre reach.

At the same time, the local traders, retailers or the Kirana shops have suffered owing to the muscle power that the e-commerce platforms exercise. Bulk buying allows them to offer deeper discounts. Equipped with data and buying trends e-commerce platforms can influence the prices and also provide unfair competition by promoting their brands. For corporates, it is easy to circumvent the rules as the companies can promote their own brands even without owning them!

The retailers have lost their business charm, as it was before, however, these are changing times. Celebrities are no longer the only people conducting photoshoots or videos to entertain people, thanks to social media platforms. Similarly, e-commerce platforms are giving opportunities to many shops and even households selling products right from the comfort of their place to a huge marketplace, without worrying about the payments and no big marketing budget. E-commerce has been a boon to those who have evolved with it and a curse for those who have maintained a distance from it.

One deserving argument that never gets the spotlight is that the rules are way stricter for the e-commerce platforms while way lenient for the retailers. A poor quality food delivery costs a lot more to the food delivery app than it would have to a restaurant. The e-commerce platforms may bend many rules, but also have to face the bigger wrath of non-compliances. It’s not uncommon for the local Kirana stores to sell products where they have bigger margins. Even the doctors are known to issue prescriptions of specific companies who secretly provide them with kickbacks for pushing their brand instead of others. In the end, it seems fair and square that the ones benefitting from power are also facing the repercussions while the ones who are powerless and weak are living average.

Who benefits the most?

It’s new and it will take time to settle – that’s how revolution happens. New participants enter, break the conventional methods, build new rules and a new normal, others protest the change, the Government intervenes lately, laws are introduced but leave behind loopholes, Courts pass judgements, fair rules are brought in and over time the dust settles. It has happened before and it will happen again. Thus, it is going to take time before this debacle between the E-commerce platforms and the retailers settles. However, one thing is for sure – the consumers are going to be the ones who derive the most benefit. While the new norms make products accessible to the consumers, it also challenges the traditional retailers to be competitive and evolve with the change. The rules bring the e-commerce companies in check and also promote the indigenous retailers which ensure that the economy isn’t hurt by the change. Thus, the consumer is truly the king and while all this happens, let’s stay on the shores and watch how everything takes care of everything by itself.

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