Flipkart and Snapdeal give way, the government is planning the largest e-marketplace for official procurements
At a time when homegrown e-commerce companies like Flipkart and Snapdeal are feeling the heat, a rather big player is planning its entry into the e-commerce market.
According to a report by The Economic Times, the government’s central purchase arm has conceptualised an online portal called GeM or Government e-marketplace. The portal is expected to allow government officials to make routine office purchases like cutlery, office equipment and electronic goods. The report, quoting government sources, estimates that purchases through the portal could touch Rs 1.4 to 1.8 lakh crore, much higher than the roughly Rs 80,000 crore sales that Flipkart is targeting by June 2016.
According to a PTI report, the Finance Ministry in May gave a green signal for the creation of ‘Government e-marketplace’ for online purchase of goods and services to various central government ministries and departments.
The report further stated that on request from the Commerce Department, the Department of Expenditure had made a new provision in the General Financial Rules (GFR) for creation of a one-stop GeM by Directorate General Supply and Disposal (DGS&D).
DGS&D will host the online GeM, the report states, ensuring adequate publicity, including periodic advertisements in newspapers regarding the items to be procured through GeM for prospective suppliers.
Utilised by government buyers, purchases of Rs 50,000 can be made from any of the available suppliers on the GeM, on meeting quality and delivery standards. After Rs 50,000, the criterion of the lowest price among available suppliers will apply on the GeM. This brings in efficiencies to the process while eliminating possible corruption in the systems.
GeM may offer standard services such as florists and taxis (cab pickups of officials) with tools for online bidding and online reverse auction. A pilot is expected to be rolled out over the next month with the Department of IT preparing the interface.
The government aims to roll out the full-fledged version of the platform by early next year.
With the Finance Minister Arun Jaitley announcing the proposal to reform government procurement in the last budget speech, the idea was to aggregate demand from government offices and use the power of bulk buying to get better cost advantages from electronic goods suppliers. The proposal was also presented to Prime Minister Narendra Modi as one of the avenues to drive operational efficiencies.
The portal is expected to come with several payment options. It was reported that while it is not mandatory to procure only through the central agency, the Department of Expenditure may issue instructions to government agencies to put out their requirements on the portal.
The e-commerce wars
The plans by the government to use an online portal for procurements goes to show how online shopping has now become mainstream. Large corporates also are launching shopping portals. Of course, unlike the government which is using the online platform for procurement the corporates are setting up online retail businesses. Just last month, the Tata Group launched its e-commerce platform – Tata CliQ. Before that in October 2015, it was Aditya Birla Group that went live with its new online fashion store, abof.com, while taking their brick and mortar stores online. Others include Reliance Industries’ online fashion retail platform, Ajio, and Arvind Ltd which went live with their omni-channel platform NNNow.com last month.
Mahindra Group is also launching its e-commerce venture M2ALL.com. Further, Reuters reported yesterday that Jeff Bezos, CEO of Amazon had committed to boost its investment in the country to over $5 billion. According to reports, this year Amazon saw its market share, in terms of shipments, gallop to over 21 percent from 14 percent, making it the only major player to increase its share from a year ago.
According to a recently released study by Internet and Mobile Association of India (IAMAI), the e-commerce market in India is expected to double to over Rs 2 lakh crores by December 2016. With the government moving a chunk of its procurement online, the internet economy is only set to grow further.