Piyush Goyal raises concerns over ecommerce growth, criticises discounting strategies
Goyal iterated the need to look at the medium-to-long term socio-economic impact of the growth of eCommerce.
Union Commerce Minister Piyush Goyal on Wednesday expressed deep concerns about the rapid expansion of the ecommerce sector in India, particularly criticising the aggressive discounting practices of major players like Amazon.
Speaking at the launch of the report 'Net Impact of E-Commerce on Employment and Consumer Welfare in India' on 21 August in Delhi, Goyal emphasised the potential long-term effects of this growth, including social disruption and negative effects on the traditional retail sector, which supports around 100 million small retailers in India.
He iterated the need to look at the medium-to-long term socio-economic impact of the growth of ecommerce. He said, “I don’t deny that ecommerce has a role, but we have to think carefully what that role is, and how it can evolve in an organised fashion. It shouldn't be seen as a point of pride if half of our market shifts to ecommerce in the next decade; it should be a cause for concern," he said.
Amid a significant rise in e-commerce activities, Goyal targeted the severe discounting strategies employed by companies such as , arguing that they undermine fair market competition. “The trend of extreme discounting by ecommerce giants is concerning. Although it may seem advantageous for consumers in the short term, it can have serious repercussions for local businesses and the broader market,” Goyal remarked.
The Minister pointed out that such steep discounts often compel small and medium-sized enterprises (SMEs) to reduce their prices to unsustainable levels, potentially leading to their market exit. He warned that this could lead to a monopolistic market in which a few dominant companies control the retail sector, thereby stifling competition and reducing the choices available to consumers over time.
However, the report reveals that ecommerce has significantly contributed to employment, creating 16 million jobs across various skill levels, including marketing, management, customer service, operations, and logistics. It also created twice as many jobs for female workers compared to other retail segments. The impact is particularly significant for vendors in smaller cities.
About 60% of smaller city vendors have seen increased sales and profits since launching online sales, with over two-thirds of these experiencing a rise in sales value and profits in the past year, the report added.