Limitations of E-Commerce in India
Kartavya Desk Staff
Syllabus: Economy
Source: BS
Context: Union Commerce Minister Piyush Goyal expressed concern over the rapid expansion of e-commerce in India, highlighting potential social disruptions and questioning predatory pricing by giants like Amazon.
What is E-Commerce?
E-commerce (electronic commerce) refers to the buying and selling of goods or services using the Internet, along with the transfer of money and data to execute these transactions. It allows businesses and consumers to conduct transactions without the need for physical interaction.
Example: Amazon is a popular example of an e-commerce platform.
The recent report shows e-commerce, making up 7.8% of total retail sales in 2022, is growing at a 27% CAGR from 2018 to 2030.
Issues with E-Commerce:
Impact | Description
Predatory Pricing | E-commerce platforms may offer deep discounts to eliminate competitors, potentially leading to monopolies. Once competition diminishes, consumers may lose the cost-effectiveness benefits previously offered.
Reduced Options for Consumers | The decline of local shops can increase travel costs and limit shopping choices if consumers avoid online shopping.
Loss of Employment | The reduced competition and decline in traditional retail sectors may lead to job losses in these industries.
Privacy Issues | There is a risk of abuse of consumer data and privacy violations due to inadequate protection measures.
Breach of Law | Some e-commerce platforms, like Amazon in India, are engaging in direct consumer sales despite existing regulatory restrictions on B2C transactions.
In this context, the government launched ONDC to provide a level playing field to retailers as well as benefit consumers.
What is ONDC?
Open Network for Digital Commerce (ONDC) connects e-marketplaces, enabling sellers and brands to list and sell products directly to customers, bypassing middlemen. It transitions from a platform-centric model to an open-source network for buying and selling goods and services.
• Objectives of ONDC are: Democratization and decentralization of e-Commerce Inclusivity and access for sellers Increased choices and independence for consumers. Making goods and services cheaper.
• Democratization and decentralization of e-Commerce
• Inclusivity and access for sellers
• Increased choices and independence for consumers.
• Making goods and services cheaper.
• It is an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry.
• It is a not-for-profit company incorporated under Section 8 of the Companies Act 2013 that manages and operates the ONDC Network.
ONDC can transform the e-landscape of India through:
• Empowering consumers: ONDC increases transparency, giving consumers more information to make informed choices and access a wider range of sellers, potentially lowering prices. Eg: Recently ONDC integrated Chennai metro ticketing into its platform.
• Eg: Recently ONDC integrated Chennai metro ticketing into its platform.
• Boosting competition: ONDC breaks down the dominance of existing platforms, creating a level playing field that incentivizes competition among sellers, leading to more product variety and lower prices. Eg: McKinsey reports ONDC can boost self-employment in India.
• Eg: McKinsey reports ONDC can boost self-employment in India.
• Innovation: ONDC’s open-source architecture encourages innovation within the e-commerce ecosystem.
• Cost efficiency: ONDC’s decentralized structure can streamline operations and reduce redundancies, leading to cost savings. Eg: ONDC doesn’t charge any platform fees, unlike platforms like Swiggy.
• Eg: ONDC doesn’t charge any platform fees, unlike platforms like Swiggy.
• Boosting small businesses: ONDC removes entry barriers for MSMEs and local vendors, promoting greater participation and inclusivity in the digital marketplace. Eg: ONDC boosts up the formalization of the Indian economy.
• Eg: ONDC boosts up the formalization of the Indian economy.
However, it faces several obstacles such as:
• Complexity factor: ONDC’s intricate mechanisms make it less user-friendly than systems like UPI, potentially hindering easy adoption. Eg: Integration of different sectors into a single platform leads to confusion.
• Eg: Integration of different sectors into a single platform leads to confusion.
• Dispute resolution concerns: ONDC’s focus on online buying and selling without managing the entire transaction lifecycle may increase disputes over deliveries, product quality, and after-sales service.
• Lack of robust grievance redressal mechanism: The unclear responsibility for customer service and complaint handling may deter users from joining the platform. Eg: No dedicated Ombudsman or grievance redressal cell.
• Eg: No dedicated Ombudsman or grievance redressal cell.
• Challenges from existing e-commerce platforms: Established e-commerce giants have strong consumer loyalty through programs and incentives, requiring ONDC to develop compelling strategies to attract and retain customers. Eg: Options like Flipkart Plus and golden membership for loyalists.
• Eg: Options like Flipkart Plus and golden membership for loyalists.
• Price advantage uncertainty: As a facilitator, ONDC might not directly influence pricing or offer discounts comparable to established players with bulk deals and partnerships. g.: Big billion-day sales by firms like Amazon and Flipkart.
• g.: Big billion-day sales by firms like Amazon and Flipkart.
Way ahead:
• Enhancing digital infrastructure: Government investments in broadband connectivity to bridge the digital divide, especially in rural and remote areas.
• Promoting digital literacy: A digital education policy in regional languages will empower consumers and sellers to use ONDC effectively.
• Targeted outreach programs: Well-funded outreach programs can attract and onboard small sellers, particularly MSMEs promoting platform adoption.
• Dispute resolution framework: An efficient single-window mechanism is essential for addressing information asymmetry, quality concerns, and buyer-seller disputes.
Regulations of E-Commerce:
• Consumer Protection (E-Commerce) Rules, 2020: These rules set guidelines for e-commerce platforms to ensure transparency, protect consumer rights, and address grievances.
• Consumer Protection Act, 2019: This act provides a comprehensive framework for consumer rights protection, including provisions for e-commerce transactions and dispute resolution.
Conclusion:
As Nandan Nilekani’s committee suggested ONDC can replicate the success of UPI in India with a collaborative effort between the government, industry players, and civil society.**
Insta links:
Open Network for Digital Commerce (ONDC)
Mains Link:
Discuss the significance of ONDC. (150 Words)
Prelims Links:
Consider the following: ( UPSC 2022)
• Aarogya Setu
• DigiLocker
Which of the above are built on top of open-source digital platforms?
(a) 1 and 2 only (b) 2, 3 and 4 only (c) 1, 3 and 4 only (d) 1, 2, 3 and 4
Ans: D