The Centre is reported to be considering a proposal to restrict the extent of discounts offered by e-commerce companies. Such discounts, it says, amounts to predatory pricing by the business-to-consumer (B2C) e-commerce platforms that include the likes of Amazon and Flipkart for all kinds of merchandise goods and Swiggy and Zomato for food delivery. While attractive prices on e-commerce platforms certainly appeals to most consumers, low prices alone is not the reason for the rise of online shopping. These platforms have revolutionised the way consumers shop — they can compare prices, product attributes and read customer reviews before making a more informed purchase decision. It has also made the whole act of shopping more convenient. Access to certain brands and products has also improved.
It is true that the traditional retail network has been affected by the coming of the online ones. Consumers are known to check out products in stores and opting to buy online when they find better deals. But sometimes the better deals are in the stores. There can be no large-scale migration of consumers from the traditional retail set-up to online one – mostly because there are concerns of product quality, after-sales service issues with appliances and durables and fitting problems with garments and footwear. Therefore, both forms of retail will co-exist in a growing market such as India. Traditional retail will, however, have to live with smaller margins.
The Centre’s proposals also include prescribing a sunset period for deep discounts and restricting potential competition-distorting mergers and acquisitions. The government must abandon all such thoughts. Rather, it should embrace disruptions caused by technology in retail, and focus on giving consumers the choice to buy what they want and where they want. The Competition Commission of India should intervene where it finds fair play is being distorted. But businesses cannot be prevented from failing. They can be helped to adapt to changes in the environment. In retail too, the traditional and the online need to find ways to co-exist.