India’s commerce minister Piyush Goyal on Wednesday expressed concern over the rapid growth of e-commerce in the country, warning of potential disruption to small retailers.
Speaking at the launch of a report on the impact of e-commerce on employment and consumer welfare in India, Goyal said the projected dominance of online marketplaces in the coming decade was worrying rather than praiseworthy.
“Are we going to cause huge, social disruption with this massive growth of e-commerce? I don’t see it as a matter of pride that half our market may become part of the e-commerce network 10 years from now; it is a matter of concern,” Goyal said, adding that the e-commerce market was doubling in size every four years.
India’s $1.1 trillion retail market saw e-commerce sales of less than $80 billion last year, according to HSBC. The e-commerce sector’s growth rate stands at 11%-12% annually. Quick commerce startups, which promise deliveries in 10 minutes or less, are experiencing rapid expansion. BlinkIt (owned by Zomato), Swiggy Instamart (backed by SoftBank) and Zepto (backed by Lightspeed) are projected to collectively achieve over $4.5 billion in sales this year, a year-on-year growth rate exceeding 100%, according to a TechCrunch analysis.
E-commerce firms are going after the high-margin products that brick-and-mortar stores sell, something that small retailers rely on for their survival, Goyal said. “How many mobile stores do you see now at the corner? How many were there 10 years ago? Where are those stores?”
He criticized the pricing strategies of major e-commerce firms, questioning whether their reported losses indicated predatory pricing.
A major investment by Amazon in India is celebrated, he said, but people are forgetting “the underline story — that this billion dollars is not coming for any great service or investment to support the Indian economy.”
“They made a billion dollar loss in their balance sheet that year, they had to fill in that loss… If you make Rs 6,000 crore ($715M) loss a year doesn’t it sound like predatory pricing to you? They are after all an e-commerce platform, they are not allowed to do B2C, legally…However, reality is all of you buy on these platforms, how are they doing it? Should it not be a matter of concern for us?”
Indian law requires Amazon, Flipkart and other e-commerce players to operate as pure marketplaces in the country. The e-commerce firms cannot own the inventory they sell — a lesson they have learned the hard way.
This isn’t the first time Goyal has been critical of e-commerce or Amazon in India. Two days after Amazon announced a $1 billion investment into its India business in 2022, Goyal said the investment wasn’t a great favor to India.
“I am not wishing away e-commerce,” Goyal said Wednesday. “I don’t deny that e-commerce has a role, but we have to think very cautiously what that role is.”