Indian Commerce Minister Piyush Goyal on Wednesday expressed concern over the rapid growth of e-commerce in the country, warning of potential disruption for 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 expected dominance of online marketplaces in the next decade is more worrying than commendable.
“Are we going to cause massive social disruption with this massive growth of e-commerce? I don’t see it as something to be proud of if half of our market is part of the e-commerce network 10 years from now; it’s a concern,” Goyal said, adding that the e-commerce market doubles in size every four years.
India’s $1.1 trillion retail market saw e-commerce sales of just under $80 billion last year, according to HSBC. The e-commerce sector is growing at a rate of 11-12% annually. Rapid commerce startups, which promise delivery in 10 minutes or less, are expanding rapidly. BlinkIt (owned by Zomato), Swiggy Instamart (backed by SoftBank) and Zepto (backed by Lightspeed) are collectively expected to generate more than $4.5 billion in sales this year, a growth rate of more than 100% year-over-year, according to a TechCrunch analysis.
E-commerce companies are targeting high-margin products that traditional stores sell, which small retailers rely on for their survival, Goyal said. “How many mobile stores do you see on the corner now? How many were there 10 years ago? Where are they located?”
He criticised the pricing strategies of major e-commerce companies, questioning whether the losses they reported indicated exploitative pricing.
He said Amazon’s huge investment in India was something to celebrate, but people had forgotten “the core story – that this billion dollars is not going to be for any great service or investment to support the Indian economy.”
“They had a $1 billion loss on their balance sheet that year, and they had to recoup that loss… If they are making a loss of Rs 6,000 crore ($715 million) a year, doesn’t that seem like predatory pricing to you? They are an e-commerce platform, after all, and they are not allowed to do business-to-consumer transactions, legally… Yet the reality is that you are all buying from these platforms, so how do they do that? Shouldn’t that be a concern for us?”
Indian law requires Amazon, Flipkart and other e-commerce companies to operate as pure marketplaces in the country. E-commerce companies are not allowed to own the inventory they sell — a lesson they learned the hard way.
This is not the first time Goyal has criticised e-commerce or Amazon in India. Two days after Amazon announced a $1 billion investment in its India business in 2022, Goyal said the investment was not a big benefit for India.
“I don’t rule out e-commerce disappearing. I don’t deny that e-commerce plays a role, but we have to think very carefully about what that role is,” Goyal said on Wednesday.