Impact expected from e-commerce policies on e-retailers

By : |May 10, 2019 0

From February 1 this year, the growing e-commerce landscape in India has dealt with a regulatory intrusion that has the potential to cause significant change to the current scenario. As per the new foreign investment restrictions, e-commerce firms in India will not be able to sell products via companies in which they have an equity interest or ask sellers to sell exclusively on their platforms.

While the policy change has been made to protect homegrown manufacturers, retailers, and e-commerce companies from the growing clout of e-commerce giants such as Amazon and Walmart, it could also reduce online sales by a massive USD 46 billion by 2022, according to a draft analysis by PwC.

E-commerce and India-The ideal match

The e-commerce revolution in India has transformed the retail dynamics completely. Morgan Stanley had even estimated that India’s e-commerce market would grow 30 percent a year to USD 200 billion within a decade that led up to 2027. The average Indian’s purchase behavior has completely changed, revolving around smartphones and search engines than anything else. Stronger internet infrastructure and a predicted base of 500 million smartphone users in India by 2020 give further fillip to the segment. At such a juncture, such regulatory actions, even if driven by good intentions, will end up severely impacting every stakeholder in the domain.

Let’s start with the end-consumer, who will be the worst hit. The continued investment from big foreign players is a major reason why our inboxes are filled with notifications of flash sales, combo deals, cashbacks and offers that, literally and otherwise, are on the end of the ‘reasonability’ spectrum.
(Hint enough?) With foreign investment drying up, the scale and scope of such offers will reduce, resulting in customer dissatisfaction.

For those who argue that this move will help foster offline retailers, small shopkeepers, and small brick-and-mortar or mom and pop stores, they should realize that this thought process is short-sighted and regressive. The consumer has moved on, and imposing restrictions cannot stop the buyer from still going the online route.

Combining the Os to develop an optimized retail framework

What can be the possible alternative then? To find an answer, it is necessary to have an approach that allows brands and retailers to develop strong and simultaneous offline as well as online identities. Offline retailers need to be given opportunities to reach out to buyers through the convenience of the online medium, who can complete the entire selection process and then pick up the item from the physical store, thereby not compromising on the aspect of trust. This will also benefit the small offline retailers as they will be able to reach out to more people.

eCommerce will soon account for 15% of all specialty retail sales in North America (in China, eCommerce is 23% of all retail) and digital influences nearly 60% of all retail sales. Fueled by mobile, which saw sales increase 55% in a year, eCommerce in North America grew by 16% in 2018 to over $500 billion. Customer journeys now straddle both the real and virtual worlds, digital and in-person are now intricately linked.

While dominance by entities, whether foreign or national, needs to be controlled, the answer does not lie in taking knee-jerk actions, but to empower the people so that they would not need regulatory protection. Nationwide retail frameworks need to support the emerging symbiotic commercial ecosystem we call omnichannel – or, quite simply, business.

New effects are emerging, such as that of returns, which have skyrocketed to nearly half a trillion dollars. With AI driven customer behvaiour and data analytics already changing the marketing aspect of retail, now is the time to pre-empt the next change that is waiting to happen-that of Retail 2.0, which promises the best of both worlds to the end-users.

By Rishabh Mehra Managing Director and CEO of Digital Mall Of Asia

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