Challenge of the Goliath

The Indian Express     29th June 2021     Save    
QEP Pocket Notes

Context: India must be wary of monopolistic e-retailers.

Challenges of monopolistic e-retailers:

  • Cornering a larger pie of marketplace: Jio Mart, Amazon, Walmart or the Tata Group cornering a larger pie of the Indian retail marketplace estimated to be $2 trillion by 2030.
  • Chinese expansion: Chinese companies like Alibaba and Tencent wanting a piece of the untapped market but retreated due to Indo-Chinese disagreements.
  • Hurting small value chains: 20 million small establishments (the Kirana stores) and the 40 million families spread across every street of the country dependent on the informal and formal retail chain.
    • Big e-retail companies, by being procurers of goods in large volumes, dictate the bottom of the pit prices.
    • Along with investment in Artificial Intelligence and process systems, their delivery prices to consumers will eventually be less than the procurement price of Kirana stores.
  • Crony capitalism: Markets that used to be served by independent entrepreneurs are now increasingly being served by the expansion of existing businesses.
    • Over time, it depletes the independent, entrepreneurial streak that is essential for a nation’s progress.
    • Crony capitalism generates monopolies that reduce competition, strangle innovation and disincentivise smaller businesses that actually create jobs and economic dynamism.
  • Huge social costs:
    • Jobs in the unorganised sector are not registered, and when millions are lost, they will not get documented.
    • With the addition of services, e-retailers will also dictate the terms to credit card companies and e-payment platforms to retain part of the fees collected when customers make purchases.
  • Manipulation of consumer behaviour: Data enables corporates to target and influence consumer behaviour, while aggregated data allows for large-scale manipulation of markets.
  • Media independence: A free and independent media is one of the pillars of democracy. It survives on advertisements and is already beginning to collapse.
    • When Google was founded in 1998, print media collected over 50% of the advertisement revenue. Today, it’s down to about 10%.
QEP Pocket Notes