The Economic Times, April 14, 2020
By Pradeep S. Mehta and Udai S. Mehta
The Covid-19 pandemic has disrupted and impacted the daily lives of citizens in an unprecedented manner. Governments continue to endeavour hard for protecting lives by imposing lockdowns, testing, segregation, and treatment. At the same time also restricting outdoor movement except for supplying and procuring essential goods and services. The role of e-commerce in both wholesale and retail trade is something worth taking a closer look at.
Providing door to door delivery of groceries, medicines and other essential commodities to consumers, while upholding the rules of social distancing is coming to the fore. It is effectively complementing local kirana stores in ensuring availability of essential supplies for consumers. However, the sector is plagued with various challenges, traditional as well as new, which must be overcome in order to unlock the true potential of e-commerce during the pandemic and beyond.
The contagiousness of Covid-19, and its unrelenting increasing spread, has prompted people to explore online purchasing options for essential products and services, from the safety of their homes. Given that it supports the implementation of social distancing measures due to the limited amount of physical contact involved in availing the same. Industry experts have termed e-commerce as the lifeline for cities under lockdown to fight against the pandemic.
E-commerce is also known to be providing many benefits for Micro, Small and Medium Enterprises (MSMEs), by providing them access to wider markets, overcoming geographic boundaries, providing a level playing field for competing with larger players etc. Consumers also gain through wider choice of goods/services, competitive pricing etc. One of the most noteworthy benefits of e-commerce for MSMEs and consumers alike during the pandemic has been matching the demand and supply of essential products such as medicines, hand sanitizers and face masks.
Apart from the ‘safe shopping’ experience and access to essential products provided by it during the spread of Covid-19; e-commerce is also known to be benefiting or has potential to benefit farmers, by enabling them to bypass intermediaries and middlemen, and sell their (perishable) produce directly to wholesale buyers such as corporate grocery stores, restaurants, agri-businesses etc. This provides benefits of enhanced income for farmers, along with reducing wastage and enabling financial inclusion.
Various modes of enabling agri e-commerce are visible today, such as established e-commerce majors expanding into the grocery segment, or brick and mortar grocery stores opening online channels, or exclusive agri e-commerce businesses, or even e-commerce platforms tying with local kirana stores for last mile deliveries. Notably, some of such e-commerce service providers are changing their business model during the lockdown, and are connecting farmers with end consumers, in the absence/reduction of traditional wholesale buyers as mentioned above.
Recognising such benefits, especially in these times, the Ministry of Consumers Affairs of India, had advised state governments and local administration to exempt e-commerce operations and its stakeholders, from any lockdown prohibitions. Given the benefits as mentioned above, it is also important to note the many challenges faced by different stakeholders of e-commerce, during the pandemic. These may be bucketed in four primary areas.
First, regulatory and enforcement failure with respect to uniform classification of essential items across various states. Although the government has permitted the delivery of essential goods such as food, medicine and pharmaceutical equipment through e-commerce, industry experts argue that service providers are struggling to procure permit passes for their supply chain staff separately for each state, which is becoming time-consuming, since instructions have not been passed onto local authorities.
Fears of stringent police action against delivery staff are also deepening the problem. Such hurdles are symptomatic of institutional infirmities like absence of effective communication and accountability mechanisms among local authorities, which often pose challenge to seamless delivery of e-commerce products, in normal circumstances as well.
Second, broken supply chains, due to initially blurred distinction drawn between stakeholders who are vital to e-commerce supply chains and those who are not. It is believed that government exemptions were initially limited to media and healthcare-related personnel, police and other administrative officials. Due to this the demand-supply chains were broken for e-commerce service providers. This had a ripple effect on the timely fulfilment of consumers’ orders for goods and services at their doorstep, thus jamming the demand cycle.
Furthermore, key gaps have also emerged in backend supply chains, i.e. between manufacturers, wholesalers and retailers, thereby jamming the supply cycle as well. Efficient supply chains are hallmark of healthy economy and well-functioning e-commerce sector. Regulatory uncertainty and knee jerk reactions, even in emergency situations, do more harm than good, as evident from the government’s approach to manage supply in light of the pandemic.
Third, adverse post lockdown impact on small online sellers on e-commerce platforms. Once the pandemic is over, the government must be sensitive towards such small players, whose businesses have come to a grinding halt amid the lockdown. There are many suppliers engaged in providing non-essential goods and services (like electronics, apparel, taxi services etc. – which make up bulk of online sales) who unlike deep pocketed larger players, do not necessarily have the wherewithal to sustain their fixed business expenses like rents, salaries, EMIs etc.
One of the ways to quickly provide relief to smaller e-commerce players is to allow delivery of non-essential items while practising hygiene and social distancing. Reforming foreign investment laws, improving regulatory coherence, and ensuring proportional regulation of the sector may also go a long way in fostering the growth of smaller e-commerce players.
Fourth, generic challenges with respect to e-commerce still remain at large, which are again highlighted during the pandemic. These pertain to inadequate Information and Communication Technology (ICT) infrastructure for last mile internet access, lack of awareness and capacity constraints amongst MSMEs and consumers, etc. which are hindering the uptake of e-commerce. In addition, the fool proof cyber security and protection of privacy still remain an issue, affecting consumers’ trust to shift online.
Stakeholders must collaborate, and support each other in finding innovative solutions together, for addressing such challenges, since enabling e-commerce will help in disabling the Covid-19 pandemic.
As a part of the 4th Industrial Revolution, governments must be encouraged to understand various aspects of e-commerce,to unlock its many benefits for the future, and accelerate the transition of their country to a digital economy. For this to happen, a transparent and structured discussion on e-commerce regulation is must. Processes to foresee and prevent unintended consequences of regulatory actions must be institutionalised. Capacity building exercises must also be undertaken for MSMEs for increasing the uptake and optimally using e-commerce services for meeting the needs of consumers. Steps must also be taken for enhancing the penetration of e-commerce services to last mile consumers, through infrastructural development and awareness generation.
To this effect, Consumer Unity & Trust Society (CUTS), and United Nations Industrial Development Organization(UNIDO) have entered into a partnership, intending to undertake evidence-based research on the many benefits and challenges of e-commerce, particularly in BRICS and select developing countries, taking into account the interests of various stakeholders.
(The authors work for CUTS International, a global public policy research and advocacy group)
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