Foster competition: Policy should support, not restrict quick commerce

As they grow their business rapidly, quick commerce companies have come under the scanner of the government. Quick commerce is a unique business model with tremendous potential, not just in terms of valuation but in creating a place for itself in the global startup world. The companies delivering on their promise to bring anything from groceries to cooked food and personal goods to consumers in less than 10 minutes, there and thereabouts, are being quizzed by the authorities on their business models. This follows complaints made by traders, represented by the Confederation of All India Traders (CAIT). The CAIT’s argument is that quick commerce companies have violated the norms related to foreign direct investment (FDI) in e-commerce. The CAIT’s complaint to Commerce Minister Piyush Goyal specifically pertains to the use of dark stores to keep inventories in alleged contravention of the FDI rulebook for e-commerce. At the core of the issue is the large network of kirana outlets and the adverse impact that quick commerce may arguably have on their business.

 

While it’s important for the government to strike a balance, it should not be at the cost of affecting growth for businesses that have demonstrated agility and success. Notably, this is not the first time that the kirana angle has come to the fore, prompting government action that can potentially affect healthy competition. For example, FDI in multi-brand retail has been discouraged for years on the grounds that kirana stores will be hurt. Conventional e-commerce companies have also faced disruption related to the flouting of FDI rules after investigation triggered by local traders’ protests. This is a critical issue in politics as traders and retailers are considered politically important. In terms of numbers, there are around 13 million kirana stores in the country and a large majority of them are in smaller cities. Estimates suggest some 200,000 kirana stores shut down in the last year itself, causing apprehension that quick commerce could be the primary reason for the closures. While there’s no scientific basis for the correlation between the two, especially as a large majority of the kirana stores are in smaller cities, where quick commerce is yet to catch up, the government can help kiranas upgrade technologically so that they can be brought up to speed. The way forward should be constructive, led by partnership and collaboration. Kiranas should make the best of the quick commerce opportunity to grow bigger. Quick commerce companies must create quality employment.

 

At a broader level, it’s time for the government to frame the much-awaited e-commerce policy, which has been in the making for years now. With new technologies and innovation — such as quick commerce — emerging, a clear and comprehensive policy will settle many prickly issues that come in the way of building futuristic businesses and value chains. The policy should not stifle competition in the name of FDI. The adoption of technology and changing consumer behaviour can change many business models. Therefore, the policy should be forward-looking. India needs large investment for sustained economic growth and the retail sector could be a big driver. Formalisation in retail can not only help increase job creation, but increased efficiency will also lead to lower prices for consumers. Restrictive policies for firms with foreign investment will affect competition, innovation, and consumer welfare.