Recent media reports with respect to Consumer Protection (e-commerce) Rules have captured the attention of small and medium-sized enterprise (SME) players. Newspaper reports suggest that the government has restarted the conversations on bringing back the previously opposed rules that will put curbs on e-commerce business and operations including a ban on consumer-friendly pricing, conformity with the retail sector and its business conduct, curbs on technology-intensive supply chain management, etc. Another report also addressed that there may be discussions ongoing to even ban ‘related parties’ involvement in the sector.
Consultation with MSMEs in policymaking a necessity
There are several fundamental reasons that have garnered MSMEs attention. Foremost, while the Ministry had previously consulted MSMEs for suggestions on the rules but further involvement of MSMEs is required if the government is undergoing serious internal considerations on some of the aforementioned factors. This may become concerning because while the perception remains that e-commerce is about platform entities and the consumers, in our view however, the role of MSMEs in e-commerce is equally essential considering it contributes significantly to the proportion of seller base and sales. Moreover, around two-fifth of the MSMEs in India indulge in online forms of sales, making it imperative to effectuate the conversation.
Due consultation and incorporation of MSME voice is important and should be an utmost priority. The fact of the matter is that more than just encompassing voices, the entire ecosystem of the economy, whether the supply chain, service industry, merchants, and many other operational activities, is largely fuelled by the MSMEs. Thus, the success or failure of any policy implementation will be driven by participation, innovativeness, and scope for expansion of the MSMEs.
E-Commerce Rules Headlines Creating Causes of Worry
On a more substantive level, there are a few major concerns. Firstly, the newspapers seem to suggest that physical and e-commerce need to be equated. However, we can respectfully disagree with this notion as the argument overlooks the fact that the provision of e-marketplaces is a technological breakthrough that has greatly benefited everyone, especially MSMEs, by providing them with better resources for growth. These marketplaces have evolved for better service delivery by studying what the consumers want and adopting best practices from the data available and global best practices. Both cannot be fundamentally seen through the same lens of effectiveness and operations.
Basing the regulations on the presumption that such digital marketplaces may seek to undermine consumer interests and kill competition, is also an overstretch. Additionally, e-commerce currently represents less than 6 percent of total retail sales in India. While the importance of marketplaces is stated, it is also important to highlight that more than half of the SMEs in the country selling online have their own e-commerce platforms. Any stringent compliance put forward will thus have direct implications on the smaller platforms as well. There is thus a need for a liberal regulatory approach to the process rather than any restrictive pathways.
Secondly, the “related parties” criterion which is getting serious reconsideration seems like a misplaced thought and has little value to the discussion. It is important to note that “related parties” or “arm’s length” business models are permitted for nearly everything else, and furthermore, the matter of consumer protection seems to have been incorrectly linked with the “related parties” criterion and requires thoughtful recalibration. The Ministry of Consumer Affairs is right in its intent to ensure that every player has an opportunity to participate effectively, and the broader set of guidelines overseeing that own or self-products are not unfairly pushed forward will be key.
The third aspect concerns logistics. One of the reasons why MSMEs have succeeded in online marketplaces has been the ease and convenience of how the platforms run their logistical services. It has resulted in lower costs for logistics and related operations, translating to affordable prices for consumers purchasing MSME products. However, there appears to be a lack of awareness of what logistics truly means, and I think people must understand that it is not just the deposit factor but also the returns that logistics services facilitate. It is about the cost of doing business that logistics successfully eases out with. If the government’s goal is to support alternate players, the focus should be on implementing practical measures and not resorting to any potential options of shutting down. Such contradictory steps would lead to a policy deadlock, jeopardising the growth of MSMEs, which have relied on the ease of logistics services.
Consumer Centricity has been e-commerce Focus
The guiding force of success for e-commerce entities has not just been its innovation in marketplaces but due credit must also be given to the focus and concentration on consumers. The e-commerce revolution has transformed consumer feedback in the country and is one of the only platforms where consumers can return goods and products if they believe are not up to their requisite standards. This has pushed the entire manufacturing industry in India to develop and sell quality goods.
It is important to have effective measures in place to ensure that all goods produced in the country meet high standards of quality for consumption. E-commerce can be a valuable tool in achieving these standards by building trust among consumers. MSMEs often sell their goods directly to consumers without the involvement of middlemen, which reduces the risk of fraudulent activities that could potentially affect the quality and authenticity of products. Digital marketplaces are thus making it easier for MSMEs to engage in B2C commerce while maintaining high standards of quality for consumers. For instance, if an MSME is attempting to source and sell genuine Darjeeling tea, but the presence of various B2B levels has increased costs and raised doubts about authenticity by the time it reaches consumers, e-commerce players can serve as a viable “direct” alternative.
It is also important to note that there is a limited availability of databases that focus on consumer viability and MSME accessibility in relation to e-commerce operations in India. Given that India holds the G20 Presidency this year, there is an opportunity for a collaborative effort to establish a framework or guiding principles for the collection of data on crucial aspects of e-commerce adoption. This will not only address the current information gap but also aid in informed decision-making on the subject in the future.
Policymaking and MSMEs are Inseparable
MSMEs in India have the rightful epithet of being the ‘backbone’ of the country’s growth. To ensure that policies are not one-sided, what is required is a well-conceived and inclusive ecosystem of regulatory approaches. This necessitates ongoing engagement with all stakeholders, including MSMEs, suppliers, platform entities, and consumers. Such engagement will enable the tailoring of regulations to the unique needs of each sector.
The government must formulate policies that enable MSMEs to be competitive in terms of market access and credit availability. Digital marketplaces can contribute to a more equitable market by offering a level playing field for small businesses to compete against larger enterprises.
If the speculative points are implemented, it may impede the success of investments in the sector. The advent of e-commerce, supported by these investments, has facilitated MSMEs in accessing a larger consumer base and has also provided them with hassle-free payment mechanisms. Hence, it is imperative that we adopt a progressive outlook towards these achievements.
The author is the President at the India SME Forum. Views expressed are personal.
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