Blow to e-comm as govt halts delivery of non-essentials during lockdown

While e-commerce companies were all set to restart delivery of non-essential items such as electronics, mobile phones, consumer durables, and clothes starting April 20, the government took a sudden U-turn on its decision to allow all e-commerce platforms to run full-fledged operations.

The government on Sunday clarified that the e-commerce companies will not be allowed to deliver non-essential items, i.e., anything other than food items and medical supplies, from Monday, April 20. This is a rollback of its order earlier this week that allowed e-commerce companies such as Flipkart, Amazon, Snapdeal, and others to deliver non-essential items. Since the national lockdown started on March 25, e-commerce platforms were allowed to deliver only essential commodities such as groceries, food, fruits, vegetables, dairy and milk products, medicines, and medical equipment.

Commerce minister Piyush Goyal in a Twitter post on Sunday said, “Grateful to Hon’ble PM @NarendraModiji for the clarification that e-commerce companies can only supply essential goods during the lockdown. This will create a level playing field for small retailers.”

The government’s decision comes as a big relief to offline retailers, who have been particularly vocal about the large e-commerce companies deploying hefty war chests to wean away customers with deep discounting and offers.

According to media reports, the Confederation of All India Traders (CAIT), a traders’ body, had appealed to the government to reconsider its decision to allow sale of non-essentials by e-commerce companies as it gave them an unfair advantage over brick-and mortar-retailers, who were asked to remain shut throughout the lockdown.

CAIT was quick to announce victory. “CAIT demolished the sinister plan of e-commerce companies to trade in non-essential commodities. Thanks to HM Amit Shah, Defence Minister Rajnath Singh, and Commerce Minister Piyush Goyal,” said CAIT national secretary general Praveen Khandelwal.

“To fulfil consumer needs in these trying times, rules for direct customer delivery need to be broad-based and all types of retailers including neighbourhood stores should be allowed to operate. Neighbourhood stores and large essential products chain retailers have done a great service to the nation thus far and widening of the essential products categories will help us support the government’s steps to ensure safety of its people while also enabling movement of goods required for economic activity,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI) in a statement.

Industry experts feel that the move will help the government instil confidence in small business owners who have been particularly hit by the nationwide lockdown in the wake of the Covid-19 outbreak.

“There is a tendency for protectionism, because you got stuck on giving medical equipment, you are dependent on others and you didn’t get it when you needed it. In that process, the government also needs to ensure that it doesn’t create an impression that they are only taking care of the middle and upper classes,” said Narendar Pani, professor and dean at National Institute of Advanced Studies.

E-commerce companies, who are estimated to lose at least $1.5 billion in gross sales during the nationwide lockdown, have been preparing to run full-fledged operations. The likes of Amazon and Flipkart had slashed commissions and introduced credit lines for the thousands of merchants on their respective platforms to ensure smooth sailing. They had also claimed to have introduced a string of measures, including sanitisation of the warehouses and regular check-up of the delivery fleet, to check the spread of the Coronavirus. They also disallowed return of goods for the time being to avoid direct contact between customers and the delivery executives.

Online purchases are believed to be safer, especially with contactless delivery and digital payments, as against people thronging to stores.

“This could have been better thought through... a lot of the e-commerce companies have invested in planning for the 20th.  And most don’t have deep pockets to handle these kinds of reversal in decisions. The focus, I feel, should have been on ensuring adequate safety protocols,” Debjani Ghosh, president, Nasscom, an IT-BPO lobby body, said in a Twitter post on Sunday.

This isn’t the first time the brick-and-mortar retailers have locked horns with e-commerce companies. They, in fact, have been lobbying with the government for several years now, their major gripe being the loss of customers to online businesses, thanks to the benevolent offers and discounts on e-commerce platforms which small retailers can’t afford.

In February 2019, the government amended the FDI policy for e-commerce which prevented online retailers from sealing exclusive deals for products as well as mandating that no individual seller can account for more than a quarter of the sales on the platform.

While e-commerce firms have created structures to adhere to the rules, discounts, much to the consumers’ delight and the small retailers’ agony, continue unabated.