Coronavirus lockdown: Don’t hurt big retail, e-commerce to help small players

Instead of hampering big retail and e-commerce, better to give small retailers a helping hand

Last week’s flip flop by the Union government on the issue of delivery of non-essential items by ecommerce players during the lockdown to contain COVID-19 is, quite simply, unreasonable. Clearly there’s no locking down of lobbying for protection by specific business sectors, never mind the hardship faced by locked down consumers.

The reversal of the earlier decision that allowed these firms to deliver non-essential items was justified on the grounds of providing a level playing field to the smaller retail players. The latest rules easing restrictions (in urban areas, they allow only standalone shops and those in residential complexes) continue with this ban on e-retailers delivering non-essentials. The discrimination is now extended to shops in market complexes and in malls.

This continues to make life difficult for people who may need non-essentials as well as large retail formats. It is the rare standalone shop that stocks, for example, many work-from-home related tools. Only the e-retailers and shops in market complexes or malls have them. Retail chains in malls can sell only groceries but not non-essentials, while the standalone shops can. This defies all logic.

If the idea was to not have people throng market complexes, some creative solutions could have been worked out. The fact that instead of doing this, the government simply imposed a ban shows the enormous clout enjoyed by the small traders' lobby, which has led the charge against corporate retail chains, foreign direct investment in retail as well as e-retail. Each time the bogey of an existential threat to mom-and-pop stores (and hawkers in the case of fruits and vegetables) has been deployed successfully to block any attempt to facilitate organised retail. And governments, regardless of the party in power, have meekly surrendered.

Big versus small retail

Retail industry experts would object to the word 'bogey', pointing out that experience from across the globe shows that the threat to small stores from big retail chains as well as e-retail is very real. But let’s not overlook the fact that India’s unorganised retail, which accounts for more than 70 percent of the market (over 90 percent in the case of food and groceries) has held its own against big retail formats that emerged in the early 2000s.

Around 2005, many of the organised retail chains set up small-format grocery stores, often very close to mom-and-pop stores. There was much initial consternation, but less than six years later, most of the chains were closing down these shops because of heavy losses. Negligible costs and convenient location give the small shops a significant advantage over retail chains and e-retailers. “See, they’ve gone, I’m still here,” one kirana store owner had gloated when I was researching an article on big versus small retail in 2012. The COVID-19 lockdown has once again seen the neighbourhood kirana/grocery store prevailing over e-commerce players who were seen as their nemesis.

The counter to this is that these advantages may, at best, only slow down the process of eventual and inevitable annihilation at the hands of large players with deep pockets. That is a genuine concern, admittedly. But two points need to be underlined here.

One, moving from unorganised/informal setups to organised/formal setups is part of the development process, just as transitioning from an agriculture-dominated economy to a services-dominated economy is. Should this natural evolution be stopped through the government openly tilting the playing field in favour of the unorganised sector, in the name of levelling it?

Again, retail industry experts would cite international examples of governments protecting mom-and-pop stores. That cannot be a good enough reason. The ultimate test of sound policy has to be the extent to which it increases overall efficiency and gives choice to the consumer. Blocking large retail formats or e-retail formats in the name of protecting the livelihood of micro players cannot be sound policy, by this yardstick.

A quick aside. The general consensus is that the ecommerce players have not been entirely kosher in the way they have operated. If that is the case, let the policy and regulatory loopholes that they may have exploited be closed. But their alleged misbehaviour cannot become a justification or excuse for privileging small players over consumer interest.

Two, a better response will be to strengthen smaller players to hold their own as best as they can. Last year, the Department of Industrial Policy and Promotion (DIPP) was renamed as Department of Industry and Internal Trade, as a way of placating the Confederation of All India Traders (CAIT) which had been demanding a separate ministry for small retail. Why doesn’t the ministry undertake a study of the problems mom-and-pop stores face and help them deal with these? If a surfeit of local regulations are to blame, why not convince state governments and local bodies to ease them?

Strengthening the hands of smaller players

It is quite possible that many mom-and-pop stores may prefer to remain small in order to remain under the regulatory radar (as many small and micro industries do). In 2016, the Union Government brought out a model Shops and Establishments Act that relaxed a lot of the rules shops had to comply with. As in the case of other model Acts relating to state subjects, very few states enacted this law. Why doesn’t CAIT push for this? If access to credit for small shops is difficult, can the Union Government not take this up with banks and the Reserve Bank of India, as it does in the case of the micro, small and medium industry?

Why, also, cannot lobby groups and governments give a helping hand to small stores to up their game? In 2012, CAIT had a pilot programme in Nagpur, training kirana stores to spruce up their premises, computerise operations and tone up procurement. There have been individual examples of startups helping small retail digitise their processes or get on to the e-retailing bandwagon as well as of large chains as well as e-retailers forging tie-ups with the kirana stores (the former has not been very successful, though). More such efforts need to be encouraged. This way small shops can also grow and perhaps employ more than the one or two persons they currently do. Arbitrary bans on large firms, on the other hand, only hamper their growth and job-generating capacity. And the consumer is left with limited choice.

If the government has to have a role in mediating this David vs Goliath battle, it has to make sure that consumer interest is not compromised in any way.

(The writer is a senior journalist and author. She tweets at @soorpanakha)

Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.