Had it not been for the extraordinary events of the past year, there would be nothing remarkable about Jayshri Hodkar’s struggle to survive as a single mother of two on earnings from her tailoring business , a single machine in a room of a rented house.
It’s one of those tens of millions of small businesses you see all over India. Most are so indescribable that it is hard to imagine that together they provide the wheels on which the $2.7 trillion (roughly Rs. 1,95,59,880 crore) economy turns. Their value only became apparent when the wheels came off.
This week last year, Prime Minister Narendra Modi announced a sudden and complete lockdown. And that’s when the Mahi Tailoring Center in Indore, a historic city of 3 million people in central India, became important to one of the world’s richest men, 11,000 miles from Seattle. With no customers coming to have blouses sewn, Hodkar came to one conclusion: her shop could not fight the pandemic alone. To pay rent and tuition, she had to hitchhike with Jeff Bezos’ Amazon.
The world’s largest retailer permeates the intricate tapestry of the one billion-plus market open to it. It does this by modifying its business models based on local preferences, practices, quirks, and disruptions related to COVID-19. The “I Have Space” partnership that Hodkar has signed up to allows entrepreneurs to collect Amazon packages for their area, store them, and go door-to-door when they know there will be someone around. home to receive orders. Doorstep or mailbox drops may be common in the US, but they are not a viable option in India. Rather than wasting money on failed deliveries, it helps Amazon have a local as an ally. Hodkar tells me she earns as much as before the pandemic for a few hours the 30-something spends on the road on her Honda Activa two-wheeler.
The American e-commerce company is approaching zero hour in India. The New Delhi Supreme Court will soon rule on its bid to scuttle the $3.4 billion (roughly Rs. 24,630 crore) sale of the assets of indebted retailer Future Group to Mukesh Ambani’s richest man Reliance India , which already has 12,000 stores. Gaining control of Future’s outlets could leave him with unwavering dominance. Footfall at Reliance Retail was still at 75% of pre-COVID levels last quarter. But by using 1 million small merchants as partners — and turning some of its own stores into fulfillment centers — Ambani, too, is mixing online and offline to go hyper-local. With a big advantage over Bezos: its 410 million telecom customers.
In a recent survey, consulting firm Technopak predicts that the retail market will grow by $700 billion (about Rs 50,69,790 crore) by 2030, with most of the expansion and half of the new jobs from merging digital and physical commerce. India’s 0.2% share of global online orders would rise to 8.9%. Besides Bezos and Ambani, Walmart-owned Flipkart and Mumbai-based conglomerate Tata Group, which recently acquired an Alibaba-backed online grocer, will be the main contenders for the prize.
India’s promise lies in growth, for which Amazon is ready to go as local as it takes. The danger lies in excessive control. Rules governing foreign investment in online retail could become even more restrictive. New guidelines are reportedly in the works to discourage sellers on Amazon and Walmart-Flipkart from buying goods from wholesale units of US companies. Elsewhere, in what seems to have become an annual ritual, the third draft national e-commerce policy makes the rounds. The document asks platforms to “ensure equal treatment for all sellers” and not to adopt “algorithms that result in prioritizing certain sellers”.
The importance of an open and well-contested market cannot be disputed. But it would be unfair to force e-commerce operators to give all sellers the same treatment regardless of “size, scale, quality and what they bring to the table”, as Krishnan Ganesh, l ‘an early backer of Big Basket, the online grocery store recently acquired by the Tata Group, told BloombergQuint.
Also, a foreign versus local lens may not be appropriate for judging monopolistic behavior. India’s antitrust regulator wants to investigate both Amazon and Flipkart-Walmart. But pure e-commerce is only a fraction of the $1 trillion (about Rs 72,41,450 crore) retail market. In the emerging online and offline Retail 4.0 landscape, local competitors won’t exactly be minnows. Moreover, they will be freed from the political shackles that keep global players in check.
Retail 4.0
The ideal policy would encourage small brick-and-mortar retailers to digitize, giving them a chance to adapt. Not all convenience stores need their own website. But they can all benefit from accessing credit and tapping more brands directly, which 1.7 million retailers in 900 Indian cities are already doing on an indigenous app called Udaan, built by a five-year-old company. which is among the fastest growing unicorns in the country. , as startups valued at over $1 billion (about Rs. 7,240 crore) are commonly known.
The rivalry between Bezos and Ambani will not end with a verdict in the Future Group case, where the founder took money from Amazon but decided to sell to Reliance. (Future Retail shares fell from their 10% limit on Friday after the Delhi High Court ruled that an interim order by a Singapore arbitral tribunal to suspend the deal was enforceable in India.) The Next Frontier will be Payments, where the two have forged competing groups to bid for the right to operate national digital networks. These will run alongside the current non-profit interface which processed $59 billion (about Rs 4,27,320 crore) in transactions in January, double the previous year. Once again, the explosive growth will create fierce competition. Visa is an Amazon partner. Reliance has partnered with Facebook and Alphabet, Google’s parent company, which also back its telecommunications company Jio. The Tata group entered with Mastercard.
This license (it could be one or two) would say a lot about which of India’s retail crown hopefuls would be able to penetrate deeper – not just into consumers’ wallets, but into lives and livelihoods. sustenance of the smallest grocers, tailors, and supply shops in the remotest corner of India. This is where the winning edge lies.
© 2021 Bloomberg L.P.
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