Piyush Goyal questions Amazon’s biz model

Huge losses in India smell of predatory pricing, which is not good for the country as it impacts crores of small retailers. Online, you can order whatever you want...it is a matter of concern - Piyush Goyal, Commerce & Industry Minister

Social Disruption

♦ 100 mn small retailers in India

♦ e-commerce cos eating into small retailers’ biz

♦ Fast-growing online retailing causes huge social disruption

♦ e-commerce platform not allowed to do B2C biz

♦ These cos only re-route all businesses through an entity to show that it is B2B

New Delhi: Commerce and Industry Minister Piyush Goyal on Wednesday questioned Amazon’s announcement of $1 billion investment in India, saying the US retailer was not doing any great service to the Indian economy, but filling up for the losses it had suffered in the country.

He said that their huge losses in India smell of predatory pricing, which is not good for the country as it impacts crores of small retailers. Launching a report on ‘Net Impact of e-commerce on Employment and Consumer Welfare in India’ here, the Minister lambasted the e-commerce companies, questioning their business model that has been impacting small retailers in the country.

“When Amazon says that we are going to invest a billion dollars in the country, we celebrate, and we forget that the billion dollars are not coming in for great service or investment to support the Indian economy. They made a billion-dollar loss in their balance sheet that year, they had to fill in that loss. And how did that loss get caused, they paid Rs1,000 crore to professionals. I do not know who these professionals are...I would love to know, which chartered accountants, professionals or lawyers get Rs1,000 crore unless you are paying all the top lawyers to block them so that nobody can fight a case against you,” the Minister said.

He wondered whether the Rs6,000 crore loss in one year does not smell of predatory pricing, as they are just an e-commerce platform and those companies are not allowed to do B2C (business to consumer) business. As per the policy, the e-commerce platform legally can’t do B2C in the country. The Minister alleged that these companies only re-route all the businesses through an entity to show that it is B2B.

“How are they doing it? Should this not be a matter of concern for us,” he said. He added that the e-commerce sector has a role, but one has to think “very” carefully and cautiously about what that role is.

“How that role can be in an organised fashion. Is predatory pricing policies good for the country?” Goyal asked. He also said that e-commerce companies are eating into the small retailer’s high-value, high-margin products that are the only items through which the mom-and-pop stores survive. The Minister also said that with the fast-growing online retailing in the country, “Are we going to cause huge social disruption with this massive growth of e-commerce”.

Citing examples of Western countries, Goyal said Europe and America have seen the consequences of this. “What has happened to the mom-and-pop stores there? How many do you see surviving, why did Switzerland allow e-commerce until recently (so late),” he said, adding “I am not wishing away e-commerce, it is there to stay”.