E-Commerce

E-commerce refers to buying and selling of good or services via the internet. It includes online sale of products or services directly to a consumer.

Indian e-commerce market is expected to reach US$ 200 billion by 2026.

India is 8^th largest e-commerce market in the world as of 2023.

E-Commerce: Types

• Business to Business (B2B)
• Direct to Consumer (D2C)
• Consumer to Consumer (C2C)
• Consumer to Business (C2B)
• Business to Consumer (B2C)

E-Commerce: Classification

• Market based model providing an IT platform by an e-commerce entity to act as a facilitator between buyer and seller e.g. Amazon, flipkart
• Inventory based model, an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly e.g. Jabong
• The largest beneficiary of e-Commerce sector in India is personal care, beauty and wellness (PCB&W) segment.

E-Commerce: Growth Factors

• Increase in internet and smartphone penetration with launch of 4G and 5G network, which increased internet connections driven by the ‘Digital India’ programme.
• Pandemic and consequent lockdown led to sudden rise in volume of sales taking place through e-Commerce site.
• Increasing financial inclusion due to digital banking leading to ease of online payments.
• Change in lifestyle has resulted in less time for shopping where it has become easy to shop online.
• Increased options for the customer with better deals while shopping online.
• Government support through GEM portal, National retail policy, eased FDI norms, consumer protection (e-commerce) rules etc
• Inflow of FDI from e-commerce giants is constantly increasing Indian Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in B2B models)

E-Commerce: Challenges

• Financial fraud and theft of sensitive information during online shopping has caused breach of right to privacy.
• Whole sector depends on internet connectivity but due to digital divide, the sector is not able to reach its full potential.
• Issue of less accountability and responsibility of the e-commerce companies as compared to physical market shops led to lack of trust among the customers. As a result 95% of shopping takes place on physical market, only 5% shopping is done on online portals.
• Poor logistics result in delayed orders and increased shipping cost.
• Sellers, as in offline, are required to have a physical ‘Principle Place of Business’ which, given the nature of e-commerce, is not practical.

E-Commerce: India’s E-Commerce rules, 2020.

To protect the interests of consumers; encourage free and fair competition in the market; bring transparency and strengthen the regulatory regime.

• Appointment of a nodal person to look into the compliances of the Consumer Protection Act and E-Commerce Rules as applicable.
• Information Disclosures: Rule 4(2) provides for disclosure of material information on the e-commerce marketplace in clear and accessible manner. Every seller has to make sure that descriptions, images, and other content of goods or services are accurate.
• Grievance redressal mechanism is ensured by appointing a Grievance Officer.
• Every marketplace e-commerce entity to provide information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment for consumers to make informed decisions.
• E-commerce Rules 2020 clearly states that no marketplace seller shall falsely represent itself as a consumer and post reviews about goods or services.
• Prohibition on display or promotion of misleading advertisement by e-commerce entity.
• E-commerce firms offer imported goods or services for sale, in such case name and details of importers are to be mentioned.
• Filter mechanism to display notification regarding the origin of goods, suggestions of alternatives to ensure a fair opportunity for domestic goods.
• Sponsored listing of products and services are distinctly identified with clear and prominent disclosures.
• No e-commerce entity shall organize a flash sale of goods or services offered on its platform.
• E-commerce companies will have to appoint a chief compliance officer, nodal contact person for 24×7 coordination with law enforcement agencies and a resident grievance officer.
• Every company which intends to operate in India will also have to register itself with the DPIIT (Department for promotion of industry and internal trade).

E-Commerce: Issue with e-commerce rules in India

• Overregulation leading to retarding growth and job creation.
• Issue of delivery charges, “add on charges” not covered because sellers advertise low prices at the start of the purchasing process and later on, several additional charges, taxes, fees imposed/disclosed towards the end, known as Drip Pricing.
• Implementation of these rules inherently leads to increase in operational expenses of e-commerce companies.
• Rules unclear about the “flash sales”, whether all the flash sales are prohibited or are there certain criteria.

E-Commerce: A way ahead

• Simplify the “Principal Place of Business” (PPoB) requirement by making it completely digital.
• Build infrastructure, both physical and digital which can lead to use of AI for better logistics support.
• Skilling policy and programmes to focus on e-commerce sector to meet future demand.
• Identify products that have potential for the export market, connect e-commerce with export-oriented manufacturing clusters and leverage existing SEZs to create e-commerce export zones.
• Promotion of robust data protection frameworks along the lines of EU’s General Data Protection Regulation (GDPR).
• Provide MSMEs with support to understand how e-commerce functions, awareness programs, incentives to those using digital marketplace.