Archive for September, 2016

5. Making Overall Sense of the E-commerce Hype 

by Rahul Varman, email: rahulv[at]iitk.ac.in

We would like to end by emphasising five significant points for further consideration.

  1. Corporatisation-Monopolisation of Disaggregated Services through Information Technology

As is evident from the discussion above we can see rapid consolidation and monopolisation under a handful of corporates, disingenuously called ‘start-ups’, of widely spread and decentralised services such as retail and taxis, as well as many other such services: hotels, ticketing, etc. With large scale evictions from land and migration from the countryside, very little employment generation in large scale manufacturing, and a deepening crisis in small scale manufacturing, and a considerable slowdown in construction and mining, there is an acute scarcity of employment. Services such as petty transport and retailhave been a residual source of some kind of employment For instance, in Kanpur, a very large number of those who were rendered unemployed by the closure of the textile mills have ended up as auto rickshaw drivers, cycle rickshaw operators or salesmen/shopkeepers. As consolidation and monopolisation happens in such services, capital intensity is bound to increase, much like what we have seen in manufacturing sector since the industrial revolution, closing the avenues of even such menial employment for a large set of people in a populous country like India. Already the likes of Uber and Google are making heavy investments for development of driverless/self-driving cars, and Amazon is making heavy investments towards robotisation of its warehouses and using drones for deliveries. BBC,[1] in a recent post, elaborates on Uber’s point of view: “But Uber’s big inconvenience is the fact it needs drivers, and so this line of research is about eliminating that final piece of the puzzle to boost profits even more (emphasis added).” (more…)

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IV. The End Game: Towards Monopolisation and Financialisation

by Rahul Varman. email: rahulv[at]iitk.ac.in

If we summarise what we have discussed so far, it appears that apart from the hype and fantastic valuations as well as a few billionaires, e-commerce has little to offer – massive losses, degrading/unstable careers, and a regulation-evading industry. In this section we will probe deeper and attempt to make overall sense of the overarching strategy of the e-commerce industry and its investors.

First and foremost, one medium- to long-term plan that each of the dominant actors seem to be following is what is called ‘last man standing’ or ‘winner takes all’. The whole strategy is hinged on the idea that each of them will be able to finish or subdue the thers to the point twhere only one or two of them remain as dominant players. So the whole idea is to burn cash and wipe out competitors before one really starts looking for profits. One can already see this process of consolidation taking place: while some new players are entering the fray, what has been happening for the last year or two is a strong movement towards mergers and acquisitions.

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III. Employment Practices of the E-commerce Industry

by Rahul Varman, email: rahulv[at]iitk.ac.in

If e-commerce firms have been able to evade regulatory requirements with regard to customer and state obligations, their employment practices have gone even further beneath the radar, taking advantage of weak trade union movements and even weaker regulatory apparatus of the country with regard to labour laws. In this regard, all that has attracted media attention is the large ‘packages’ that e-commerce companies, flush with funds, were providing till recently to graduates of elite colleges like IITs and IIMs. These firms had become star campus recruiters until the recent controversy when they reneged on some of their commitments.

Flipkart has close to 35,000 employees today, and yet their employment practices remain almost a black box. We get a peep into them only when there is a moment of rupture, as in July 2015, when more than 400 deliverymen employed by e-retail companies in Mumbai went on strike protesting lack of basic working rights. What was most revealing was the charter of their demands: ID cards, fixed duty hours, toilets in delivery offices, overtime allowances, bike maintenance allowance, food and laundry allowance, payment to foot delivery boys of Rs 5 for shipment and Rs 10 for return shipment, ESIC cards, uniforms, weekly holidays and ‘exemption from work’ on public holidays, and many more such elementary labour rights. The corporate response was on predictable lines: “Flipkart, offers the best salary and benefit structure comparable to others in the industry.”[1] In spite of more than a decade of e-commerce, we are still debating[2] the law under which they should be held accountable: Factories Act (of course they will claim that they are not a ‘factory’ within the definition of this law) or the Shops and Commercial Establishment Act (in any case they have been claiming that they are not a shop!).

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II. Regulatory Issues and E-Commerce in India

 — by Rahul Varman. email: rahulv[at]iitk.ac.in

Though the aspect of regulation hardly creates the sort of hype that valuations or cheap merchandise and rides do, from time to time we do hear about the regulatory strictures involving e-commerce entities by state agencies as well as the courts. Often this is not so much because of the vigilance of the regulatory authorities but contradictions with other constituencies, for instance the threat that e-retail poses to organised retail and even smaller physical retail units. The most fascinating aspect of this is the continuing debate regarding framing and defining the e-commerce services for applying the relevant regulations and laws.

For instance, while Flipkart, Amazon and other retailers have grown to a massive size and have been in existence now for years together (Flipkart is nine years old and has 35,000 employees on its rolls), the debate goes on regarding whether they are a ‘marketplace’ or a ‘retailer’. While the e-commerce entities claim that they are only marketplaces, a platform that brings potential buyers and sellers together at one place through technology (like a marketplace physically does), critics, that is competitors, various state agencies, and independent observers, object to this formulation. The basic objection is that these e-retailers have made massive investments in physical facilities such as warehouses and logistics to source and deliver the merchandise, and hence to say that they are nothing more than mere software is highly problematic. Amazon has 21 operational warehouses with more than 5 million cubic feet of storage space across India in cities like Ahmedabad, Delhi, Kolkata, Mumbai, Nagpur, Gurgaon, Pune, Ludhiana etc.[1] (more…)

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— by Rahul Varman, email: rahulv[at]iitk.ac.in [1]

[The following is the first instalment of a five-part article, to appear on the following days. – Editor.]

One is at a loss for words to describe the rise and rise of e-commerce in the eyes of the ruling and middle classes as well as the mainstream media. Not a day passes without the sector capturing the headlines and prominent space. Words like e-commerce, start-ups, and digital India, and brands like Flipkart, Amazon, Ola, and Uber have become household names in no time. Massive numbers in terms of investments, valuations, etc. in the sector are being presented.

This sector is talked of as the engine of economic growth and source of ‘good’ jobs that are equal to the aspirations of the young and educated. We are also told that start-ups and e-commerce are making the nation innovative and entrepreneurial, and that, for the first time in history, the young are becoming providers instead of seekers of jobs. After the announcement of ‘Start-up Action Plan’ by the Prime Minister Modi in January this year amidst much fanfare, the signature of the present regime, and in the presence of high profile galaxy of CEOs of a large number of big corporations that supposedly are ‘start-ups’ in the internet related areas, Forbes India gushed[2]: “Never before in India’s economic history has ‘entrepreneurship’ been given such a centre stage by the Government and policy makers”.

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