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Applauding the curbs on online companies 

With the government striving to put curbs on online companies, Goan retailers are altogether happy about the move, finds out Shoma Patnaik

In the final month of 2018 when online giants like Flipkart, Amazon, Snapdeal, etc., were raking in the big bucks from the dazzling discounts and sales, the government chucked an unexpected googly at the sector.

A new regulation, effective from February 1, was announced which disallows online or e-commerce players from selling products of companies in which they have equity stakes. Aimed at curbing predatory pricing the rule is expected to put a brake on the heavy discounts that online companies offer on their own goods. It is a rule that is being hailed by the Indian retail industry and strongly opposed by the online industry.

Meanwhile in Goa, store owners are viewing the parleys with interest. The competition from online giants so far is muted in the state vis-à-vis metro cities but local store owners are getting the feel of it from the increasing presence of companies like, Swiggy, Zomato and Oyo.

The fore mentioned companies although in a separate segment than players like Flipkart and Amazon, are modeled on the same ‘aggregator platform’ lines and follow similar aggressive marketing strategies. Lately they seem to be everywhere with a presence that looks set to grow in future.

Goa’s retail industry veteran, Kirit Maganlal, founder, Magsons chain of superstores, says that, he views the recent regulation positively and firmly believes in curbs on ecommerce players. His opinion is that, brick- and-mortar formats do not have a level playing ground versus the e-commerce format.

“Whatever one format does it should not be trampling over the right and the facility of the other,” he says, adding that, online companies by the kind of predatory pricing policies they follow are pressurizing physical stores to sell cheap.

“E-commerce companies come with no investment at all except in IT technology whereas the brick-and-mortar stores need to have hard core capital assets. The cost of running a brick-and-mortar operation is much higher than an e-commerce operation (excluding the IT) and the government must set up a regulatory body to formulate rules for the online sector,” points out Maganlal.

According to the Panjim based chain owner, “E-commerce has become a runaway horse today with no curbs to how it operates. It is given rise to whole lot of unfair practices and needs regulation.”

From Vasco, Akhil Chada, founder, Pehli Mall, also favours reining in of the online giants. “They have the capacity to offer killer discounts that we cannot. Our rent and electricity alone accounts for nine per cent of our turnover. We welcome competition but it needs to be healthy,” he says.

Chada, suggestion is for online players to be subject to rules and regulations like any other industry. “When we have numerous permissions to take like from the labour welfare department, local municipality, industry department, GST, etc., it is not fair that the online sector is permitted to operate so freely,” he says.

The Goan retail industry comprises small stores, super stores, department stores and big names such as Shoppers Stop, Big Bazaar, Mark & Spencer, Max, etc. The industry is in growth phase and as pointed out by Maganlal, “like all service industries it is growing faster than primary industry.”

Several of the local retailers who previously ran modest garment stores have revamped their premises to a department store layout. The big names of retail are also in an expansion mode. Big Baazar is planning to open its second outlet and another Max store is due to come up in Margao.

Ground level check-out reveals that, several local retailers have upgraded and made considerable investment in logistics. Many are also present in the online market and accept orders from customers digitally. Most of the local retailers say that, they are well placed for business due to robust demand and loyalty of residents. Yet they admit to feeling the heat of competition from the e-commerce Goliaths.

“Today’s business scenario such that it is become very difficult for a proprietorship store to operate. We are subject to all kinds of taxes and every small bit of item used in the household is available online. The apparel market is feeling the impact and the electronic market is the worst affected by the online competition,” discloses Sahil Kavlekar, whose runs family owned, JK Kavlekars and Sons, a department store in Morod, Mapusa.

Kavlekar points out that, retailers like him are forced to go on offers although they cannot match the huge discounts seen online. “When the government is made it so easy for e-commerce giants to do business in our country, why doesn’t it likewise support us indigenous players through supportive policies?” he asks.

The year 2014-15 was when e-commerce industry came into the limelight, although it existed for at least three years prior to that. Since then the industry continues to grow exponentially with consumers in villages, small towns and cities getting hooked on to the lure of online shopping. A report on e-commerce by PricewaterhouseCoopers estimates that, the sector in India would grow 25 percent a year for next five years, hitting US $100 billion a year by 2022.

Is the hold of online players slackening off? Most probably not, although there are murmurs of dissatisfied customers and increasing reports of poor quality goods. According to Goan retailers, some of the items purchased online are not of the promised quality.

Meantime, cutthroat competition from online is not only in retail. It is present in the food industry, pharmaceutical as well as hotel industries. Each of these industries are complaining against the online players for unfair trade practices.

Recently the Travel and Tourism Association of Goa (TTAG) showed solidarity with the Federation of Hotels and Restaurant Association of India (FHRAI) which put forward a set of demands to control online travel aggregator (OTA) companies like Make My Trip, Cleartrip, OYO, etc.

Savio Messais, president, Travel and Tourism Association of Goa (TTAG) said that, a major chunk of the business of hotels in the state is from the OTAs and, “local hoteliers are suffering because online companies are taking a huge commission but not giving the contracted rate to the hotels.”

The Chemists and the Druggist Association of Goa (CDAG) like its parent body, the All India Organisation of Chemists and Druggists is totally against e-pharmacies for unscrupulous mode of sales.

The e-commerce industry is making headlines for bumper sales during festivals and the year-end. The next big event coming up for the industry is Republic Day. All eyes are whether the astounding discounts will be announced this Republic Day considering the curbs on the industry.

 

The online companies are not making any money and are actually in losses but their business model is such that initially they will make losses and at one point of time will make profits and gobble up the small businesses. Established store owners like us are withstanding the competition as of now but things have become very difficult for the smaller stores. Many of the small stores are finding it difficult to sustain and having a tough time. The government needs to equally support physical stores like how it has favorable policies for the online companies,”

Sahil Kavlekar, Kavlekar’s Neo Collection, Morod

 

There should be specific norms to control e-commerce growth. There are already so many norms for brick-and-mortar operations. For us the government has not even announced a retail policy. In the absence of impetus to existing retailers if you encourage e-commerce companies who do unfair trade practices it does not make sense,”

Kirit Maganlal, founder, Magsons Group

 

Online players must not be given a free hand and get out of hand. Their impact in Goa is not as much as in metro cities but their regulation is a must,”

Akhil Chada, founder, Pehli Mall, Vasco

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