#dnaEdit: Fireworks before Diwali

If anything has burst into a firework before Diwali, it is the cacophony of protests by established retailers against e-retailers. The provocation has been the wild success of e-commerce firm, Flipkart, of its widely publicised online sale on Monday. The sale on the online marketplace, as Flipkart prefers to describe its technology platform, had turned out to be more spectacularly successful than its promoters had anticipated. Overnight, the brick-and-mortar shopping chain-owners saw red and, probably, an existentialist threat. 

The biggest among them has spent a fortune to say the trifle that “no deal can win the trust of a billion people and one has to earn it.” The Confederation of All India Traders has even urged the government to intervene and regulate online businesses. So loud has been the noise that industry ministry Nirmala Sitharaman has even confirmed that complaints were received and the government will look into them. 

Look the government should, but with an open mind. These are the same trade and industry bodies which clamour against government intervention in their businesses and seek freedom for industry and business. The government should look into the complaints in the same manner as it should when companies collect money from the public in their IPOs and then vanish or refuse to pay back loans from banks or deposit companies defraud the public. But government may not start looking into complaints against success. 

That is exactly what the established retailers are doing. What is their complaint against online sale? The online store is selling products below cost. How does it hurt public interest if some producers choose to sell their products at below cost? They cannot go on doing that. Sooner or later, they will stop when online companies will be forced to either close shop or sell at affordable prices — affordable to manufacturers. This is competition and not against it. Joseph Schumpeter, legendary economist, had observed: “The nearer we are to an epoch, the less we understand it, our own we understand the least”. To gain an understanding of the outcry of retail shopkeepers against digital marketplaces, one has to extricate himself from the present and take a long-shot view. 

The fight of brick-and-mortar shop-owners against digital shopping platforms is a classic clash between the old and the new. Here is a phenomenon in which buyers can take their decisions while sitting in front of a computer screen at home. Why should they then need to make an effort to go out?  

There is a case for intervention if online platforms devise ways of accepting money and not delivering goods, intentionally or even unintentionally.  

There have been failures of the digital marketplace for sure. It has failed to work up enough capacity to deliver on their promises of sale. The sheer logistics of organising delivery on time was lacking. This needs to be addressed. Flipkart has not been as good an organiser as it has been in conceptualising. They should be hauled up for this failure. But then the advance of digital shopping should not be throttled just because some cavernous shopping malls might go empty.