e-Commerce: The New Boom

e-Commerce: The New Boom

E-commerce rules 2020

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Types of e-commerce model

Mains level : Paper 3- Rules to regulate the e-commerce

The article analyses the various restrictions under The Consumer Protection (E-Commerce) Rules, 2020 to regulate all commercial transactions and issues with such restrictions.

Context

  • The recent rules relating to e-commerce, issued by the ministry of consumer affairs, food and public distribution, under the Consumer Protection Act, 2019 needs some changes.

What the recent rules specify

  • The Consumer Protection (E-Commerce) Rules, 2020, notified on July 23, regulate all commercial transactions sold over a digital or electronic network.
  • The e-com rules currently recognise two e-commerce business models, namely, marketplace model and inventory-based model.
  • The rules have separate specified provisions for marketplace- and inventory-based entities.
  • The e-com rules require that all information on the return, refund, exchange, warranty and guarantee, delivery and shipment of the goods or services being sold, including their country of origin, be provided on the platform.
  • Such details enable consumers to make an informed decision.

What the new rules seek to achieve

  • The country of origin requirement is significant as India and several other countries are currently re-negotiating their free trade agreements.
  • E-com rules prohibit unfair trade practices by entities and sellers on marketplaces and manipulation of price.
  • The entities are prohibited from manipulating the price of the goods or services to gain unreasonable profit by imposing unjustified price or charges on consumers.

Issues with the rules

  • It remains unclear as to what would constitute price manipulation.
  • It also remain unclear how the e-commerce entities and sellers are expected to navigate these roadblocks without falling foul of such provisions.
  • Both the marketplace entity and sellers are now required to set up a grievance redressal mechanism, small businesses may not be in a position to comply.
  • The rules also prohibit an e-commerce entity from levying a charge for cancellation post confirmation.
  • While the provisions may be intended as safeguards that ensure a level-playing field, some of these conditions are impractical.
  • Applying identical rules does not convey a business-friendly approach.

Investment restrictions

  • The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 currently recognise the marketplace and inventory model.
  • It permit 100% FDI under the automatic route to marketplace entities as also to those engaged in single-brand retail.
  • Foreign investments, up to 51%, are permitted in multi-brand retail with prior government approval.
  • As per the non-debt rules, entities engaged in single-brand retail are permitted to undertake retail trading through e-commerce.
  • However, single-brand retail trading through e-commerce has to open a brick-and-mortar store within two years from the date it commences online retail.
  • Retail trading, in any form, by means of e-commerce, is not permissible for entities engaged in inventory-based multi-brand retail trading and having foreign investment.

Consider the question “What are the objectives sought to be achieved through The Consumer Protection (E-Commerce) Rules, 2020 to regulate commercial transactions? What are the issues with the rules?”

Conclusion

The commercial sector is anxious for India to consider relaxing some of these requirements, or extending the time period for compliance, given that brick-and-mortar operations may not be possible in the foreseeable future.


Source-

https://www.financialexpress.com/opinion/e-commerce-rules-a-one-size-fits-all-approach-some-need-to-be-relaxed/2071953/


Back2Basics: Invenetory model and marketplace model

  • Marketplace model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.
  • The main feature of the market place model is that the e-commerce firm like flipkart, snapdeal, amazon etc. will be providing a platform for customers to interact with a selected number of sellers.
  • Inventory model of ecommerce means an ecommerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
  • The main feature of inventory model is that the customer buys the product from the ecommerce firm.

e-Commerce: The New Boom

Disintermediation from E-commerce

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Disintermediation

Mains level : Paper 3- Duopoly in e-commerce in India

 E-commerce was expected to provide the level playing field. However, Indian e-commerce has been experiencing the duopoly and new entrant faces several difficulties.

What is disintermediation

  • The emergence of the internet was seen as a tool for marketers to reach consumers directly.
  • The term disintermediation meant taking intermediaries out of the loop.
  •  The aim was efficiency.
  • It was hoped that without local stockists and distributors in between, retail demand could be fulfilled at lower cost.
  • After all, anyone could put up a website and woo traffic.

What is the issue?

  • Today, the gains of online market addressal have converged into the hands of a few big winners in a winner-takes-all scenario.
  • Getting an app onto handsets often involves a toll paid to e-gatekeepers.
  • These apps created an entry barrier for the new entrants.
  • So far, single-brand apps have mostly failed, regardless of price baits.
  • After all, it is hard to beat the convenience of a single-touch window that lets shoppers load e-carts with all their needs.

Conclusion

E-com was once about snipping out distribution networks. With market access cornered by pioneers, now others want to get past these intermediaries. Only blockbuster apps can do it.

e-Commerce: The New Boom

‘BharatMarket’: An e-commerce platform for retail traders

Note4Students

From UPSC perspective, the following things are important :

Prelims level : BharatMarket

Mains level : Not Much

Traders’ body Confederation of All India Traders (CAIT) said that it will soon launch a national e-commerce marketplace ‘BharatMarket’ for all retail traders in collaboration with several technology partners.

A prelims question with tricky options to throw you off track-

The BharatMarket initiative recently seen in news is-

A. Trade of Bharat-22 Exchange Traded Fund (ETF)

B. Platform for farmer to sell their produce

C. Initiative in power sector

D. e-commerce platform

Here you have to play safe…..

BharatMarket

  • The marketplace will integrate the capabilities of various technology companies to provide end-to-end services in the logistics and supply chains from manufacturers to end consumers, including deliveries at home.
  • It will include nationwide participation by retailers and aims to bring 95 per cent of retail traders onboard the platform, who would exclusively run the portal.
  • It has been already started as a pilot project, initially with a limited number of essential commodities, in six cities — Prayagraj, Gorakhpur, Varanasi, Lucknow, Kanpur and Bengaluru.
  • This will be an effective way to get essential commodities to consumers during the lockdown period and within containment zones.

e-Commerce: The New Boom

Project Zero

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Project Zero

Mains level : Regulating e-commerce in India

E-com giant Amazon has announced to bring “Project Zero” to India.

Project Zero

  • “Project Zero” introduces additional proactive mechanisms and powerful tools to identify, block and remove counterfeits goods on Amazon website.
  • It aims to ensure that customers receive authentic goods when shopping on Amazon.
  • Over 7,000 brands have already enrolled in Project Zero across US, Europe and Japan.
  • A number of Indian brands participated in a pilot to help the company test the experience in India.

Functioning

  • It combines Amazon’s advanced technology and innovation with the sophisticated knowledge that brands have of their own intellectual property and how best to detect counterfeits of their products.
  • It does so through three powerful tools: Automated protections, self-service counterfeit removal tool and product serialization.
  • Product serialization is enabled by a unique code that brands apply within their manufacturing and packaging process.
  • It allows Amazon to individually scan and confirm the authenticity of every single purchase of a brand’s enrolled products through Amazon’s marketplace.

e-Commerce: The New Boom

[op-ed snap] The competition law and data advantage conundrum

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Web platforms and role of competition

CONTEXT

Competition law is struggling to come to grips with the internet-based platforms who pursue growth over profits. 

How web platforms work

  1. They operate on the basis that long-term customer lock-in is more important than the short-term benefits of quarterly profits. Thus they keep the prices very low so as to maximize customer growth.
  2. The price of a product or service is “predatory” or not depends on whether it is being sold below cost.
  3. Internet businesses offer unprecedented economies of scale and savings on overheads. So it is difficult to establish whether their price is predatory.
  4. Some internet platforms are fast becoming part of the critical infrastructure of the internet.
  5. Due to this, platform businesses have access to unprecedented volumes of data in excess of what their competitors will ever possess and can understand consumer behavior.
  6. Thus they can tailor their services more accurately than before and offer an unprecedented quality of user experience.
  7. They understand what sells and can take advantage of the feedback loops based on rankings, user reviews, and shopping carts. This data gives them an advantage over traditional advertisers as to who they should aim their advertisements. 
  8. It is this data advantage that internet platforms use to establish authority over their competition.
  9. As data platforms acquire more and more customers, their understanding of user behavior improves exponentially, making it possible for them to deliver services more directly relevant to the needs of their individual customers. 

Competition regulation

  1. If the purpose of competition regulation is to ensure diversity of market access and prevent the concentration of market power in the hands of a few, regulators should do something to address the distortion brought by internet platforms. 
  2. Restricting the manner in which digital platforms function will end up denying consumers these advantages.
  3. Many smaller businesses have rolled themselves into larger platforms to leverage the scale and data advantage of the combined business. 
  4. This consolidation also progressively robs customers of choice and users will eventually have no option but to use one single dominant platform for all their needs.

If we want to regulate competition on the internet, we will need to come up with something new. The remedies that have served us so well for all these years are just not useful in the same way when it comes to internet platforms.

e-Commerce: The New Boom

Government unveils draft e-com norms

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Regulating e-commerce in India

  • To protect the interest of online shoppers, the Department of Consumer Affairs has released draft guidelines on e-commerce that state that an e-commerce entity cannot directly or indirectly influence the price of the goods or services.

E-commerce guidelines for consumer protection 2019

  • These are issued as guiding principles for e-commerce business for preventing fraud, unfair trade practices and protecting the legitimate rights and interests of consumers.
  • These guidelines apply to business-to-consumer e-commerce, including goods and services.
  • It added that every e-commerce entity needs to publish the name and contact details of the grievance officer on their website along with the mechanism by which users can lodge their complaints.
  • As per the draft, an e-commerce firm cannot falsely represent themselves as consumers or post reviews about goods and services in their name.
  • The draft guidelines adds that e-commerce firms need to ensure that personally identifiable information of customers is protected, is open for stakeholder comments for 45 days or till September 16, 2019.

Mandatory terms

  • Besides, it proposed to make it mandatory for firms to display terms of contract with the seller relating to return, refund, exchange, warranty/guarantee, delivery/shipment, mode of payments and grievance redressal mechanism to enable consumers to make informed decisions.
  • The draft also proposes that once an e-commerce firm comes to know about any counterfeit product, and if the seller is unable to provide any evidence that the product is genuine, the firm needs to take down the listing and notify the consumers of the same.

e-Commerce: The New Boom

[op-ed snap]On the learning curve: transforming education outcomes in India

Note4students

Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From the UPSC perspective, the following things are important:

Prelims level: Saksham

Mains level: Initiatives taken in field of education reforms and their effectiveness.


NEWS

CONTEXT

The systemic approach to transforming education outcomes in India is leading to success.

Background

  • Among the lakhs of employees on the payrolls of State governments in India, the education department, unarguably, has the largest share of employees.
  • Besides frontline service providers (teachers), there are a number of other officials and administrators who form an important part of the educational set-up.

The Haryana case study

  • Given the size of the education department, any effort to introduce education reforms must ensure that the incentives of all stakeholders are aligned throughout the system to ensure their participation.
  • Education transformation programmes by States run the risk of falling flat, as they are often unaccompanied by a single transformation change road map that all key actors agree upon and work towards.
  • A successful example of implementing such a road map can be seen in Haryana, which has created a race among its administrative blocks to be declared as ‘Saksham’ (Hindi for abled/skilled), i.e. have 80% or more students who are grade level competent.
  • Under this campaign, State officials nominate their block for the ‘Saksham Ghoshna’ once they are reasonably confident that their block has achieved the 80% target — as a result of remedial programmes, teacher training and internal assessments.
  • This self-nomination is then followed by rigorous rounds of third party assessments to vet their claims.
  • If a block is found to be ‘Saksham’, the block officials are recognised by no less than the Chief Minister, and a large-scale ‘show and tell’ event is organised to honour them.
  • Further, when all blocks in a district are declared as ‘Saksham’, the entire district is also accorded ‘Saksham’ status.
  • According to the latest third party assessment in February 2019, 94 blocks out of a total of 119 in Haryana have been declared ‘Saksham’ and overall grade competence has been assessed at 80%, which is a giant leap in learning outcomes when compared to the overall grade competence of 40% in 2014.
  • Given these early successes, many other States are also embarking on such programmes.
  • The valuable lesson from all this is that inducing competition among administrative units helps invigorate key stakeholders to work in tandem in order to achieve intended outcomes.

Benefits of Ranking of states

  • Since its inception, the NITI Aayog (National Institution for Transforming India), has also been a believer in competitive federalism that puts pressure on policymakers across States to perform better on pre-defined goals and metrics.
  • To translate this to education, we have now developed the State-level ‘School Education Quality Index’ (SEQI), which seeks to make improvements in learning outcomes a focal point of governance.
  • It gives scores to States based on their educational performance and puts this data out in the public domain.
  • The SEQI uses three data sources, including the National Achievement Survey, to come out with 33 indicators to measure education outcomes, of which the largest weightage (48%) is given to learning outcomes.
  • By having a two-fold ranking system — one which recognises well-performing States via an overall performance score, and a delta ranking that measures the level of improvement made by States from their base year — the NITI’s Aayog’s State ranking not only encourages competition among States but also rewards and motivates other States to consistently improve.

District Programme

  • The NITI Aayog’s Aspirational Districts programme, launched in early 2018, also draws from this template.
  • Here, 112 under-served districts across the country compete with each other in order to achieve targets in five crucial sectors; these includeeducation, which has among a weightage of 30%.
  • These districts are monitored real-time and ranked on the basis of their progress.
  • The follow-up for each indicator is handled by the respective Ministry in charge of the same, while NITI Aayog handles the data compilation and dissemination.
  • Most importantly, there is a constant focus on recognising and disseminating best practices of select districts to other States, which act as a reward for well-performing local administrations while providing impetus to other districts to adopt similar measures.
  • This strategy has already shown success; districts that were ranked low in baseline surveys, such as Virudhunagar (Tamil Nadu), Nuapada (Odisha), Gumla (Jharkhand), Siddharthnagar (Uttar Pradesh), and Vizianagaram (Andhra Pradesh), have shown remarkable progress in subsequent rounds of assessment.
  • The fact that this programme has huge support and buy-in from the Prime Minister personally ensures that all stakeholders are spurred into action and energised to achieve the stated goals.
  • Given the success of these initiatives, it is abundantly clear that the right incentive structures for stakeholders lead to administrative efficiency, which then improves the quality of service delivery.
  • States therefore need to induce competition and give a boost to put all key actors in education in the driver’s seat to improve their learning levels.

Way Forward

  • The successes that we are already witnessing in India with the systemic approach to transforming education are inspiring.
  • Improvement in learning outcomes is an immediate goal for India to fulfil its aspirations of playing a greater role in the global economy and a systemic transformation is the best solution that we have so far.

 

 

 

 

 

e-Commerce: The New Boom

Draft e-commerce policy: Keeping our data safe and secure

Note4students

Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Analysis of Draft e-commerce policy

Mains level: The newscard provides various prospects of the draft policy in short and lucid manner


News

  • The DPIIT has released the draft National e-commerce Policy that sends a clear message that India and its citizens have a sovereign right to their data.

Key Issues addressed

  • Data
  • Infrastructure development
  • E-commerce marketplaces
  • Regulatory issues
  • Stimulating domestic digital economy
  • Export promotion

Indian control over own data

  • Govt to be given access to source code, algorithms of AI systems Impose custom duties on electronic transmissions to reduce revenue loss.
  • Bar sharing of sensitive data of Indian users with third party entities, even with consent.
  • A ‘data authority to look at community data.

Local Presence of Apps and Websites

  • All e-commerce websites, apps available for downloading in India to have a registered business entity here.
  • Non-compliant e-commerce app/website to be denied access here.

Incentives for data localization

  • Location of the computing facilities like data centres, server farms within India.
  • Firms to get 3 years to comply with local data storage requirements.
  • Data storage facilities to get ‘infrastructure status’.

FDI in E-Commerce

  • FDI only in marketplace model (where multiple vendors come together under an IT based platform).
  • No FDI in inventory model (where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly).

Certain E-Com Trade Rules

  • Curbs on Chinese ecommerce exports.
  • Gifting route, often used by Chinese apps, websites, banned for all parcels except life-saving drugs.
  • Integrating Customs, RBI and India Post to improve tacking of imports through ecommerce.
  • Incentives & e-commerce export promotions.
  • Ecommerce startups may get ‘infant industry’ status raising limit for courier shipments from Rs 25,000 to boost ecommerce export.

Regulation for E-coms

  • No separate regulator for ecommerce sector.
  • E-consumer courts to be developed.

The recent changes in e-commerce sector


 

DIPP recently notified a new FDI policy for e-commerce and certain other rules <What exactly e-commerce is? Answer in comments>

What are the rules?

  1. 100% foreign direct investment is permitted in the marketplace model of e-commerce
  2. FDI is not permitted in inventory based model of e-commerce

Additional to these rules for FDI, the other rules are:

  1. An e-commerce entity may provide logistic, warehousing , order fulfilment, call centre, payment collection and other services
  2. An e-commerce entity will not permit more than 25% of the total sales should not be done by one vendor or its group companies
  3. The seller shall be responsible for post sales, warranty and guarantee of goods sold by it
  4. The e-commerce entity will not directly or indirectly affect the sale price of goods or services while maintaining a level playing field

What does it mean?

Now let’s analyse its impacts on various stakeholders, one-by-one

#1. E-Commerce Players


 

  • Price determination- This is a grey area with unclear rules. One interpretation could be that Govt will determine the price and not the market. This could upset the markets
  • Clearly defining the models- This is a positive development. The marketplace and inventory based models are now concretely and clearly defined by law
  • Group companies- Group companies (Flipkart- WS Retail, Amazon- Cloudtail) are created to work around the e-retail rule which doesn’t allow FDI in B2C multi-brand retail

The companies will now have to figure out a new way to scale down sales through their group companies

  • Discounts- The rule in itself is notvery clear as it doesn’t explictly spell out the terms ‘deep discounting’ or ‘discount’

Example- Amazon uses the term ‘promotional funding’ to describe its discounting model, and as is clear, technically doesn’t affect the actual price of the product

Even though the note says the rules are effective immediately, discounting has continued as is. It shows that that this is still a grey area

  • Inventory based models- This model, which is effectively under multi brand retail, remains out of the FDI route

#2. The Consumer

  • E-commerce companies have brought in deep competition in the retail sector by way of offering discounts
  • How are the discounts funded? Part of this is funded through a cash burn, and part through operating efficiencies over the brick and mortar setup <What is cash burn? Answer in comments>
  • Restraints on discounts, if workout in real, consumers will lose a lot of power in terms of price and choice

#3. Brick and Mortar Players


 

  • Effects on brick and mortar retailers will depend on how the restraints on discount work out
  • Footfalls in Brick & Mortar retail had dropped dramatically, and the pricing change may now draw consumers back
  • However, e-commerce companies and strong retailer lobbies will obviously work to keep their dominance

 

Conclusion:

  • Overall, the move is in the right direction, but it lacks strength and complete clarity on various issues (such as pricing, discounting)
  • The grey area in pricing is very open to interpretation, especially on the point of determining the right price, and could be an anti-market move
  • Retail sectr still remains affected by a lot of interest groups and a solid policy change to actually reform retail remains

After this, you can read this story for more insights- Disrupting the disruptors (The Hindu)

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