The E-Commerce Battle
With the rise of many e-commerce firms, domestic and mainstream retailers are losing their profits and sustenance in the heavily competitive business arena.
We see that with the rise in Flipkart, Snapdeal, and Amazon users, the number of people who do regular shopping at malls and shopping centers has reduced. Similarly, with the rise in demand for Ola and Uber, many of the local auto-walas and cab drivers are losing out on their job, profits, and motivation to continue in the business.
This is accredited to game theory and is seen as something normal that happens in the field of business. The intensity with which this hits the economy is also something to ponder over. Above all, the article is to not only establish the battle BY the e-commerce firms, but also the battle OF the e-commerce firms. Together, they dominate against the local firms and amongst themselves; the foreign player dominates the domestic player.
Over the past few years, we have seen how crucial and gigantic these e-commerce firms have grown. They seem to be usurping the profits and business of other smaller and local firms. The offline retailers have lost a major chunk of their customers, thanks to the attractive sale discounts offered online. Neither do they have the investment nor the power to compete with the online firms. We have seen it in the case of local auto-walas. And we have seen the sarcastic snort and the hated expression when we wave off an auto telling them that an Ola auto has been booked.
We go for such autos and cabs due to the financial gain that we get. But little do we realize that we are actually promoting a greater monopoly in the picture since we demand more of the e-commerce firms rather than the offline firms. When offline firm loses out on profits, they exit the business field and when this happens, the online firms automatically get a monopoly hold in the market.
This then gives the online firms the rights and powers to flex and design prices at their will in the e-commerce battle. They would then get to be the judge and jury of the demand and the price costumers pay for the demand. The customers will ultimately lose out on the financial gains since they would have no other choice. When the situation comes to this stage, no amount of rationing or price tabs by the government will help. Since that would lead to the firms reducing their supply and the price rises to its double, thus backfiring.
The only solution that we have here is to start keeping price tabs before it gets too late. Very recently, the Department of Industrial Policy and Promotion (DIPP) put a cap on these subsidized online products. DIPP put a ban on such high discount rates. This means that there will be no more of the “Big Billion Day” by Flipkart. Nor will there be any 75% discount offered by Amazon. The DIPP has also warned the firms that anyone seen violating this law run the risk of falling foul of the law. But we see that this has a small impact. The online companies have changed their strategies.
Battle Between E-Commerce
The other important aspect to notice is the battle between the e-commerce sites. Amazon dominates Flipkart in the e-commerce battle. Uber dominates Ola. This is done by Amazon and Uber, which are key foreign players, have greater investments on hand to offer more discounts and increase promotional strategies when compared to Flipkart or Ola.
Statistics have shown how Flipkart had to increase its investments by $3 billion just to compete with Amazon. While Amazon could afford to sell at lower prices thanks to the greater investment it had. These lower price strategies seem to be fatal for the profits of domestic players. To an extent, the DIPP law helps the domestic firms in the e-commerce battle as all of them can use other business strategies instead of counting on the mainstream price war.
What Happens To The Customers During The Rise Of Monopoly?
Ultimately, we see that if in either of the two situations, a monopoly rises, the ultimate losers will be the customers. This is due to lack of choice and the power that we lose in terms of the finances and prices. We, as customers, need to keep our choices open. At the same time, we have to ensure that we always have the choices that we need to have.
When we don’t balance between the choices that we have, we make sure that we lose the choices. This is because they will not be motivated to continue. This, on a long term, affects us. Sometimes thinking long- term rather than reaping short term benefits is also important.
Despite all the laws and policies that the government frames, the ultimate decision making is ours. Promoting the local businesses and offline retailers is also the responsibility of the customers as much as it is of the government.