India's small traders endorse e-commerce (but only the kind that helps them)

India's traders are quickly warming up to marketplace models but at the same time want to shut out foreign investment in offline and online retail
Written by Rajiv Rao, Contributing Writer

For decades now, India has—or more specifically, Indian traders and small grocery-stores have—been terrified at the spectre of large foreign multinationals as well as e-commerce outfits, swamping the country with cheaper prices and putting them out of business.

They form a potent political bloc so it's not surprising that India, while allowing joint ventures with Indian companies in retail businesses, has prevented foreign companies rom setting up shops in a solo capacity (although it is unclear as to how the small trader is more protected in this shared arrangement). In e-commerce India has forbidden any foreign majority stake.

So it is ironic that , according to this report, small traders, are serious about embracing the internet, more specifically, eBay’s online marketplace. Apparently they are still opposed to foreign investment in retailing of the online and offline variety but welcome online marketplaces like eBay (which are allowed in India, in addition to their offline equivalent, called 'cash and carry,' which have seen numerous joint ventures and transformed the wholesale and small business landscape in India.)

eBay is already working with a host of small and medium industries and organisations such as the Surat Diamond Association and the Federation of Indian Exporters' Organisations.

The 'have you cake and eat it too' position that these small traders have vocalized isn't all that surprising considering the amount of money there is to be made in India as a middleman. Here’s an article by a prominent member of the dalit community (formerly known as 'untouchables') that describes just how monopolistic these small traders can be and why they are so scared to have to earn a living in a world that has done away with their privileged position.

Yet, ironically, these small traders are the very ones thinking about joining a marketplace model where the role of the middleman no longer exists. Perhaps, the prospects of a much larger audience for their goods far outweighs the benefits accrued in a localized retail monopoly. 

Of course, general retail fears about e-commerce (foreign owned or otherwise) may not be so outlandish when you consider the carnage happening to brick-and-mortar retailers in India amidst the ongoing e-tailing boom. Apparently, they're being hit badly enough by the 20-40 percent discounts being offered by brands on e-commerce sites that they have begun putting pressure to reduce them. Brands themselves have noticed that consumers have begun to 'showroom'—where they browse stuff at a store and then buy it for a steep discount online.

India is currently in the midst of debating whether or not to allow FDI in e-commerce. If it decides to do so, it will no doubt empower many, threaten certain monopolies and change the way Indian society and culture function altogether as it grows rapidly from the US$3.1 billion or 1 percent of total retail today to US$22 billion in just five years.

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