The High Cost Of 10-Minute Convenience: How E-Commerce Is Squeezing India's Small Entrepreneurs

News18

2 days ago

Both new and old players are flouting the laws, and despite policymakers being aware of these illegal activities, they have been slow to act and level the playing field.
Across India's cities and towns, e-commerce and 'quick commerce' platforms are revolutionising traditional retail, threatening the livelihoods of millions of small shopkeepers, entrepreneurs, street vendors, and local manufacturers. The unfortunate aspect is that both new and old players are achieving this by flouting the laws, and despite policymakers being aware of these illegal activities, they have been slow to act and level the playing field.
Over the past decade, giants like Amazon and Walmart-owned Flipkart have reshaped Indian retail through immense scale, aggressive discounting, and complex seller networks. Consumers have benefited from low prices and a vast selection online, but local producers and shopkeepers have suffered. Walmart, notorious for its impact on the US economy by driving down prices and destroying both manufacturing and small businesses, found a way into Indian retail through e-commerce after its initial entry was blocked. The current homelessness and opioid crisis in the US can be traced back to job losses or jobless growth. Similar destruction of small businesses and entrepreneurship is unfolding rapidly in India, creating the same conditions.
Industry estimates suggest that up to 70 per cent of the items sold on Amazon and Flipkart are of Chinese origin, indicating that India's e-commerce boom has favored cheap imports over domestic manufacturing. These imports are routed through companies owned and operated by e-commerce giants in countries like Singapore to exploit FTA and tax rules. Despite the Indian government being aware, there is no action to prevent this, including enforcing rules for disclosing the origin of products on their websites.
From toys to electronics, the influx of low-cost Chinese goods has made it tough for Indian MSMEs (micro, small, and medium enterprises) to compete, even in categories where local industry once thrived. A detailed 2024 study by the Global Trade Research Initiative found that Chinese imports have captured over 52% of India's toy market (despite high import tariffs) and majority shares in products like umbrellas, leather goods, and glassware, displacing many local producers. Domestic manufacturers are not benefiting from the e-commerce surge, as consumers often prefer the cheaper, mass-produced imports available online.
This challenge is compounded by the way major e-commerce marketplaces operate through 'preferred sellers" and exclusive partnerships, creating roadblocks for smaller sellers. Investigations by India's antitrust regulators have shown that Amazon and Flipkart favor a small group of large sellers on their platforms, granting them better search placement, lower fees, and other advantages. Just 35 sellers out of Amazon India's 400,000+ sellers account for two-thirds of all sales, with Amazon's joint-venture sellers (Cloudtail and Appario) making up 35 per cent of sales alone. Ordinary merchants are 'mere database entries," as described by Competition Commission of India (CCI) investigators.
This preferential treatment enables predatory pricing strategies – popular products are sold at or below cost by the favored sellers, supported by the deep pockets of the platforms. An antitrust report in 2024 found that Amazon and Flipkart had indeed violated competition laws by using preferential listings and selling goods below cost (especially mobile phones) to capture market share, which had a 'catastrophic impact on the existing competition in the market." These tactics were noted across many product lines, drawing shoppers away from small shops to online platforms, where independent sellers couldn't match the prices.
The 'Amazon effect" – as fearful shopkeepers call it – means local electronics or book stores watch customers browse, then order the same items online at heavy markdowns that small retailers can't afford to offer.
A typical Indian kirana (neighbourhood grocery) store offers a wide variety of goods. These family-run shops – numbering in the millions – are the backbone of India's retail economy. They now struggle to compete with the deep discounts and home-delivery convenience offered by e-commerce giants.
India has failed to implement its FDI (foreign direct investment) rules, which aim to prevent foreign e-commerce firms from stocking inventory or controlling prices directly. As a result, these platforms use the 'marketplace" model to circumvent the rules. By 2020, the Commerce Ministry was alarmed that Chinese goods dominated online sales and that platforms might be circumventing rules through preferred seller arrangements. 'We have received suggestions… our priority is to cut unnecessary imports and boost local manufacturing," an official said as the government mandated country-of-origin labels on e-commerce products in 2020. The intention was to inform consumers that their online bargains were often imports, encouraging them to consider Indian-made alternatives. However, this has not been enforced, and platforms have avoided compliance, with no action taken by the Consumer Protection Authority.
Commerce and Trade Minister Piyush Goyal has publicly criticised the e-commerce giants, noting that the 'massive growth of e-commerce is not a matter of pride but a matter of concern." He highlighted the imbalance where traditional small traders, a pillar of India's economy and the BJP's political base, are struggling against Walmart and Amazon-funded giants. Goyal called out e-commerce platforms' strategy of using large investments to finance sustained losses to wipe out competition. Now, quick commerce players are doing the same, affecting street vendors who supply vegetables and small household items.
Flouting Rules, Violating Safety And Quality Norms
Crucially, the 'dark store" model of quick commerce, enabling 10-minute delivery, is breaking all the rules. These small warehouses, located in residential neighborhoods to be closer to customers, violate zoning laws for warehouses and commercial establishments. They establish themselves as shops but operate as warehouses, creating traffic problems with swarms of delivery bikes in narrow lanes. Residents in some cities have protested the noise, traffic, and safety hazards from these 24/7 mini-warehouses. Despite this blatant flouting of zoning laws, state governments' urban affairs ministries have not taken any action. While the police and municipal corporations are active in evicting street vendors, they have done nothing against quick commerce entities destroying other entrepreneurs.
Regulators have found safety and quality violations behind the scenes. In recent months, Maharashtra's Food and Drug Administration (FDA) conducted surprise inspections of quick-commerce storage facilities and found disturbing lapses. Blinkit's dark store in Pune's Balewadi had its food business license suspended after officials found food safety violations, including expired products and hygiene issues. In Mumbai's Dharavi area, a Zepto dark store had its license suspended due to expired goods, fungal growth on food items, and unsanitary storage conditions. (The license was later reinstated after Zepto claimed to fix the issues.) However, the FSSAI, the national regulatory body for food and licensing, has never questioned how fresh food is being stored and distributed from warehouses masquerading as shops, or how these entities openly flout the laws for shops and warehouses.
The Bureau of Indian Standards (BIS) raided Amazon warehouses in March this year and seized hundreds of products (toys, appliances, cables) lacking the required ISI safety certification. Despite finding non-certified products, no action has been taken against the organisation, with the onus conveniently passed on to the vendors by the platforms. There are institutional gaps and complicity that need to be investigated suo motu.
Regulatory scrutiny must focus on the larger problem: some of the cost-cutting and hyper-growth tactics by online platforms may bypass quality and safety norms that brick-and-mortar businesses must follow.
After five years, and with billions of dollars in trade already done, the Competition Commission of India released its investigation report in September 2024, explicitly stating that by giving preferential treatment and discounts to select sellers, Amazon and Flipkart harmed countless small retailers. It likened their deep discounting to an unfair trade practice foreclosing competition. The report found all allegations of anti-competitive conduct to be true. However, since that report, no action has been taken as all petitions and cases have been transferred to the Karnataka High Court. Now, the platform and regulators play a cat-and-mouse game in court, with the legal fraternity showing little concern for the economy, entrepreneurship, or jobs.
How can the playing field be leveled?
Policymakers need to recognise the limitations of current laws and act collectively. Raids and investigations might appease the media but do not change the behaviour of these platforms on the ground. It's surprising that a system designed to prevent such issues is being exploited by smart lawyers and public affairs professionals on these platforms to undermine the Indian economy.
There is no innovation in these digital shops; delivering something in 10 minutes is convenient but lacks innovation. Significant capital is being invested in solving a problem that isn't worth solving. Burning capital is not innovation; it's the destruction of capital and economic ecosystems, leading to joblessness. Hence, these entities should not be viewed as technology companies or innovators, even by the courts. There is no balance to be achieved in protecting them; instead, there is job destruction. Policymakers and courts should ensure a level playing field for the smallest entrepreneurs.
The first step in avoiding further capital dumping is to enforce existing laws, ensuring compliance with foreign investment rules (preventing platforms from secretly controlling inventory via proxies) and consumer protection rules (mandating origin labeling and product safety certification online).
Secondly, policymakers should stop delaying the Digital Competition Act (or 'Digital India Act") to address anti-competitive conduct by Big Tech and online marketplaces. Lobbying has delayed this bill for over five years, and it is urgent that it be passed immediately.
Thirdly, several government ministries, including Commerce and Consumer Affairs, have formed a panel (as of August 2024) to assess the impact of rapid delivery services on small shopkeepers. The outcomes and proposed actions of this panel must be shared with the public. If the panel has not proposed anything, it should be dismantled.
Fourthly, the government must revive and clean up the board and management structure of the Open Network for Digital Commerce (ONDC). Envisioned to bring millions of kirana stores and small sellers online on a neutral platform, breaking global platforms' dominance, ONDC aims to integrate 30 million sellers and 10 million small merchants. In practical terms, the platform has gaps, especially in attracting buyers. Policy makers have also shied away from using policy to make ONDC attractive to consumers. The failure of ONDC is real and present, and action is needed to prevent its complete shutdown.
Fifth, India's policymakers must finalize the long-pending National E-commerce Policy, addressing grey areas like flash sales, data use, seller parity, and more. This policy should explicitly protect domestic manufacturers and traders by mandating transparency in search algorithms and strengthening local sourcing norms.
Sixth, state and city administrations must regulate the physical footprint of quick commerce. Requiring dark stores to obtain commercial licenses, adhere to zoning laws, and comply with all safety and food standards, with stringent penalties for violators, is crucial. Quick-commerce players should not externalize the costs of their speed race into residential neighborhoods, creating traffic snarls or compromising safety. City councils and resident welfare associations should engage in dialogues with these companies to designate suitable locations for fulfillment centers and establish guidelines, such as limiting late-night operations in residential areas.
Seventh, industry self-regulation and consumer awareness are essential. Companies like Amazon, Flipkart, Blinkit, and Zepto must realize that long-term prosperity comes from coexisting with the ecosystem, not cannibalizing it. Responsible business practices are crucial. A 'winner takes all' and 'kill all the competition' approach will not ensure long-term survival in India, as consumers will eventually reject them.
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Eighth, consumers wield power here. Shoppers should understand the diversity of marketplaces and choose to support local businesses. It might be worth walking to the kirana instead of ordering bread online, or buying Diwali gifts from a local artisan, despite the inconvenience compared to one-click purchases. Each such choice sends a signal. Public opinion can push platforms to change – for example, after outcry over working conditions and reckless delivery promises, some quick-commerce firms dropped the '10-minute" claim to reduce pressure on workers. A similar push could discourage predatory pricing if consumers make it clear they care about the origin of products and who benefits.
K Yatish Rajawat is a public policy researcher and works at the Gurugram-based think tank Centre for Innovation in Public Policy (CIPP). Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18's views.
tags :
e-commerce
Location :
New Delhi, India, India
First Published:
July 02, 2025, 16:37 IST
News opinion Opinion | The High Cost Of 10-Minute Convenience: How E-Commerce Is Squeezing India's Small Entrepreneurs