India’s quick commerce industry is booming, with sales zooming and new entrants coming in every day, but the euphoria has also caught the attention of government authorities.
The rapid expansion of quick commerce platforms such as Blinkit, Zepto, and Swiggy Instamart has raised significant competition concerns within the Consumer Affairs Ministry, CNBC reports. The Ministry of Consumer Affairs is reportedly worried about the potential impact these platforms could have on small businesses and local kirana stores, which are vital to neighbourhood commerce in India.
The Consumer Affairs Ministry has reportedly voiced these concerns to the Ministry of Corporate Affairs (MCA), emphasizing fears that aggressive discounting and the proliferation of “dark stores” run by these quick commerce platforms might disrupt the competitive balance. The Ministry is concerned that these practices could create an uneven playing field, threatening the survival of smaller retailers who struggle to compete with the financial and logistical advantages of these tech-driven companies. The MCA, however, has reportedly taken a different position, suggesting that these quick commerce players are not yet substantial enough to be regulated at least under the digital competition law and that the issue needs to be dealt with by consumers affairs ministry.
This government scrutiny comes in the same week as Commerce Minister Piyush Goyal had said that the increasing FDI in India in e-commerce was a cause of concern, and these companies were likely using predatory pricing to put homegrown physical retailers out of business. He even singled out Amazon, saying that the company had been skirting FDI laws, which don’t allow FDI in retail, by forming Indian subsidiaries. Just yesterday, it had been reported that Amazon was looking to launch its own quick commerce initiative, which would go live in the first quarter next year.
There is reason for government authorities to be concerned — quick commerce companies use their substantial capital to set up dark stores near residential neighbourhoods, and stock an inventory of goods. When they receive an order, they dispatch partners who deliver it in 10-15 minutes. Their economies of scale likely allow them to procure goods at prices lower than what kirana stores can afford, and are also able to offer instant home deliveries unlike most kirana stores. This puts millions of small mom-and-pop Indian kirana stores at risk, and could threaten the livelihood of their proprietors.
There’s also the thorny issue of FDI regulations — Indian laws currently allow FDI of 100 percent in case of an e-commerce marketplace model, but no FDI at all in case the company holds inventory. Unless they creatively form business subsidiaries, quick commerce firms will necessarily need to hold their own inventory in order to be able to deliver goods in 10 minutes, which could bring the quick-commerce operations of foreign-owned companies like Flipkart and Amazon under the scanner.
And the current political calculus will mean that the government will likely be concerned about the plight of millions of small kirana store owners in the country. The BJP-led government doesn’t have a full majority in parliament, and small shopkeepers form a core part of its voter base. If foreign-owned quick commerce stores are able to dent the business of these shop keepers, it’s quite likely that the government will find it politically expedient to step in — and quell the rising enthusiasm in the quick commerce space.