Don't let the new e-commerce rules ruin innovation

I have tried to figure out what caused this Cambrian explosion of options. How is it that today I can order Bhutanese, Tibetan, East Asian, Middle Eastern and Japanese food from dozens of different sources, when just a couple of years ago, the only way I’d get to experience any of these cuisines was if a new restaurant opened up. Where were all these chefs for so long and what suddenly spurred them to surface in such numbers?

The internet has made it easier for us to monetize our passions than ever before. Anyone can post a product online and dozens of people will be willing to buy it. Services like Shopify seized upon this and built online services that small entrepreneurs can use to quickly open a web store, giving them an end-to-end solution for the entire retail workflow. This removed much of the pain once associated with starting a new business.

In India, if anything, we have gone much further. Thanks to the proliferation of digital platforms, every element of the commercial workflow has been unbundled and is readily available as a disaggregated service that anyone who cares to use can access. This has made it possible for small businesses to leverage the web without the help of platforms like Shopify.

Most home-food businesses use Instagram as their menu, displaying their dishes on the app as a series of images or short videos to select from. Others use Instagram Stories or WhatsApp Blasters to announce spot sales, triggering a frenzy as customers vie to get their orders in before stocks run out. Payments are almost always through Google Pay or other UPI apps that offer the most efficient money-transfer option. Doorstep delivery is left to Swiggy, Dunzo or any one of the many delivery services that are available in almost every Indian city. Unlike elsewhere in the world where small businesses need to sign up to large digital platforms, in India they can assemble the services they need into bespoke digital workflows tailored to meet the unique requirements of their businesses. This allows them to set up fully functional stores at a fraction of the cost that platforms like Shopify charge. But not everyone has the technical ability to put something like this together.

A while back, I’d written about Beckn, a set of protocols that offered a range of commercial functionalities by laying down specifications for various interoperable services. Today, Beckn-enabled services offer restaurants and home chefs alternatives to the large food-delivery services that have cornered the market. Other similar services have started to take advantage of India’s radically unbundled ecosystem to enable end-to-end commercial workflows that suit every business—at a fraction of the cost.

This is why we have seen such a proliferation of home businesses over the past year and a half, and why I have been so spoilt for food choices.

But behind every silver lining, there is a dark cloud, and in the case of India’s unbundled commercial architecture, this has taken the shape of the Consumer Protection (E-Commerce) Rules, 2020. The ostensible purpose of these rules is to extend to e-commerce customers the protections available under the consumer protection law. While I have no quarrel with holding large e-commerce platforms to the same standards as traditional retail, the E-Commerce Rules extend much further. They apply to all entities that “own, operate or manage digital or electronic facilities or platforms for electronic commerce", which implies that services such as those described above would fall within its ambit—as they make “digital or electronic facilities" for electronic commerce available to small home chefs and micro businesses.

What this means is that all these services that stitched together digital workflows for small entrepreneurs will have to appoint nodal and grievance officers in much the same way as big e-commerce players do. They will have to set up consumer grievance redressal mechanisms and maintain lists of sellers who repeatedly violate intellectual property laws. While all these compliances make sense in the context of large marketplace websites that display the goods of multiple sellers on their website, they are counterproductive when applied to digital services that offer commercial workflows to help small businesses manage their orders, payments and deliveries.

The cost of putting in place these processes will shutter these services, leaving the small businesses that rely on them bereft of the technical support they need to sustain their operations. More importantly, it will mean that the wide choice of cuisine I have grown accustomed to over the pandemic will no longer be available.

And that’s a big disappointment.

Rahul Matthan is a partner at Trilegal and also has a podcast by the name Ex Machina. His Twitter handle is @matthan