The e-commerce revolution is not inclusive enough

E-commerce poses a serious challenge to jobs. At a time when India is grappling with a jobs crisis, a clear perspective on how emerging trends like e-commerce are affecting the number and quality of jobs is crucial to managing its disruptive effects.

Recently, commerce minister Piyush Goyal expressed concern about the growth of e-commerce and its impact on employment. The minister highlighted the possibility that half of India’s market could become part of e-commerce networks in the next decade, which he described as a “matter of concern.”

Forecasts (from agencies like BCG) suggest that the e-commerce market in India will grow at a compound annual growth rate (CAGR) of 11.79 percent between 2024 and 2028. This is almost on par with the 11.82 percent in the US, but higher than the projected global e-commerce growth of 9 percent. Online retail in India accounts for about a quarter (Invest India estimates) of total organised retail sales.

As e-commerce grows, a key question is what impact it will have on India’s micro, small and medium enterprises (SMEs) – a major source of employment that employs some 111 million workers.

The advantages of e-commerce include its potential to provide businesses with access to markets that extend beyond their physical location and cover a wider geographic radius, as well as the prospect of increased exports.

While this may be true for some businesses, it is not true for most. Given that most businesses in India are unregistered micro-enterprises, they face many hurdles when engaging in e-commerce.

The rapid adoption of online payment systems and UPI among small businesses is often cited as evidence of companies’ willingness to adopt e-commerce. But meaningful engagement in e-commerce goes beyond that.

Lots of paperwork

There are a lot of formalities involved in registering businesses on platforms. There are laborious onboarding processes and platform fees. How do you ensure that your store/product is competitive and stands out from the rest? These challenges, and additional barriers such as access to finance and government procurement, are more evident for women who engage in e-commerce as artisans or small-scale producers.

Some evidence suggests that online businesses are more productive, but that’s because to go online and reap the benefits, a business has to be “better” from the start. For many of these small businesses, e-commerce starts and ends with adding an app-based delivery staff and having a UPI payment system. Business consolidation is inevitable as only the fittest survive. This will squeeze out SMEs.

In addition to the impact of e-commerce on SMEs, questions arise as to whether e-commerce will generate new jobs? E-commerce will create new positions in companies, such as in digital marketing and management. What distinguishes e-commerce from traditional, offline supply chains is the use of technology, data and information to make decisions and connect stakeholders.

But such job roles require a higher level of education and skill. For those who gain the right education and skills, e-commerce offers some opportunities, but these jobs are out of reach for most. Efficiency also means fewer positions.

Much of the e-commerce supply chain relies on platform workers. Estimates designed to quantify e-commerce jobs count this form of task-based work as jobs; it doesn’t. The rise of e-commerce creates more opportunities to generate income by breaking up traditional jobs into task-based gigs. This type of “gigification” means that a growing number of workers are self-employed under contracts for services that lack worker protections and rights.

Women’s employment across the e-commerce supply chain, as in traditional supply chains, is gender-diverse, with women more likely to be found in packaging and warehousing than in delivery or in highly skilled positions.

E-commerce is growing. The genie cannot be put back in the bottle. But it is unfair to deny the disruptive effects of this phenomenon on the quantity and quality of jobs in India. Managing the impact is not a matter of more or less regulation, but of appropriate and effective regulation that enables businesses and workers to adapt to the pace and scale of disruption.

The author is the president and CEO of JustJobs Network