E-tailing–Trouble for Channels

Though online business is gaining popularity in India, it has frustrated the entire IT fraternity. Furious over online portals, distribution channels have sought immediate attention of the government to safeguard their business interests. Various IT associations have been raising voice against online trading to protect small players in the industry.

India's retail market is estimated at $470 bn in 2011 and is expected to grow to $675 bn by 2016 and $850 bn by 2020. According to Internet & Mobile Association of India (IAMAI), at present, there are over 2.5 crore online buyers and more than 21.3 crore internet users in the country.
Mumbai based Association of System Integrators and Retailers in Technology (ASIRT) says online portals have not only impacted dealers, resellers, and system integrators severely, it is also harming the economy by depriving the government of taxes.

Kshitij Kotak, president of ASIRT said, "Citing their losses, loss-making online portals do not pay any income tax. Online portals are able to bypass state VAT and LBT as there is no single authority that tracks both. We demand that the government levy online tax at the rate of 20% across the country. It should also investigate suspicious foreign funding and predatory pricing e-commerce players engage in."

Rushabh Shah, spokesperson of Trader's Association of Information & Technology (TAIT) said, "Of course, online commerce is threat to our businesses as it has disturbed the existing channels. Government should provide level playing field and have control over pricing."

JOB LOSSES

Kotak also pointed out that online portals are killing jobs by eliminating the distribution chain.

"Nearly 13000 employees at one online retailers is killing 30 lakh unorganized retail in the country. Online retail valuations help only a few Indians, making a few hundred Indians obscenely rich while marginalizing millions," he said.

ASIRT delegation met Union minister Ravi Shankar Prasad and voiced their concerns. The delegation has also sent a note to Finance Minister Arun Jaitley and chief finance secretary and sought their appointment. Mr. Kotak said that they have not yet got confirmation from the ministry.

" We need urgent help to save industry from dying and nearly 2 crore people from being converted to skilled slaves having to find alternate job opportunity and rebuild their source of earning", he added.

ONLINE THREAT

South Gujarat Information Technologists Association (SITA) strongly feels that online business is a threat to small resellers.

Unnat Mehta, President of SITA said, "Online business is always welcome if it is healthy and real but what is going in current scenario is the competition between online portals to sell at cheaper rate than its rivals."

"Online portals are supported by some of the industry giants those are directly or indirectly into IT business. To run these kinds of business, online portals easily get logistic partners and call centers. Those who are in channel or IT enabled services join hands with online people. This has done lots of damages to the IT Industry", he said.

Mehta said that SITA has proactively taking steps to guide its members to stand firm against online portals.

"SITA called a channel partners meet last month and planned a motivation for the channel to educate end customer not to go for just price but local support in terms of services.

"Dhiraj Chhajed, spokesperson, Computer Association of Nashik (CAN) said, "Online trade is a threat to distribution channel and CAN is working on the issue of online retail with help of FITAM."

"Even though many companies like HP, Lenovo and Samsung announced that online e-commerce sites are not their authorized partners, it is not much helpful, Mr. Chhajed pointed out.

"Deep discounting by online retailers is the biggest concern. We think that two actions would address the issue- first is price mentioned online should be MRP only and second is online models should be different from offline models."

SUPPORTING E-COMMERCE

However, there is a section in the industry which looks at E-Commerce as an opportunity and feels that instead of getting anxious about online trade, distributors should change their traditional approaches.

Nityanand Shetty, chairman of Infotech Software Dealers Association (ISODA) said, "We have to accept and move forward with E Commerce. Basically, E Commerce is nothing but modern way of doing business. We need to be practical and adapt the changes."

Aditya Singhania, director of Ventron Digital Systems said that the channel community need to adapt e-commerce as it is inevitable.

"E Commerce is a growing industry. It is consumer friendly industry. However, it is a threat to channels but I think it will not eliminate the channel distribution. Therefore, instead of looking at online portals as a setback, we should adapt it." he said.

Though there are a few who support e-commerce and see it as complementary, most of the IT associations are yet to appreciate the merits of e-commerce and see it as a big threat to traditional business.