The Dark Cloud over India's Micro-Entrepreneurs

The proliferation of micro-entrepreneurs in India has been enabled by India’s radically unbundled e-commerce ecosystem. However, given the expansive wording of the new Consumer Protection (E-Commerce) Rules, the flourishing of this important ecosystem is threatened as the platforms enabling these entrepreneurs will have to comply with so many obligations as to make their operations commercially infeasible.

This article was first published in The Mint. You can read the original at this link.

For me, one of the bright spots of the utterly miserable past year-and-a-half has been the spontaneous proliferation of home cooks in Bangalore. All of a sudden, almost out of nowhere, a wide variety of dining options have become available.

Every fortnight or so, I can choose from a range of exotic sausages and cold cuts that Bala makes himself and shares by word of mouth. Roughly three times a week, Rohan sends out a WhatsApp alert listing the pies and quiches he plans to make in a couple of days so that his clientele can choose what they want. Every weekend, Ulo spins up a batch of artisanal ice-creams that sell out so quickly that it is fastest-finger-first every week - week after week. And if I am in the mood for something fermented, I look no further than Local Ferment Company, that sends me everything from kombucha and sourdough to a delicious selection of dry-aged cheeses.

I have tried to figure out what caused this Cambrian explosion of culinary options. How is it that today I can order Bhutanese, TibetanEast 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?

Internet Storefronts

The internet has made it easier for us to monetise 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 SwiggyDunzo 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.

Unbundling Commerce

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. I used the analogy of lego blocks to describe how these protocols could be used to build new products":

Think of them as lego bricks that can be assembled into different configurations to suit the specific needs of a wide variety of commercial enterprises. Today a business that wants to set up a digital presence can only get these lego blocks from the handful of platforms that effectively function as the valves of online commerce. Beckn radically opens this up by allowing them to get their lego blocks from every other business that is Beckn-enabled.

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.

The Dark Cloud

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.

Unintended Consequences

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 sucks.