V. Making Overall Sense of the E-commerce Hype
All the build-up about e-commerce has been put together around a few myths that are repeated ad nauseam. In this final section we will first highlight some of the key mystifications and then attempt to critique them and bring out the real implications of e-commerce based on the above analysis.
Role of E-commerce in Ruling Class Ideology
- The first and foremost theme being promoted about e-commerce is the seductive idea of consumer choice and sovereignty: all you need to do is swipe your phone and the taxi or the commodity appears instantly – 24x7 everywhere, ‘consumer is the king’! The defining aspect of every person’s identity is that of consumer, not his/her role in the system of social production (e.g., as worker, petty producer, capitalist).
- The second theme being promoted is the idea of entrepreneurship: all we need to do is be innovative and dream big, and we can make it like the Bansals of Flipkart and Agarwal of Ola. A related theme is the need to be ‘job makers’ and not ‘job takers’. Built into this conception of entrepreneurship is the idea that if a person is hunting for a job, something is wrong with him/her, and not with the system that fails to offer meaningful occupation for those masses who are more than willing to learn and toil.
- The third related theme is around technology: hi-tech industries, technology startups, so on, and so forth. The idea being that, for e-commerce, technology is the driving force which powers entrepreneurship and consumer convenience. Moreover, it is technological innovations that lead to economic growth and competition, by bringing in efficiency and reduction in costs, particularly in the case of e-commerce by eliminating intermediaries and their unnecessary commissions. This also eliminates the need for all forms of social organisation such as trade unions, consumer forums, etc: Every individual is an independent contractor, striking the best possible deal in the market with other such atomised entities through the impartial interface of ‘technology’.
- In this discourse the role of State is very specific: that of a facilitator of ‘ease of doing business’, so that entrepreneurs and their technology can have their way. For everything else Government is at best a mere hindrance, as in the case of taxes and labour laws; so the less the better. This is the idea behind Modi’s ‘minimum government’. Of course, there is a need for State power, but of the ‘right’ kind, one that acquires land and other assets, and ensures ‘law and order’ for big business. Inherent in this is also the idea that State has no responsibility to generate employment, as it is only there to facilitate private entrepreneurship. Thus Modi’s slogans –‘Start Up India’, ‘Stand Up India’, and the like – are addressed to the people at large, who are responsible for creating their own employment.
- Finally, all of the above is invested with an aura of inevitability invoking ‘technology’ and related themes. And if some people – workers, individual consumers -- suffer negative consequences from ‘technological innovation’ and ‘entrepreneurship’, we may feel bad about them, but little can be done about it as they are on the wrong side of history and progress. Theoretical justification is sought in the term ‘creative destruction’ coined by the Harvard economist Joseph Schumpeter around the time of the Second World War, and a favourite of the business press today.
Real Implications of E-commerce
Our analysis so far shows that the actual reality of e-commerce is far from the myths that are being put forward and we would like to end by emphasising five significant points for further consideration
1. Corporatisation-Monopolisation of Disaggregated Services through Information Technology
According to some recent estimates118 by NASSCOM, employment per tech-based start-up is about 20, and total employment in tech-based start-ups is just 80-85,000 at an investment per job created of about Rs 40 lakh. Even the rosy projections of start-up proponents claim that jobs in these outfits will rise to only about 2.5 lakh by 2020, or about 0.05 per cent of total employment. Clearly, the start-up phenomenon is no solution to the jobs crisis.
Moreover, in all likelihood start-ups are going to displace existing employment in large numbers. As is evident from the discussion above we can see rapid consolidation and monopolisation under a handful of corporates, disingenuously called ‘start-ups’, of widely spread and decentralised services such as retail and taxis, as well as many other such services: hotels, ticketing, etc. With large scale evictions from land and migration from the countryside, very little employment generation in large scale manufacturing, a deepening crisis in small scale manufacturing, and a considerable slowdown in construction and mining, there is an acute scarcity of employment. Services such as petty transport and retail have been a residual source of some kind of employment. For instance, in Kanpur, a very large number of those who were rendered unemployed by the closure of the textile mills have ended up as auto rickshaw drivers, cycle rickshaw operators or salesmen/shopkeepers. As consolidation and monopolisation happens in such services, capital intensity is bound to increase, much like what we have seen in manufacturing sector since the industrial revolution, closing the avenues of even such menial employment for a large set of people in a populous country like India. Already the likes of Uber and Google are making heavy investments for development of driverless/self-driving cars, and Amazon is making heavy investments towards robotisation of its warehouses and using drones for deliveries. BBC119
in a recent post, elaborates on Uber’s point of view: “But Uber's big inconvenience is the fact it needs drivers, and so this line of research is about eliminating that final piece of the puzzle to boost profits even more (emphasis added).” Thus in the name of entrepreneurship, ironically, e-commerce is likely to eliminate a very large number of petty and small enterprises and those who were dependent on them for their livelihoods.
2. Making the Real Relations vis-a-vis Employees, Customers, and State Invisible through Technology
E-commerce comes wrapped with seductive ideas like modernity, hi-tech and convenience — the best service is a mere swipe away on your mobile, of course the assumption being that there is enough money at least in your mobile wallet (if not your physical wallet). First and foremost, as we have discussed above in some detail, this idea that e-commerce is a mere app in your mobile is highly deceptive, and becomes an excuse to evade any sort of accountability, whether laws, taxes or regulations. As Stacy Mitchell, a senior researcher for the Institute for Local Self-Reliance in the US, says,120 “They’ve really flown under the radar in terms of there being a public conversation about their power within the marketplace and what the implications of that are… Amazon’s operations are invisible. All you really see is the website, and then when you open your door, the Fed-Ex guy is there.” As a recent report121 points out, Uber is multiple things to different constituencies depending on their interests, and they have taken contradictory positions in multiple law suits in the US. So while for its drivers it is only an aggregator, when a suit was filed against the unsolicited messages to prospective drivers, Uber said that actually it was messaging to prospective employees (which is not illegal) and when an antitrust case was filed against it for price fixing amongst the contractors (its drivers), Uber claimed that it was a mere software facilitating drivers to ‘find fares’. Take your pick!
While a wide range of e-commerce activities, both by omission and commission, are invisible to the State, the customer is more and more visible to the e-commerce firms. Every single click or swipe of a customer or a potential customer is becoming open to the gaze of the corporates, and most personal behaviour in the cyber space and mobile networks is increasingly a valued commodity for the corporate customers. This kind of close surveillance is creating mountains of personalised ‘data’ to be stored and analysed, resulting in development of whole new fields of so called ‘inquiry’ and profiteering like big data and analytics. Of course, in the process, the privacy of users is the first casualty. For instance, Uber actually took pride in demonstrating in a launch party in Chicago, its ‘God View’ of identifiable customers moving from one place to another in real time in New York on a big screen, their privacy be damned!122
When confronted with bad press publicity regarding some of their very questionable conduct, the Uber management threatened journalists with spending "a million dollars" to hire a team that could look into "your personal lives, your families... and give the media a taste of its own medicine."123
Uber was particularly upset about an expose of their sexist and misogynist Parisian promotion, which claimed to pair riders and “hot chick drivers” with the caption, “Who said women don’t know how to drive?” In December 2015, Yale environmental researcher Spencer Meyer filed a suit against Uber, alleging price fixing by Uber’s drivers and founder in violation of federal antitrust law. Uber hired a security company, which attempted to dig up ‘derogatory information’ about him, an act the district judge hearing the case called “blatantly fraudulent and arguably criminal."124
The rhetoric accompanying e-commerce technologies is convenience, but here, as elsewhere, the crux of much of the technology deployed is to control the labour process and to appropriate the surplus in the service of capital. For instance, while the minutest movements of the drivers can be monitored125 and accordingly they can be rewarded and penalised, Uber/Ola need not own any of the means of production/ service, the taxis. This is in stark contrast to the textile factories of the 18th century, at the dawn of industrial revolution, when the capitalists had to invest in factories to closely control the labour power and process. So while labour can remain disaggregated and the means of production can stay decentralised, the appropriation of surplus can be concentrated at a global scale – this is what is ‘new’ about the new economy! An analysis of Uber pricing in 17 cities across the globe concludes126 that there is no apparent logic and consistency in pricing policy: “One of the ways that Uber makes its money is through information asymmetry: it has enormous amounts of data, but it shares that information very sparingly, and generally keeps both passengers and drivers rather confused about how much money any given ride is likely to cost... And if the drivers don’t know what’s going on in terms of fares, the passengers certainly don’t.”
3. State Exists Only for Disciplining Labour and Not Capital
As is evident from the discussion above, while e-commerce can cock a snoot at every piece of law, State institution and regulatory intent in the name of technology, development, bringing in capital, employment, etc, the State is ever more indulgent. The State is eager to rise on the ‘ease of doing business’ index, and similar other indices and report cards. In many ways the technology companies of today hark back to the times of robber barons of 19th century, for whom nothing could come between them and their ambitions. Contrast the State’s behaviour towards capital with its attitude towards the working class’s so called ‘indiscipline’ or ‘taking law in their own hands’(which takes place only when their pleas to the State to discipline capital within its own laws have fallen repeatedly on deaf ears, as in the Maruti case). So the way the NDA’s election slogan – “minimum Government, maximum governance” – is actually put into practice is: ‘minimum government’ when it comes to capital’s public accountability, maximum governance with a very heavy hand when it comes to making labour serve capital’s interests
4. The Commanding Heights Belong to Finance Capital
As we have discussed in some detail, behind seductive ideas like entrepreneurship, start-ups, hi-tech, etc. it is really the heavy but invisible hand of big finance that calls the shots. And finance capital’s agenda is very clear: how to make more money out of money literally from thin air. One dramatic example is the SoftBank investment of $20 million in Alibaba in its early stages around 1990. Estimates suggest that this investment was valued at $58 billion in 2014, that is an appreciation of 2900 times in 24 years.127 Now this is the kind of return that finance capital really fancies, which is simply impossible at a sustainable level in any reasonable productive enterprise. These kind of returns are only possible through absolutely parasitic means where common people and the working classes’ rights at large can be muzzled and no voice, no accountability of any kind is made to stand between profits and capital – that is the real ideal that the e-commerce industry specifically and present day capitalism at large is really chasing.
5. Structural Constraints Facing E-commerce in India
Despite all the fantastic numbers that the e-commerce industry and its cheerleaders never tire of flaunting, the industry is bound to face reality at some point, and reality remains as harsh as ever. Even with all the fantastic growth rates, e-retail in India is at present not more than 1 per cent of the total retail market. Last year close to 90 per cent of all online purchases in the country were confined to only three categories: electronics, fashion and books, very much primarily within the domain of the upper-middle strata.128 Even within sales of physical goods, e-commerce sales of books are a mere 7 per cent of total book sales, mobile phones are 2 per cent of all handsets sold, and fashion goods sold online are just 1 per cent.129 With all the hype about Flipkarts and Olas, eTravel comprises 70 per cent of the total e-commerce market, and eTravel is dominated by the likes of IRCTC (a subsidiary of the Indian Railways). Last year, revenues of Flipkart were less than half of IRCTC.130 The basic problem for them is nothing else but the structural constraint facing the Indian economy – the lack of demand on the part of the common people.131 None other than Binny Bansal, the co-founder of Flipkart, was forced to confess the limited size of the market in spite of all the discounts: “The market hasn’t grown and that’s way more concerning than how we are doing against Amazon”, he is quoted as to have told his employees in a town hall meeting.132 With the Government increasingly caught up in its own rhetoric of development, FDI, technology, etc, and simply trying to wish away the grinding poverty of the masses, things cannot but take a turn for the worse as far as market expansion for the likes of e-commerce is concerned, and no amount of incentives can push them beyond a point. We can already see various signs of it. For instance, the demand problem is already pushing the taxi aggregators into starting two wheeler taxis, which is like selling things in progressively smaller sachets. But all this cannot push the market beyond a point.
Structural problems are plaguing not only India, but the global economy at large. A recent Bloomberg report13
complains that, “The world's biggest firms are sitting on mountains of cash and have no idea how to spend it”, a result of policies that have resulted in transfer of income from the household sector (common people) to the corporate sector. They attribute this problem to the decades of globalisation that has resulted in “oligopolistic” competition, that is, a few corporates dominating pricing power, like what we have discussed in connection with the e-commerce sector above. Most interestingly, they anticipate/ recommend even further oligopolisation through merger waves like we have anticipated for the e-commerce sector above. The total mergers and acquisitions (M&A) deals in 2015 were more than $3.3 trillion, a 40 per cent above its previous high of 2007, they report. In 2014 Business Insider reported that companies, together with private equity firms, were sitting over “a global cash mountain” of $7 trillion that according to them was piled since the financial crisis. Perhaps the profligacy of e-commerce sector and the willingness of the VCs to be ever ready to fund the cash burns is also on account of the paucity of profitable investment opportunities in the present phase of monopoly finance capital.
A reality check appears to have already started for e-commerce, with consolidations, drastic mark downs in valuations, and reports about retrenchments becoming a regular feature in the past months. This reminds one of the dotcom bubble of 2000-2002 when NASDAQ (the US stock market for the internet based companies) suffered a loss of whopping 78 per cent within two-and-a-half years, primarily due to a crash in prices of the technology companies. (Interestingly, most of them were engaged in online retailing.)These parallels are increasingly being drawn by both the local and the international media. In the words of one commentator,
E-commerce startups are overvalued. This is no longer a contentious claim. The only question is ‘how will the bubble unwind?’ Will it be a soft landing or a hard landing? A hard landing is an earthquake of sorts where a large e-commerce company sees an implosion of its valuation. This scares off investors in all sectors. In this scenario, even growth areas like SaaS and software infrastructure that are unrelated to e-commerce will get affected. There will be a lot of collateral damage.134
Similarly, a former marketing chief of Housing.com termed the whole e-commerce sector a Ponzi scheme and said,135
In their endeavour to make their mark, with insane scaling-up, acquisition of consumers and the rush to raise more monies, the entire startup scene has turned into a big Ponzi. Rash decisions, numerous pivots, reckless hiring and subsequent firing, unclear business plans are due to lack of experience and unrealistic goals set up by entrepreneurs.
The real problem is that while the ruling establishment is busy in whipping up the frenzy of this Ponzi, the most vulnerable people are the ones who are going to suffer when it comes crashing down. A detailed Guardian136
piece examines if the ‘dotcom bubble is about to burst (again)’, and concludes,
“First they came for the booksellers and I did not speak out because I was not a bookseller. Next they came for the taxi drivers etc etc. Then baristas, divorce lawyers, artists, journalists… there are not going to be an awful lot of jobs of any description left. How any of us are going to be earning a living in 20 years’ time, in 10 years’ time, is something that most of us aren’t thinking about. In this light, building a startup that has a 90per cent chance of failure looks like a pretty smart option.”
In one sense the Guardian is correct. Within this system, the choices, even with the best of training in the developed economies, are being reduced to either a 90 per cent chance of failure or not to have a job at all. However, for most of the toiling masses in India even these stark choices are not available. The only way forward is to think outside the present framework, where the best of human creativity and skills get reduced to serving the large monopolies, big finance, or a surveillance State. The point is to look beyond the parameters of this system, redefine concepts like creativity, technology, and entrepreneurship, and conceive a world that will have humans and their toil at the centre of things. The realisation of such a world can begin only with a thoroughgoing critique of the present system and its current trappings such as e-commerce.
-- Kanpur, October 26, 2016
118. NASSCOM, “Start-up India – Momentous Rise of the Indian Start-up Ecosystem”, Edition 2015, 10000startups.com/downloads.php?f=Startup-Report-2015.pdf, accessed on 26/10 2016. (back)
119. “Uber joins race for driverless cars”, BBC, 20/5/2016, http://www.bbc.com/news/business-36339340, accessed on 30/06/2016. (back)
120.Christopher Zara, “Amazon.com and Retail: Predatory Pricing, Bully Tactics Squeezing Competition, Retailers And Small-Business Advocates Say”, International Business Times,20/12/2013, http://www.ibtimes.com/amazoncom-retail-predatory-pricing-bully-tactics-squeezing-competition-retailers-1516554, accessed on 01/07/2016. (back)
121. David Dayen, “To Avoid Regulations, Uber Describes Itself as Either, Neither and Nor”, Intercept,26/5/2016, https://theintercept.com/2016/05/26/to-avoid-regulations-uber-describes-itself-as-either-neither-and-nor/, accessed on 16/07/2016. (back)
122. Kashmir Hill, “'God View': Uber Allegedly Stalked Users For Party-Goers' Viewing Pleasure” (Updated) Forbes, 3/10/2014, http://www.forbes.com/sites/kashmirhill/2014/10/03/god-view-uber-allegedly-stalked-users-for-party-goers-viewing-pleasure/#7234c2413f84, accessed on 01/07/2016. (back)
123. “The ugly side of Uber exposed in US: Here’s why Indians should also care,”Firstpost,19/11/2014, http://www.firstpost.com/business/corporate-business/the-ugly-side-of-uber-exposed-in-us-heres-why-indians-should-also-care-1996737.html, accessed on 01/07/2016. (back)
124. Sam Biddle, “Federal Judge Rips Uber Apart Over Dirt-Digging Investigation”, Intercept, 30/7/2016, https://theintercept.com/2016/07/29/federal-judge-rips-uber-apart-over-dirt-digging-investigation/, accessed on 12/08/2016. (back)
125. Douglas Macmillan, “Uber’s App Will Soon Begin Tracking Driving Behavior” Wall Street Journal,29/6/2016, http://www.wsj.com/articles/ubers-app-will-soon-begin-tracking-driving-behavior-1467194404, accessed on 01/07/2016. (back)
126. Felix Salmon, “The way Uber fares are calculated is a mess”,28/5/2015, http://fusion.net/story/140655/the-way-uber-fares-are-calculated-is-a-mess/, accessed on 01/07/2016. (back)
127. Bruce Einhorn, “Masayoshi Son's $58 Billion Payday on Alibaba”, Blomberg, 9/5/2014, http://www.bloomberg.com/news/articles/2014-05-07/softbanks-58-billion-payday-on-its-alibaba-investmentaccessed on 02/07/2016. (back)
128. Digbijay Mishra, “Flipkart has biggest piece of Indian e-tail pie”, Business Standard, 21/3/2015, http://www.business-standard.com/article/companies/flipkart-has-biggest-piece-of-indian-e-tail-pie-115032100041_1.html, accessed on 02/07/2016. (back)
129. Shishir Asthana, “5 things you didn't know about India's e-commerce industry”, Business Standard, 12/11/2014, http://www.business-standard.com/article/companies/5-things-you-didn-t-know-about-india-s-e-commerce-industry-114111201035_1.html, accessed on 02/07/2016. (back)
130. Kim Arora, “What makes IRCTC India’s biggest e-commerce player,” Economic Times, 31/1/2016, http://articles.economictimes.indiatimes.com/2016-01-31/news/70222599_1_irctc-website-tatkal-online-ticket-booking,accessed on 03/07/2016. (back)
131. See various issues of Aspects, especially No. 58: http://rupe-india.org/58/contents.html or their recent blog: https://rupeindia.wordpress.com/2016/05/30/why-the-poor-do-not-count/ (back)
132. Alnoor Peermohamed, “Slow e-commerce growth worries Flipkart”, Business Standard, 22/08/2016, http://www.business-standard.com/article/technology/slow-e-commerce-growth-worries-flipkart-116082201457_1.html accessed on 10/10/2016. (back)
133. Luke Kawa, “Piles of Cash Mean the Biggest Companies Will Get Even Bigger,” Bloomberg, 21/01/2016, http://www.bloomberg.com/news/articles/2016-01-21/piles-of-cash-mean-the-biggest-companies-will-get-even-bigger, accessed on 18/10/2016. (back)
134. “Unwinding of e-commerce bubble is the biggest ecosystem question, says iSPIRT's Sharad Sharma”, Economic Times, 5/6/2015, http://economictimes.indiatimes.com/magazines/corporate-dossier/unwinding-of-e-commerce-bubble-is-the-biggest-ecosystem-question-says-ispirts-sharad-sharma/articleshow/47539620.cms, accessed on 03/07/2016. (back)
135. “Here’s why employees are no longer happy...” op. cit. (back)
136. Carole Cadwalladr, “Is the dotcom bubble about to burst (again)?” Guardian. 4/10/2015, https://www.theguardian.com/technology/2015/oct/04/is-dotcom-bubble-about-to-burst-again, accessed on 16/07/2016. (back)