Govt policy hits hiring patterns

In the past three years, the e-commerce industry went through peaks and troughs as it moved past the exuberant times and shed flab, resulting in massive job losses. During the same time, brick and mortar retail went through a slow-growth phase with modest expansion and hiring. In both the scenarios, government intervention at the right time could have made the difference. The NDA government’s treatment of both these segments has been one of disparity.
Through 2014 till mid-2015, the e-commerce sector was peaking in terms of growth and hiring. Private equity and venture capital funding into the sector went to record high levels. Losses in the sector too went up to never seen levels and by the end of 2015 and early 2016, the investors started asking difficult questions about the revenue metrics and return on investments. Funds started drying up for both small and large e-commerce companies.
It was around this time that the government brought in clarity to the FDI policy for the e-commerce sector. This came with a few riders. The government maintained that an e-commerce marketplace should not have more than 25 per cent of its sales coming from one vendor. Cloudtail India and WS Retail Services used to generate major portion of the sales of Amazon and Flipkart respectively. Discouraging discounts by the marketplace, the new policy also stated that they cannot offer warranty or guarantee for products sold on their platform and that they should not make promises on behalf of sellers to influence purchase decisions.
The government policy gave the investors one more reason to relook at their funding for the sector. As funds dried up, several smaller companies shut shop and many others, including the larger ones, started downsizing. Several lakhs lost jobs in the second half of 2015 and 2016 as companies like Flipkart, Snapdeal, Askme, Grofers, Foodpanda, and Peppertap either went for rightsizing or shut shop. When consumer internet search platform AskMe shut shop, around 4000 people became jobless., which had employed 2,500 people, closed down its operations. Food Technology company TinyOwl fired more than 600 people as it wound up operations.
Flipkart, the posterboy of e-commerce laid off close to 1,000 people and Snapdeal, which is getting merged with Flipkart shed another 600 people. Grofers laid off 200 people, PepperTap 150 and CommomFloor 100. Hiree shed 80 per cent of its employees and GoZoomo 35 per cent.
“The discounting strategy on online players has been disrupting the market. The PE-funded deep-pocketed e-commerce players have been artificially creating demand by huge discounting and thereby mounting losses. We have been asking the government to bring in more clarity in the FDI policy for a long time. Have the government done so earlier, we would not have seen the situation aggravating to this level,” said Kumar Rajagopalan, CEO, Retailers Association of India.
“The hiring pattern of the e-commerce sector too has evolved post the funding crisis as companies now employ more temporary staff during the peak sales seasons against longer contracts earlier. In the mid to senior levels pay hikes have dropped from 40-50 per cent to 15-20 per cent,” said Lohit Bhatia, business head, IKYA Human Capital Solutions. Right policy initiatives would have made retail one of the key sectors contributing to Prime Minister Narendra Modi’s pre-poll promise of one crore jobs in five years.