The employment generation outlook is positive as both skilled and unskilled labour are set to benefit.
E-tailers have become the top choice for students of top technical institutions.
An engineering degree and a job with Zomato? A decade ago, few could have imagined that a “solid” education and degree such as that would land someone in a food delivery company! The reality today is that e-commerce companies are the top choice for engineering and business school graduates, as they offer among the best pay packages – Employee Stock Options (ESOPs) and other long-term incentives.
A random search proved it: the best offer at the National Institute of Technology (NIT), Jamshedpur, this year was Amazon’s Rs 27 lakh annual package to 10 students, as per a news article in Telegraph earlier this month.
“Traditional” companies Infosys and Larsen & Toubro (L&T) did take the maximum number – at 64 and 57 students, respectively – but with annual pay packages much lower at Rs 3.3 lakh and Rs 5.11 lakh respectively. In an interesting development, Ola cabs has now reached campuses – it hired five students from the premier institute, from computer science and electronics engineering streams, offering a package of Rs 11.5 lakh.
Indeed, students are lapping up these offers. E-commerce companies have been able to create new aspirations for young graduates. The money offered apart, there is a perceptible shift in the way employment is viewed, thanks to these companies providing a career path laden with opportunities for growth of career, skill sets, and a vibrant and challenging work environment. And in a very happening sector.
India’s fast-rising e-commerce industry
India is one of the fastest-growing e-commerce markets worldwide. Between 2009 and 2014, the sector grew by 34 per cent compound annual growth rate (CAGR), as per a PricewaterhouseCoopers (PwC) October 2015 report titled ‘E-commerce in India: Accelerating growth’. After that, a KPMG report in 2016 on the ‘Impact of E-commerce on Employment in India’, pegged the growth figures at a revised 41 per cent CAGR. It also talked about the size of the industry reaching $41 billion – against the earlier estimate of $30 billion. Further, that it would reach $103 billion by 2020 – against the previous estimate of $81 billion. The figure below illustrates this revised higher forecast:
The bar charts taken from different sources at different points reveal the growth of the sector, and the expected growth, since 2011. The first is sourced from a United Nations Industrial Development Organization (UNIDO) report on e-commerce development in India.
This shows a fall in growth rate in 2013 and then a sudden increase from 2013 to 2014 and beyond. In absolute terms, the e-commerce market has been expanding.
Now consider the following chart from Statista. It projects the retail e-commerce sales for the period 2016-2022 in United States dollar terms.
The PwC report stated that with the new government being elected, business confidence had significantly improved, and that in 2014, investors aggressively funded this sector due to strong growth prospects. Retail and lifestyle segments were already selling hard and newer segments such as real estate, grocery, healthcare, and classifieds had also picked up.
Impact of the growth – on employment, economy, society
That the influence of this sector is all-pervasive – and powerful – was highlighted in a Snapdeal-KPMG report in 2016. Not only was employment going to be impacted but also the socio-economic conditions, it told us.
The biggest impact was on employment, and within this, it had a wide variety of effects, as per the report.
One, e-tail-led employment was estimated to grow at the rate of 58 per cent CAGR.
Two, e-tail and allied sectors, such as logistics, warehousing, information technology/information technology-enabled services, are expected to create direct employment for around 1.45 million of workforce by 2021 – a significant jump from the 23,500 jobs that existed in 2012.
Three, e-commerce provides employability for people with basic/no formal qualification – especially in the e-tail logistics workforce engaged in providing last-mile connectivity. Within logistics and warehousing, it is expected to directly employ more than one million people by 2021, becoming the largest contributor in terms of employment opportunities created by e-tail.
Four, it provides employment opportunities to people across tier-II and tier-III towns with no formal degrees, thus creating an environment of more inclusive and balanced growth.
Opportunities for skilled jobs
E-tail expected to emerge as a destination for highly-skilled technology jobs employing nearly 0.3 million people by 2021. Besides technology, the regular corporate functions such as human resource (HR), finance & accounts, and administration to add a nearly 0.1 million workforce by 2021.
In 2015, hiring activities had grown by nearly 10 per cent, and most surveys carried an optimistic outlook for 2016; almost all recruitment agencies highlighted aggressive hiring by e-commerce companies, reinforcing the sector’s role in leading employment creation. Associated Chambers of Commerce and Industry of India (ASSOCHAM) had in 2015 put the numbers at 0.35 million people then – and between 0.5 million and 0.8 million employment opportunities by 2018-19.
E-commerce companies – hiring big and the best
The KPMG report further pointed out that two of the leading e-tail players had increased their combined workforce from less than 10 to 40,000+ employees within six to nine years of inception. Global e-commerce players that came to India also expanded their workforce, riding the wave of industry growth.
These companies hire technology profiles considered core to e-commerce companies, followed by other key functions – product marketing, supply chain, pricing and profit management, customer and seller experience management, merchandising, vendor management, content development, and service.
Given the huge packages they offered – the biggest among campuses – it was not surprising that they attracted the best engineering and management brains. According to the report, the e-tail market is expected to emerge as a destination for highly skilled technology jobs, employing nearly 0.3 million people by 2021. Besides technology, the regular corporate functions such as HR, finance, accounts, administration, customer care, vendor management, and merchandising are expected to add nearly 0.1 million employees to the workforce by 2021.
Different employment categories
E-commerce came as a boon for employment for other categories as well. E-commerce startup entrepreneurs sprung up as ‘service providers’ to the larger e-tailing industry by venturing into logistics, technology, services, and marketing to provide customised solutions.
Freelancers – developers, designers, content writers, models, and consultants hired for e-commerce ventures – began earning well, with their estimated monthly salary more than the salary of permanent employees in most other industries.
Importantly, the e-commerce industry is creating a huge demand for IT and ITeS professionals. IT companies are developing e-commerce-centric products and services, and the services in demand for IT and ITeS professionals range from high-end skills like product development, architecture, analytics, data mining, and user interface design – to customary skill sets around managing delivery infrastructure and call centre operations.
And then of course, what e-commerce sustains on – sellers, merchants, and small and medium enterprises (SMEs). Here, e-commerce has emerged as a game-changer; web-enabled sellers are benefited by higher profits and enhanced customer reach.
Other industries that promote employment are payment wallets segment – worth $3.2 billion in 2015, and expected to reach $11.5 billion in 2020. This growth is expected to lead employment growth and create more than 1,500 middle and senior-level jobs, with salaries going up to Rs 1.5 crore. Advertising is another major growth area, with e-commerce players spending heavily on advertising and marketing, and this is expected to strengthen further on the back of non-urban area expansion. This will have a ripple effect on manpower deployment.
The impact of e-commerce on creating employment opportunities for artisans and craftsmen in traditional art forms cannot be overstated, as it provides greater reach, a marketplace, a platform, and, definitely, better margins.
The KPMG report informed us that the leading e-commerce players have signed memorandums of understandings (MoUs) with the government, and the Communications Ministry was planning to connect e-commerce companies with its 130,000 common service centres (CSCs) in villages. This would enable reach in far-flung areas, and has the potential to create 300,000 employment opportunities with the development of entrepreneurs and others in industries such as handicrafts and textiles. Already, e-commerce initiatives have connected with Banarasi weavers, Madhubani painters, Chanderi weavers, and other art and handloom forms. Increased demand for products positively impacts demand and people have begun contributing to family businesses and augmenting family income in this manner, rather than be employed in other low-productivity jobs.
Women’s empowerment became another opportunity through e-commerce. The recent launch of the online portal “Mahila-e-Haat” became a platform for thousands of women to sell their products across the country. This is aimed at providing women financial independence and expected to benefit around 10,000 self-help groups and 1.25 lakh women in India.
Last but not the least, this has the potential to reverse the brain-drain phenomenon. In India, demand for technology and engineering talent among startups has increased by more than 50 per cent in recent times, resulting in brain gain, the report informs us. Those who return, start their ventures and further create employment opportunities.
A step further – creating jobs and reducing income inequality
A study in 2017 by Michael Mandel, chief economic strategist, Progressive Policy Institute, studied the United States (US) and arrived at the conclusion that e-commerce was not only creating more jobs but also reducing income inequalities. This, it argued, was happening because “ecommerce is primarily a machine for turning unpaid household hours shopping into paid market work”. Fulfillment centre workers and drivers among others were doing the job that families did, driving to shopping places, parking, checking out stuff, and driving back. So, though some brick-and-mortar retail jobs might be lost, many more are created on the other hand by e-commerce. (In the US study, they found that in the period December 2007-June 2017, e-commerce created 400,000 jobs while brick-and-mortar retail has lost 140,000 full-time-equivalent jobs over the same stretch.) It was also found that the e-commerce jobs paid more than the brick-and-mortar ones – 31 per cent more. They required only a high-school diploma – though they involve hard work, using cognitive and physical skills.
The big change in e-commerce occurred when companies realised that other than having fancy websites, they needed to invest in rapid delivery if they were to make a dent in consumer’s shopping habits and the related gratification. Amazon Prime was a “watershed event” in this context, guaranteeing delivery in two days, with “advanced distribution” capabilities. Reportedly, despite worries about robots, these fulfillment centres are big employers.
The report concludes by saying: “In the long-term, will the job expansion of E-commerce continue? Some people worry that fulfillment centre workers are going to eventually be replaced by robots, which automatically pick, pack and sort. That’s impossible to assess at this point.”
MSMEs and e-commerce
Media reports recently have been highlighting concerns raised by World Trade Organization (WTO) for the sector in India and why India needs to tread with caution. An equally important thrust area is the potential that e-commerce holds for middle and small and medium enterprises (MSMEs), which are particularly important as they have a significantly higher share in employment generation.
MSMEs in India consist of 51 million units which provide employment to around 117 million people, manufacture more than 6,000 products, account for 45 per cent of the total manufacturing output, and contribute 40 per cent of total exports from the country, as per the report quoted in subsequent paras.
With e-commerce, SMEs gained big time, as geographical boundaries no longer hindered them; they now sell round-the-clock, across the world, with very little investment; earlier, they were marred by the presence of middlemen and complex trade structures.
Many strengths, opportunities, threats, and weaknesses were brought out in the National Report on E-commerce Development in India, under the aegis of UNIDO. The report, authored by the Federation of Indian Chambers of Commerce and Industry (FICCI) was specifically centred around MSMEs and budding entrepreneurs, and the potential that e-commerce held for them.
Apart from other suggestions, the one concerned with employment talked about how lack of skilled manpower was a bottleneck across categories of employees in the industry – in logistics, analytics, pricing, inventory management, transportation, and last-mile delivery.
To address this challenge, it suggested joint programmes by the private and government sectors to ensure a steady flow of trained talent, and suggested strategic alignment between the central and state governments to strengthen this talent development initiative. For example, e-commerce private players could feed into the ‘Skill India’ initiative of the government to make it more industry-relevant while the state governments identify potential talent pockets in their area to promote inclusion of raw potential into this programme.
For creation of employment, or absorbing the vast numbers in disguised unemployment in sectors such as agriculture, for development of rural areas, and to reverse the migration from villages to towns, this area needs to be worked on. Apart from financial inclusion, digitisation efforts are already on.