Ever advancing technology has continually disrupted economies and businesses. However, over time this increased connectivity, as well as innovation, is being used as a means of leverage by itself, allowing for the growth of economies in a digital medium. Platform economies are one such paradigm shift wherein businesses are able to leverage the online network to create a platform that serves as a link between consumers, entrepreneurs, workers, and other businesses. Amazon, Airbnb, Flipkart, and Paytm are some examples of businesses that are part of such an economy. Platform economies are also closely tied to gig economies, which refers to the increasing shift of labour from traditional workplaces to remote platform-based labour through dedicated platforms that look to connect businesses seeking workers and workers seeking temporary/short-term work, much like independent contractors.
The platform business model
Traditional business models are centred around the typical linear supply chain of value creation by converting inputs into finished outputs, this may be in the form of products or services. The model of a platform business, on the other hand, revolves around the central idea of connecting individuals and facilitating interactions between them. These could be either short-term or long-term interactions such as a single purchase by a buyer from a seller or a mutually beneficial collaboration between two parties for longer periods. Their role “is to provide a governance structure and a set of standards and protocols that facilitate interactions at scale so that network effects can be unleashed.” Hence, platform businesses do not own the means of production and instead focus on connecting those who have the means, with interested individuals.
As per John Hagel, there are four types of platforms that we are seeing; Aggregation platforms, which helps users find a resource by culminating a broad variety of resources in one place, e.g., Amazon, Flipkart, Snapdeal, etc, social platforms focus on the networking and social aspects over the business aspects and help bring people together and interact on a platform, e.g., LinkedIn, Facebook, Instagram, etc. Mobilisation platforms are those that emphasis on a collaborative aspect and look to mobilise several individuals for certain tasks which are more long term oriented, e.g., Linux, Apache, Blender, etc, and lastly, there are Learning platforms that have been referred to as ‘creation spaces’ by Mr. Hagel, these are platforms which look to create an environment that allows for faster and more efficient learning and in some situations, higher levels of performance can be achieved, proportionally to the number of new participants, e.g. Coursera, Udemy, CCmixter, etc.
The growing platform businesses are also able to create more opportunities for gig workers who now have dedicated platforms to help connect with potential customers. The growth in the field of platform economies undoubtedly ripples into gig economies and facilitates simultaneous growth which can help individuals move away from traditional jobs to gig work which is gaining wider acceptance and demand across the world, allowing gig workers to transcend physical restrictions.
Platform Economics in India
In the Indian economy, the shift from a conventional pipe business model to a platform business model is characterized by the need to gain a competitive advantage, attained through achieving economies of scale. Expansion into platform economics allows for Indian companies, who were previously dominant in a single field, to expand into multi-sided platform markets. Indian platforms like Ola, Flipkart, and PayTM have developed digital start-ups, that offer a range of marketplaces and services. These digital platforms cater to the needs of everyone with smartphone connectivity and data plans, which is a considerable size of India’s growing middle-class population. Although the growth of digital platforms has been said to bring with it job opportunities, it still creates several challenges with respect to the gig workers and the precarity of their employment. Furthermore, although development to the business model has been taking place for a while in India, the country still lacks in terms of regulation and technical standards, and the further study of this process will allow for future solutions and policy changes to support the evolution and potential of the business model.
The state of India’s labour and consumer markets make it primed for a notable change by embracing the potential of platform economies in India. Almost 93% of India’s workforce is involved in the informal sector. These individuals are likely to be most affected by the development of platform and gig economies in India. Platform work is prevalent in multiple sectors such as delivery, logistics, healthcare, art, agriculture, and many more.
The increasingly varied nature of platforms in India means that more workers are able to shift from the informal sector as it invites individuals of varying profiles to work for themselves in a gig platform. As per a report by Mckinsey Global Institute, this growth in the platform economy has the potential to increase the valuation to $500 billion by 2025, compared to the current valuation of about $170 billion. The primary drivers for such growth are expected to be the efficiency and productivity that such an economy can bring forth and it has also been argued that it can help propel India’s Post-Covid Recovery.
The Ola Mobility Institute’s report provides insightful research on the current state of platform workers in India and looks to actualize the potential of platforms in India. The report noted that platform workers on average were earning more than non-platform workers with 43% of platform workers earning more than Rs. 1000 per day while none of the surveyed non-platform workers earned above Rs. 1000 per day. The report finds that platform workers earn 25% more per hour than their non-platform counterparts. The report also showed a positive trend in asset ownership for platform workers despite being younger, hence this is ‘resulting in a category of individuals who monetize assets and contribute to the economic dynamism of short-term leasing’ this would, in turn, result in a shift from the current paradigm and help alter the existing dynamic of the economy. Though this trend and potential seem promising on paper, the exact nature and implication of widespread platform development are likely to be different.
Implications of the Emergence of Platform Economies in India
Impact on the Labour Market
Under a traditional business model, employee-employer relationships are formed through a long-standing commitment by the employers to the employees, characterized by standardized contracts and social benefits. When companies have a standardized business contract, they can commit to providing higher wages and benefits to help their workers, which can also aid in increasing their competitiveness. Platform businesses, on the other hand, have no fixed contracts with their workers, and hence workers have scattered work schedules, subjective wages, and no social benefits. Another consequence of the business model is the precarity of work, meaning that the work is poorly paid, unprotected, and insecure. Work precarity on platforms is manipulated by a very specific brand of control, not just by the platforms, but also through feedback and rating systems.
Some argue that the gig-worker economy could provide employment to many, such as the 2 million jobs that were created by platform-based ride-hailing companies like Uber and Ola in India and the 15 million service provider jobs that platform economies support. Chances of employment are easier too, with companies like Swiggy and Zomato having no barriers to entry; anyone with a phone and bike can become a delivery partner. However, the risk that comes with such kind of employment is high too.
In India specifically, delivery workers who work with such platforms, are not regulated by labor laws, because they fall under the broad term of “delivery partners” and not employees. Due to this, companies can avoid compliance with labor laws, which subsequently reduces their internal labor costs. This is because they do not have to pay wages or security, the delivery drivers earn as they deliver orders, and they are only paid a small number of incentives. However, this shifts the risk and the costs of the labor onto the workers and encourages a perception that by committing to this work, they are investing in something which will yield payoffs in the future. Considering about 93% of Indian households depend on such forms of work for household income, the precariousness of the gig-economy and platform economy might further be detrimental to socio-economic inequality in the country.
Evolvement into Monopolies
Another significant issue that arises through the growth of the platform economy in India is the emergence of a monopoly market. Platform economies function on a “winner takes all” model, with these platforms dominating their respective markets. As a platform continues to get more popular, its user value increases, creating an economy of scale and the market centering itself around them. For example, UrbanPro, an online platform for students and tutors, became a monopoly, after other identical services like TryMyTutor and Flipclass were unable to capture a significant enough consumer base to maintain power. Their success ends up benefiting the customers, in the form of lower prices and data-driven services. Amazon, for example, is able to provide prices that other small/traditional businesses may not be able to compete with. However, it also ends up preventing new competition from entering the market, as well as leads to the exploitation of workers under them.
Power is also consolidated among platform owners, who end up making personal economically beneficial decisions rather than consumer-oriented decisions. Google India has had multiple cases against them for abusing their dominant power as a platform in other markets and were even fined Rs. 136 crores. The lack of adequate competition law when it comes to online platform-based companies, makes it harder to regulate the formation of monopolies. Professor Anupam Manur argues that this could be hard, as to enforce competition laws, it must be established that a company is in fact dominant. Ola and Uber argue that they may be the two largest cab companies, but in the large transportation market, which includes cabs, metros, trains, planes etc. they only play a small role. Similarly, Google and Facebook argue that they only play a small role in the large advertising market, that includes both online and offline markets. Thus he believes old laws need to be changed to incorporate the new world of platform economics, and new laws need to be created to ensure market power is not concentrated in one platform, in whatever way possible.
In conclusion, the platform-based business model, although with its fair share of negative consequences, continues to have the potential to evolve into learning platforms, that could help create and capture economic value. Platforms help work as a facilitator between the consumer and producer, helping to close the gap between the two. Although they have been criticized for their dominance in particular fields, this reflects the fact that they offer the best service and are usually in high demand by consumers. Specifically, in the Indian market, platforms have not evolved into their full capabilities yet, and require further regulation and control through the law, but still continue to be successful in providing economic growth to the country. The introduction of new platforms in the Indian market has revolutionized the way Indian consumers access entertainment, goods and services, financial assistance, and social interaction. If the precarity of work and the possibility of monopolies are regulated by new labour and competition laws in the country, the platform economy will continue to be a tremendous success in India.
This is written by Arthaniti's Editorial team members - Advait Kandiyoor (JGLS) & Trisha Jawahar (JGLS)
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