View: Why digital platforms' regulations are required to preserve small businesses
Digital platforms fundamentally alter how business is conducted. This is particularly true for small businesses because platforms help them find potential buyers worldwide. No wonder recent unicorns like Nykaa have emerged from these online businesses.
A fundamental challenge that small businesses face is that potential customers need to know that the business exists and how it is different from its competitors.
Small businesses must prove to potential buyers that they can deliver what is promised. Further, logistics such as payment, shipping and delivery must be managed for transactions. All these factors add significantly to the entry and scaling-up costs for small businesses.
Digital platforms reduce these costs for small businesses through targeted advertising and logistics support to facilitate entry and scaling up.
Small businesses would have had to rely on more expensive and less effective conventional advertising such as pamphlets and radio if these digital platforms were not available.
While the reliance on digital platforms is increasing worldwide, the tussle between digital platforms and regulators has also intensified over the years. Across the world, regulators are becoming increasingly concerned about how platforms treat complementors — companies who do business on the platforms.
While big complementors, regulators and the platforms are heard, one voice is systematically ignored: the voice of nascent small businesses that rely on these platforms for advertising and sales. Traditional wisdom is that platforms set terms for complementors because those businesses do not have a choice.
