How GeM is a paradigm change in the way govt engages with market systems.

Government E-Marketplace is the one stop shop where common user goods and services can be procured. It's a dynamic, self-sustaining and user friendly portal for making procurement by Government officers.

Flow Of Article:-

1. Introduction

1.1 Vision  

1.2 Mission

1.3 Reason behind the GeM Initiative

1.4 Evolution of GeM over the span of its operation

2. PESTEL Analysis

3. Industry Analysis

3.1 Brief overview

3.2 How GeM is different from other player  

3.3 Porter’s Five Forces

4. Product Life Cycle

5. Study of select issues 

5.1 Expansion of GeM into a public limited company  

5.2 Delay in payment to the vendors  

5.3 Single user ID  

5.4 GeM 1.0, GeM 2.0 & GeM 3.0

5.5 Lack of assigning reviews & ratings

5.6 Presence of large, medium & small enterprise across  

5.7 Less payment platform for fund management  

5.8 Lack of insurance facility on transit by Government

6. Summary and Conclusion

1. INTRODUCTION 

Government e-marketplace is hosted by Directorate General of supplies and disposal. It is a platform where common goods and services can be procured. It is a user-friendly portal for making procurement under government. It is one stop shop portal where varied goods are available that too demanded by various ministries across the sector. The portal was launched on August 9, 2016 under the ministry of commerce and industry. The main objective for the launch of this platform was to promote open and transparent procurement procedure.

1.1 VISION: “Evolution in public procurement and promoting a transparent, efficient and inclusive market place” 

1.2 MISSION: “Create a unified procurement policy to encourage changes in behavior and drive reform while establishing a lean yet dynamic organization that is capable of continuous innovation. To build an easy to use yet fully automated platform that ensures transparency and efficiency in the final procurement. Along with that creating a sustainable ecosystem for all stakeholders and driving inclusive development”.

1.3 Reason behind the GeM initiative

There was a need to bring consistency in public procurement and to remove mal-practices that were being practiced in the existing system by the buyers and sellers. Purpose and Impact that GeM is expected to deliver. It was launched to enhance efficiency, transparency of procurement and motivate small and medium enterprises to do business with the government. This will also lead to better transparency and efficiency within the government organizations and reduces the lead time of the whole process from placing the order to receiving it.  

GeM was founded on the model of OFI (Openness, Fairness and Inclusiveness). The GFR 2017 mandates all the ministries and Departments to procure well and services from GeM itself thus creating ample demand of the same. This helped GeM sellers to push it products in the market faster than usual. With various regulations and guidelines followed by the platform, the guarantee of having genuine products on the platform is there. The veracity of goods and services that comes under this are common goods and services. Thus, the spectrum is very wide when it comes to variety of products. Along with that, the GeM platform clearly defines the set of good that are never to be sold on this platform.  

There are 3 forms of commerce transactions i.e. B2B, B2C and B2G. B2B is a form where one business makes commercial transaction with one of the other business while B2C refers to Business to commerce where products and services are sold directly to the consumer by the company. But GeM is a B2G (Business to Government) platform for businesses to bid for government opportunities in a reverse auction fashion. Public sector enterprises generally post tenders in the form of request for proposals, request for information, quotations and then suppliers responding to them. 

1.4 Evolution of GeM over the span of its operation

The journey of GeM starts in Pre-GeM phase where there were close to 3000 sellers with around 250 item categories. Eventually it transformed from GeM 1.0 to GeM 2.0 which got MSP on board thus protecting the rights of sellers and integrating with partners i.e. UIDAI, MCA-21 and banks. Currently its operational phase is known as GeM 3.0 which gave multi language support to the platform. Due to this the reach of the platform rose exponentially thus creating a large ecosystem. This exponential scaling up of the platform has received tremendous results in terms of staggering revenue of Rs 51.6 billion with over 315k transactions. There are 3 purchase options through which buyers can purchase on e-market place: -

1) Amount less than 50000: No need of any comparison in products and buyers have the freedom of choosing any product according to their specifications: Buyers can purchase from any of available suppliers on GeM by meeting the appropriate quality specifications and delivery period.

2) Amount more than 50000: Then the GeM seller having the lowest price amongst the available sellers of at least 3 different manufacturers on Gem meeting the appropriate quality, specifications and delivery period. Mandatory to do comparison first, then buyers need to select the L-1 Product.

3) Purchase amount more than 3000000: In this case the supplier having lowest price meeting the quality standards. After mandatory obtaining bids using online bidding or reverse auction provided by GeM serves the required purpose. 

Thus, GeM has achieved spectacular results over the course of its span and yet due to few shortcomings, it has exceeded like anything which clearly describes the need of it in the society. Soon after opening to the private sector and competing neck to neck with giants like Amazon and Flipkart with a greater number of sellers. This will truly bring in healthy competition and competitive pricing with taking fairness into place will occur.

2. PESTEL Analysis

Political:

?     Government of India is aiming for a corruption-free country and hence GeM will help in transparency in procurement of goods and services.

?     Government of India has launched Digital India Campaign to create the digital infrastructure.

?     Government is boosting the MSME sector through various measures. 

Economic:

?     Due to economic slowdown, implementation of GST and demonetization has affected MSME badly to MSME sector who is the main supplier to GeM.

?     Economy is moving towards the cashless, paperless and contactless transactions so there we can see a consistent growth in this sector.

Social:

?     People have becoming smarter and adaptable to use the internet, including the sellers and hence they want to sell their goods and services on a reliable platform where they will get better opportunities.  

?     In this age of internet, where buyers have many options, they prefer to buy goods which are available at best price and have good reviews.

Technology: 

?     Digital India initiative was launched by the government to create digital infrastructure and make people digitally empowered.

?     Buyers prefer swift electronic payment along with prompt notification nowadays.

Environment:

? Government and the citizens are becoming more environment friendly and hence adopting measures to save environment like using less paper in their day to day lives and using more digital methods.

Legal:

? Government hasn’t provided any rebate or tax benefit as such as of now for the new sellers. The usual GST charges are applicable as on other platform, but sellers can avail deductions in their income tax under relevant sections.

Outcomes of PESTEL

Opportunities

?     There are no such other government led websites for the procurement of goods and services hence it will give direct access to all registered government buyers.

?     Due to rise in mobile phone usage, e-commerce industry is growing at an unprecedented rate and hence people are becoming more dependent on them.

?     Less websites are aligned with the facets of Digital India (SOP based, paperless and cashless), thus giving Government e Marketplace a platform to ace in it.

3. INDUSTRY ANALYSIS

3.1 Brief overview 

Government e-marketplace has brought a revolution in the industry by transforming the way in which the goods procurement is done in the government and other apex institutions. By properly aligning the methods and ways of selecting the seller, it eliminated multiple levels of manual, sequential verification. This led to time saving, better efficiency and faster procurement by the government since it reduced the lead time for the same.

The core benefit that GeM brings to the table is the payment of the product. The general issue of running the sales largely on credit has hurt number of retailers and businessmen due to increasing bad debt and high-risk involvement. A sense of assurance of payment within 10 days is tremendous compared to 55-60 days industry average. This truly unleashes the potential of this platform as the quantity yet diverse demand across various sector is immense and by transparency the whole process, it curbs various problems like corruption, favoritism of seller, delay in delivery, ensuring quality products & many more benefits. The transition in the model of business to consumer is done as follows

1.     The First stage will open the Gem portal to private entities/contractors working on government projects. This will allow them to directly buy products from the platform rather than the government buying the products and handing it over to them.

2.     The Second stage will be to open Gem for private entities who will be allowed to buy products for their personal use

3.     The Third stage will include opening the services to individual buyers.

Along with the government objectives, the actual selling process on GeM is explained as follows:

Step 1: First register yourself on the Gem portal

Step 2: List your products under specific product categories

Step 3: Once an order will be received. Then deliver the product to the consignee duly entering its details on the portal.

Step 4: After the order is successfully delivered, consignee will inspect the product for its conformity with contract specification and then issue acceptance/rejection through online consignee’s receipt and acceptance certificate (CRAC).

Step 5: After this the buyer will process the bill and forward to paying authority for time bound payments.

Government E-Marketplace does have various differentiating factors and it has truly established itself as one of the top reliable players in the industry. Apart from having the monopoly of being secured directly under the Ministry of Commerce and Industry, the aura of being a GeM seller is clearly the point as to why they prefer to sell on this platform. The badge of being a registered GeM seller acts a marketing tool for the sellers as a government approved buyer has more reputation than other private players.

3.2 HOW IS GEM DIFFERENT FROM OTHER PLAYERS?

?     Gem has double the number of sellers than flipkart. It has 2,59,000 sellers and service providers combined. Apart from that service isn’t sold by Flipkart and other potential competitors thus giving GeM an edge over others.

?     The government has started offering credit facility to MSME’s on Gem through trade receivable electronic discounting system. It is a bill discounting service supported by SIDBI for pre and post shipment of products.

?     Gem leverages technology to make government procurement contactless, paperless and cashless while cutting costs by 25%, brings in dynamic pricing and faster turnaround time, widens vendor base and curbs the rigging of tenders.

3.3 Porter’s Five Forces

Competitive rivalry: Gem competes against strong competitors. This aspect of Porter’s five forces analysis deals with the effects of firms on each other. In the case of Gem, the following external factors are responsible for the strong intensity of competition or competitive rivalry in the online industry:

?     High aggressiveness of firms 

?     High availability of substitutes 

?     Low switching costs 

Gem experiences the strong force of substitutes because of their high availability. For instance, some companies physical or brick-and-mortar stores are substitutes to Gem’s online service. Moreover, low switching costs impose a strong force on the company. Low switching costs correspond to low barriers for consumers to transfer from one company to another. With high chances of forward integration on few segments by large manufacturers/suppliers and the competition from the traditional brick and mortar business increases the competition further.

Bargaining power of buyer: This aspect of Porter’s five forces analysis model determines the influence of consumers on firms and the industry environment. The following external factors support the strong intensity of the bargaining power of customers in affecting Gem:

?     High quality of information 

?     Low switching costs 

?     High availability of substitutes 

Due to highly accessibility of data with the consumers, the information and awareness regarding the services of other competitors has increased which in turn makes the whole scenario even more competitive. Also, the high availability of substitutes further empowers consumers to shift from one company to another. With such less product differentiation, the cost of switching to other product has become negligible. The intense completion in this e-commerce industry has led to good bargaining power in the hands of customers.

Bargaining power of suppliers: The availability of the supplies & Suppliers control is quite limited to the fact that the number of competitors outrun the sole power of individual supplier. The influence of suppliers on the online industry environment is outlined in this aspect of Porter’s five forces analysis model. This can be due to following external factors:

?     High population of suppliers 

?     High size of suppliers 

The high population empowers suppliers to impose a weak force on Gem’s e-commerce business. The large size of most equipment manufacturers limits their influence on the company. Ecommerce is truly the preferred channel as it also helps one with brick and mortar to increase their presence. The big players in the offline market can easily add on a branch of online to support their revenues.

Threat of substitutes: Gem competes with substitutes in the online market. This identifies the substitution effect on the industry environment. In the case of Gem, the following external factors support the strong intensity of the threat of substitution:

?     Low switching costs 

?     High availability of substitutes 

?     Low cost of substitutes 

The high availability of the product in the market and the extensive number of competitor further increase the influence of substitutes against the company. Thus, this shows that substitution is one of the preferred strategies adopted by the companies.  

Threat of new entrants: The effects of new entrants are considered in this aspect of Porter’s five forces Analysis model. Gem experiences the strong intensity of the threat of new entry based on the following external factors:

?     Low switching costs 

?     High cost of brand development 

?     High economies of scale 

Gem’s customers can easily transfer to new firms, thereby empowering new firms to impose a strong force against the company. However, the high cost of brand development in online industry weakens the influence of new entrants on the performance of the company. Moreover, the company benefits from high economies of scale that make its e-commerce business strong. So new entrants need to achieve similarly high economies of scale to compete against the company. The ecommerce industry has a lot of potential for growth for all the players. With e-commerce industry estimated to reach $56 Billion by 2023 there are lot of opportunities for lot of new players to gain market share and increase their business.

4. Product Life Cycle:

On the X-axis years are taken from 2011 to 2017 and on the Y-axis industry sales in rupees billion has been taken. Since Government-e-Marketplace was started in the year 2016 sales data was available only for 2 years. Hence, we have considered e-commerce industry and derived the curve because GeM is a B2G sector which comes under the e-commerce sector itself. The curve is upward sloping showing with industry sales increasing each year.

For deriving the curve, we took the data from the “National report on E-Commerce development in India” which was released by UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION.

Output of PLC: Since the curve is sloping upward, therefore this sector is in the growth stage.

Strategy: Government can use the strategy of market penetration because there are various segments that has not been tapped by the GeM, as of now only equipment like computer, printer, furniture etc. are being procured. It can be expanded for various sector like defense where they GeM has not been used properly. 

5. Study of Select issues

5.1 Expansion of GeM into a public limited company

The Government intends to turn the state-run Government-e-Marketplace GeM, into a public limited company, which will help GeM in utilizing its potential and to have its next growth stage. Currently GeM is registered as a section 8 company as its objective was not make profits, but the government is planning to change the nature of the company and make profits out of it. As of now government has no plans to list the GeM in the equity market, but they may want to list it in the future when it will be valuable to the government.

The main purpose for the conversion into a public limited company is that the government wants to allow the private entities to purchase in the GeM platform which will help further in decreasing the cost of the goods and services for the government. A draft has been floated for consultation from the cabinet of inter-ministries whether the private players should be allowed to make bulk purchases or not. If this proposal is approved by the cabinet, the it will allow any private entities to make purchases in the GeM platform. This would bring in a partial competition with the private e-commerce companies. Authorities of Government-e-Marketplace have assured that there are no changes required in the character of the GeM platform.

GeM is doing a transaction worth of around $1.5 billion and it is excepted that it will do transactions worth of around $25 billion in the next 3 years and $100 billion in the next 7-8 years by creating more awareness among the buyers and sellers. Also, it wants to compete and do more transaction than e-commerce companies like Flipkart and Amazon India whose transaction is around $12 billion at present.

At present GeM has about 300,000 registered sellers and service providers offering close to 1.4 million goods and around 19,000 services on its platform. Gem has more than 40,000 organizations who have made transactions of nearly Rs.37,000 crore. In this the MSMEs make up 20% of the GeM sellers and contribute over 40% of the value of the transaction. Also, to provide a holistic growth to this sector government will roll out a national e-commerce policy will within 12months.

GeM is working on to build strong rating mechanism for both buyers and sellers. This will help both sellers and buyers to fulfill their objectives:

?     Sellers can avail loans for the working capital, where the credit worthiness of the seller can be linked to the rating and performance of the sellers.

?     Buyers will be in better place to judge from whom to procure the goods from the sellers who has good reviews and ratings especially in critical areas of procurement.

Reasons for the expansion:

?     Increase in the volume of transaction will bring down the prices which will benefit government. This will help the government to make a savings of 1% of the GDP in the next 3-4 years and eventually help to control the fiscal deficit.

?     E-commerce sector in India is prone to monopolization, which is a legitimate reason for the government to intervene. 

?     Many vendors have issues with the of the e-commerce companies who believe they are not getting a better deal on the current available platforms; hence these vendors may shift towards the GeM.

Problems for the expansion:

?     In a highly competitive market and with the performance record of our PSUs it will be difficult for an organization run by the government to match the efficiencies of the private companies like Flipkart and Amazon.

?     If the government wants to be a market leader in this sector then it may have to adopt the strategy of giving discounts to attract the customers as other e-commerce companies do, but this may turn out to be controversial and worthless.

5.2 Delay in payment to the vendors

?     According to Manufacturer’s Association for Information Technology (MAIT) one of the major concerns faced by the vendor registered in the GeM platform is the delay in payment.  

?     As per the rules laid out by the GeM if a buyer has proper justifications then they can reject the goods and return it without any charge under a period of 10 days. If the buyer is accepting the goods, then they must make the payment within the same period. But right now, the average time taken to make payment is around 23 days.  

?     This is a major concern because the whole investment of the product or service is raised by the vendor through debt. When a vendor provides a product or service through credit there appears a gap in the cash flow which they will need to cover. 

?     When the payments are delayed it creates pressure on the vendors for their future commitments with the GeM. This may eventually lead to decrease in the number of vendor association with GeM.

?     This will also lead to some amount of credibility loss to the Government run E-commerce portal as these vendors go about complaining about the delay in payment

5.3  Single User ID

?     When a company is registered in the GeM, it will be provided with only one single user ID. This is a concern for the vendors because if there happens to be a single point failure, then the whole product access and sale would get interrupted.

?     There are immense difficulties faced by businesses in owning or affording extensive IT departments, equipment and redundancies. A GeM will have to invest huge amounts for such extensive IT departments. 

?     The intensive reliance of the GeM is laid upon the rules and guidelines that are made. With that into place, to make the situation as real as possible in the real-life scenario, the amount of infrastructure pertaining to that is relatively low as compared to the current views. Thus, launching the GeM platform via various mediums like website, mobile application is a must but catering to other enterprises in small areas may call for a need of an offline platform where the local sellers can get the information regarding the same.

?     Designing a better structure to make allocation of product ID’s in a better manner is important for vendor attraction.

5.4  GeM 1.0, GeM 2.0 & GeM 3.0

?     The time taken by the government for the transition of a paper-based procurement to an online procurement portal should have taken place after having a proper plan and infrastructure. 

?     Proper planning and implementation take time, but in the case of GeM, the government rushed through the proceedings and implemented it a bit too early. This eventually led to many shortcomings as far as an E portal is concerned. 

?     Some of the issues are so immense that it can cause problems a great loss to the economy as there are loopholes in the existing website that is holding sensitive information especially payment platforms access. Thus, with less security and firewalls, the entire platform can be brought to a standstill if a potential bug is escalated in the system.

?     Such rush in the transition is good for the platform as it lets it grow at a much faster rate than others but along with that comes a lot of problems and challenges.

?     To overcome this problem the Government had to come up with new updated versions i.e., from GeM 1.0, to GeM 2.0 & GeM 3.0. This update was in alignment with the demands made by the stake holders.

5.5  Lack of assigning reviews and ratings 

?     The website provides a platform for various sellers to register and become eligible to sell to one of the most valuable companies. The filtering mechanism of quality sellers is not present which creates the issues of originality of the product that is sold defeating the purpose of the platform i.e. to make the system more efficient.

?     Also, the mechanism to provide feedback, ratings and reviews to the types of buyers and sellers is not present thus reducing the transparency of the organization and paving the way to fraudulent activities.

5.6  Presence of Large, Medium and Small enterprises across all divisions

?     Across all the 3 stabs of purchase i.e. below Rs 50000, Below Rs 30 lakhs and above it, there isn’t any guideline as to which all companies or scale of companies can participate in the selling process. 

?     Due to this various big companies push their products among all three categories and outrun small firms in terms of pricing due to economies of scale. This hurts the core values of GeM which was to ensure growth of Small and Medium Enterprise but here also the big conglomerates sneak their way in and earn profits at a margin which won’t be available to other existing sellers.

5.7  Less payment platforms for fund management

?     Currently GeM is associated with payment gateway in which the amount is transferred directly to the beneficiary’s account, but the issue is for people who are not that much technically sound or be afraid using online services due to data breach issues.

?     This thing truly makes the genuine seller a mile behind of those with good computing skills thus making it unfair for the micro and small enterprises.

?     The problem must be resolved by providing some offline arrangements for payment procurement too.

5.8  Lack of insurance facility on transit by government

?     When the goods leave the premises of the seller, various items in the order are brittle and need extra care than usual items. For the security of these items, buyers must buy the insurance from private agents so that the damages can be recovered if happened under transportation.

?     GeM being such a big platform doesn’t provide its sellers an insurance facility which will ensure that products that reach are in pristine condition and if not, then the appropriate individual who is accountable must be available for the desired proceedings.

5. Summary and Conclusion

?     Government e-marketplace has emerged as one of the most thriving commerce platforms with a staggering 4-fold increase in business in last year only. 

?     It has achieved significant milestone grossing over 23000 crores in Gross merchandise Value with over 8.8 lakh products. With over 42% of transactions by volume being done by the existing MSME's shows the wide range of success of this platform. 

?     By integrating with Ministry of Corporate affairs (MCA21), SEBI and other prominent institutions, the robust registration process is in process thus making it a secure platform with verified individuals. 

?     For seamless operations various training sessions are being conducted impacting lakhs of industry individuals. With traffic up by 50% on the website the awareness and promotion of current platform, the impact of this platform is truly immense. 

?     The prospects look promising as the MSME sector is immense and with correct measures the platform will reach heights. 

?     Being awarded with Digital India Platinum Award for ‘Exemplary Online Service’ by Electronics and IT ministry, the platform is also engaged in promoting women entrepreneurs and self-help groups. 

?     Since its inception it has transformed the public procurement in the commerce industry by making the system paperless, seamless and cashless. Providing goods of right quality in right quantity keeping transparency & efficiency in place is its moto. 

?     By reducing manual inefficiency & ineffective human interventions, it truly achieved the status of an efficient and standardized public procurement platform.