India’s retail ecosystem, both online and offline, thrives on a delicate equilibrium: consumers trust that they can shop safely, sellers trust that they can operate freely within established rules, and regulators trust that both sides will act responsibly. When any pillar of this triangle is destabilised by disproportionate action, the entire structure wobbles.
Consider the widely reported incident of dhatura seeds being sold on ecommerce and quick-commerce platforms. The product is expected to be purchased as an offering to Lord Shiva and was not intended to be consumed, which the consumer unfortunately did. However, consumers ended up eating the dhatura seeds, and the incident has understandably raised concerns for regulators, businesses and consumers alike. The situation is an aberration rather than a systemic failure.
Dhatura has long been sold outside temples and at roadside stalls across India because of its religious significance in certain rituals. A consumer purchasing it on ecommerce or quick-commerce apps could just as easily pick up from a vendor near a Shiva temple and consume it, with the same consequences. However, the food regulator in Karnataka has issued show cause notices to all ecommerce and quick commerce platforms to suspend their food licenses. To suspend or cancel the food licences of online retailers and prohibit the sale of all food products would be an excessively strong response, in the words of the Mumbai High Court, “using a sword to kill a mosquito”.The issue is not whether regulators should act. They absolutely should when consumer safety is at risk. In this case, the misuse of the product created a life-threatening situation. Regulators should require both offline and online businesses to clearly educate consumers about the potential harmful effects of products if misused. They should also encourage businesses to understand their rights and responsibilities when selling such products, thereby strengthening consumer protection. In both online and offline sales of dhatura, the solution should be to ensure that consumers are adequately educated about the proper use of such products, while requiring sellers to exercise appropriate diligence.More broadly, businesses are increasingly concerned that regulatory action is moving faster than the opportunity to respond. There are instances where, even before businesses have had an opportunity to address regulatory queries or rectify deficiencies, their licences or ability to operate have come under pressure. Enforcement should address the violation without unnecessarily disabling the business. When regulators respond to individual incidents with sweeping suspensions, licence cancellations or blanket crackdowns, the collateral damage falls on consumers, sellers and workers across the ecosystem.
For consumers, trust erodes, not because a stray listing appeared on a platform, but because the regulatory response introduces uncertainty. Will the favourite grocery app still operate next week? Will the local kirana store be still around? Paradoxically, heavy-handed regulation can damage the very consumer confidence it seeks to protect.
There are economic consequences that are often overlooked. If a regulator cancels a platform’s licence, millions of consumers do not simply stop buying; they shift their purchases elsewhere. That sudden, artificial redirection of demand into fewer channels can create supply pressures where none existed before. The consumer who was ordering groceries at competitive rates may now pay more for the same basket, not because of any market failure, but because a regulatory decision has artificially constrained where they can shop.
For sellers, especially the millions of small businesses and start-ups that depend on digital storefronts, the stakes are equally significant. India’s online retail landscape has democratised market access in ways unimaginable a decade ago. A potter in Khurja, a spice trader in Guntur or a handloom weaver in Pochampally can now reach consumers in Mumbai, Delhi and Bengaluru without needing a physical retail presence.
For a small seller or emerging start-up, a digital platform can be the difference between testing a product and building a business. Online channels provide access to customers, logistics, payments and markets that would otherwise be out of reach. Revoking or threatening the licences of the platforms they depend on does not simply affect a large corporation; it can disrupt the livelihoods, investments and growth ambitions of lakhs of entrepreneurs.
The impact also extends to gig workers and delivery partners who power India’s digital commerce ecosystem. Platform disruption directly affects their ability to earn, particularly where delivery work has become an important source of flexible income. Regulatory action against platforms has consequences well beyond the platform itself, reaching workers, their families and the broader local economy.
This conversation is especially urgent as India approaches its most important commercial quarter. The festive season — from Onam and Raksha Bandhan through Navratri, Dussehra and Diwali — is the lifeblood of Indian retail. For many sellers, 60–70% of annual revenue is generated in these months. Online platforms amplify this opportunity by an order of magnitude, connecting sellers to demand surges they could never capture through a single physical storefront.
None of this is an argument against regulation. Regulators have a genuinely difficult job — protecting public health, ensuring fair trade practices and holding platforms accountable in a rapidly evolving digital landscape where new product categories and fulfilment models emerge constantly. But effective regulation distinguishes between systemic risk and isolated failure. It prioritises targeted corrective action — educating businesses and consumers on product safety, mandating better disclosure and labelling, strengthening post-market surveillance, and addressing specific instances of non-compliance, rather than reaching for the nuclear option of shutting down operations.
The most productive regulatory frameworks globally share a common principle: proportionality. A single non-compliant listing warrants a targeted correction, not a platform-wide shut down. A data-driven approach that identifies patterns of non-compliance and addresses root causes will always outperform enforcement that grabs headlines but leaves underlying issues untouched.
The way forward is not less regulation, but smarter regulation grounded in education, proportionality, due process and sustained dialogue between regulators and industry.
(Views are personal)
