There are two basic business models linked to app-based businesses. The first entails usage of various apps to ease the processes involved in various businesses. Secondly, businesses are directly conducted through apps. Purchasing of a variety of products including food items, renting of cars and many other things are included in this business model and this category can be identified as within the aegis of ‘app-based business’. The segment is gaining prominence with rising internet and smartphone penetration in India.
Online and offline job creation
Apps-based business increases the scope of employment. This is because an app based business gains ground due to its special utility and quick adoption among a section of the market. A buyer can get a commodity in his/her home or office. It is also possible to send an item as a gift to any person on a particular date and time without physically going to the market.
Apps have narrowed the distance between the consumer and the market. They have successfully reduced purchasing time and increased the choice base. This has led to an increase in the propensity to buy goods and services. Therefore, apps-based businesses increase demand in an economy.
At the same time, a section of already established physical shops lose their customers to online apps. Now the question is, how far does the online market feed off directly from the share of the offline market? This depends on several factors like economic condition of a country, intensity of online marketing - that is preference for online or offline marketing, amount of disposable income of people (purchasing power), enhanced employment opportunity, availability of variety of products, prices of commodities and others. Some market studies observe that pricing is the most important factor. The next consideration of the buyer is availability of a variety of goods. Sometimes, online players can offer latest products and thereby edge ahead of their offline competitors.
Nature of jobs
It is true that app-based businesses increase job opportunities, sometimes quite significantly. But the question is regarding the type of employment created. Does it create ‘decent jobs’, which is the main concern of social scientists? Decent job, according to International Labour Organisation (ILO) definition, involves opportunities for work that are productive and deliver a fair income, security in work place and social protection for families, better prospects for personal development and social integration. There are also many other aspects that include equal treatment to women and men under the purview of the definition of decent jobs. But jobs in app based organisations do not have social protection or job protection. Employees of these organisations do not come under labour laws. So the nature of employment is highly tilted against the interests of the employed and the government may need to intervene in this.
Who are the gainers?
Professor Ratan Khasnobis, Economist and Dean of Studies, Adamas University, West Bengal, thinks that there is need to identify the gainers in this newly emerging business model. He says that there are three sections involved in this process, namely, the developers of the apps, the entrepreneurs, and the employees. Generally, developers do not do business. They sell apps to entrepreneurs or investors at an agreed price. Then the entrepreneur uses the app in his business, which then entails hiring of employees. Here, the employees have to follow certain business rules and devote their energy to ‘work’ the app and generate income. The employees can be identified to be at the lowest end of the chain. They are to perform duties without any social protection, proper salary, and health insurance and employment benefits to ensure profit for the entrepreneur. According to Khasnobis, this section is the losers in this business model whereas the entrepreneurs are the gainers.
A new emerging problem
In developed countries, the official operative part, which controls the whole process in app-based businesses, is being automated. Robotics and Artificial Intelligence (AI) is well-poised to enter this sector in developed economies. Here lies another problem. Such usage of robotics and AI may lead to reduction in employment generation. Khasnobis said that in developing countries like India, automation is yet to take this role but may be a reality in near future.