E-commerce fraud on the rise
Jul 02 2013, 15:23 | By SME Mentor
E-commerce is often touted as the sunshine sector and, every so often, statistics are quoted on the increasing number of Indians who are taking to shopping online, thanks to ease of access to the internet as well as plastic money.
But with every rose bush comes thorns, and way too many of those have surfaced in recent times. As recently as May 2013, Timtara, an e-commerce venture focused on electronics, not only shut down but its founders were arrested after 200 consumers alleged that the company was guilty of fraudulent transactions worth over Rs 12 lakh.
Complaints On The Rise
Timtara received a fair bit of media attention but the truth is that many more customers have, over the last seven years (during which there has been a rise in e-commerce ventures), burnt their fingers because they either not received the goods they ordered online or hit a wall while asking for a refund for goods that were not satisfactory.
Ankur Singla, CEO and founder of Akosha.com, an online consumer complaints platform that also helps customers recover their losses, says that in the last couple of years, e-commerce complaints have risen dramatically and now comprise 15-16 per cent of the complaints Akosha receives.
Canny & Cunning
Between January and March alone, of the 76,000 complaints with Akosha, nearly 14 per cent related to e-commerce - 58 per cent related to faulty deliveries and the rest to delays, lack of refunds and non-delivery of goods. Singla says with no formal regulations in the e-commerce segment, e-tailers make tall claims and offer goods at less than half or one-third the regular price but these are often nothing but a game to beat the competition. "For instance, diamond earrings worth Rs 25,000 may be on sale for as little as Rs 10,000. Customers are tempted by such offers only to realise later that the earrings will never be delivered," Singla explains.
Manav Shankar, founder and CEO of meranaukar.com, which provides concierge services across India, echoes Singla's view. "E-commerce is in its early days in India and not a single player, big or small, is profitable yet. Margins are wafer thin and there is always the pressure to grab more eyeballs than your competitors. As a result, most of these players come up with seemingly irresistible offers," remarks Shankar, who believes like the telecom industry in India, the e-commerce space too will witness consolidation and emerge stronger.
The process has already begun, with better-known online marketplace players such as Snapdeal and Flipkart acquiring smaller players among their peers and shutting them down soon after. (Snapdeal acquired esportsbuy.com in April 2012 and shut it down a couple of months after, whereas Flipkart acquired Letsbuy.com in February 2012 and shut in down in May.)
K Vaitheeswaran, founder and CEO of Indiaplaza, one of India's earliest e-commerce ventures, too believes that it is only a matter a time before more checks and balances are introduced and redressal mechanisms get stronger. However, Vaitheeswaran believes that most entrepreneurs do not enter the e-commerce space with fraudulent intentions. He also agrees that most early e-commerce ventures cannot keep their commitments after the first few months of operation due to lack of funding from VCs or other investors, who withdraw support because they expect quick results and want to cash out quickly.
It's early days yet and with Internet penetration in India at a miniscule 7 per cent, it is too early to write off the e-commerce sector. Admittedly, there are a few rotten apples but the onus is also on the customer to be discerning while making online purchases.
Tips For Online Shoppers
If you are an online shopaholic, here are a few things you can keep in mind.
Check their track record: While shopping online, do stick to websites that have been around for a while and proved their worth. Fly-by-night operators may lure you with direct mailers and flashy advertisements in newspapers and banner ads in popular social media platforms but do not fall for them.
Rely on word of mouth: Make sure you do your research before making any purchases online. Check with relatives, friends and colleagues about their online shopping experiences and use their recommendations while making decisions.
Check for security: This is perhaps the most significant part of your purchase - sharing your credit card details or making a transaction through Internet banking - and this is where you have to be very cautious. Do not ever buy from a site that does not have a padlock icon either in the address bar or at the bottom of the navigation page. A padlock indicates that your transaction is secure and the e-commerce website can be trusted.
Test the waters: E-commerce experts recommend that you first make a transaction of lower value before ordering anything big. In case of electronic goods, at least in India, Shankar of meranaukar.com believes it is wise to stick to buying directly from company websites rather than depending on e-tailers.
Greed Before A Fall
Singla of Akosha says that complaints notwithstanding, the onus is still on customers, who more often than not are victims of their own 'greed'. He therefore says it is best to stay away from 'offers' that seem too good to be true. "If a piece of jewellery or an electronic item is being offered at a third or fourth of its market price, smell a rat," he says.
So shop online as much as you please, buy look before you leap!
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