Going bust

Priyanka Pani Manisha Jha | Updated on April 12, 2013

Online players are trying to outdo each other with offers that are almost too good to be true. _K. MURALI KUMAR

The recent arrests of the co-founder and CEO of the Delhi-based e-commerce site Timtara following the slew of customer complaints has brought the issue of online frauds in e-commerce sites back into focus once again.

If statistics are to be believed, the number of online complaints in India has been on a steady rise even as the e-commerce industry struggles to gain foothold in its early days of growth. According to online customer complaint forum, the month-on-month growth rate for online e-commerce complaints, averaged over a period of past two years is around 30 per cent.

“Online and e-commerce is one of the top sectors in terms of number of complaints registered with us,” said consumer complaint forum site CEO Ankur Singla.

In the last trimester (Jan ‘13-Mar ‘13), out of the 76,000 complaints that were registered with Akosha across all sectors, around 13.84 per cent were from this sector. A bulk of these complaints are registered by consumers in the metros with Delhi topping the list with over 1,900 complaints (18.40 per cent) of the total complaints in the e-commerce sector in the last trimester.

An overwhelming majority (58 per cent) of these complaints faced by e-commerce consumers related to deficiency in delivery, followed by refund issues (29 per cent).Within deficiency in delivery, a whopping 39 per cent were related to delay in delivery of goods followed by non-delivery of goods (34 per cent) as was the case with customers of Timtara. Within refund issues, 71 per cent complaints related to delay in processing the refund followed by 29 per cent from refusal to process the refund.

Competition to blame?

“With increasing competition, several online players are trying to outdo each other by offering ridiculous and too-good-to-be-true sounding offers such as a gold necklace worth Rs 15,000 for Rs 3,000 which is luring customers to pay and later realise they have been duped when no product is delivered to them. With e-commerce in India being in its early days, repercussions of fraud are manifold and what India needs is a seal of trust through a third party system which could vet or rate the e-commerce sites based on data on its customer service credentials just like in the US,” said Singla.

Consumer protection

As far as consumer protection policy goes in the e-commerce space, customers have remedies available under the Consumer Protection Act as well as under the general law of the land/IPC/criminal law, according to Singla. “These include filing a complaint and approaching the consumer court, filing an FIR with the police,” he added.

Meanwhile, Harish Bijoor, Brand Consultant, said that such cases will not only hit the credibility of both established players and the new entrants but also impact the profitability as people will shy away from making advanced payments through plastic cards.

The e-tailers usually want their customers to make online payments as it reduces the chances of goods being returned by the customers, he said while adding that about 20 per cent of goods get returned when done through cash-on-delivery (COD) platform. Also, the player or firm ends up losing twice if a single transaction through COD gets cancelled after being delivered at the doorstep.

However, consumers need to be extra careful and should do a proper due diligence before making any big ticket purchases. They should stick to small amounts while visiting a e-tailer for the first time. It is advisable to stick to trusted and well-established players.

“We will see a decline in the credit card and debit card transactions if such incidents continue to recur,” Bijoor, who does proprietary reports for companies, said.

Meanwhile, new players are of the view that they need to work towards building the consumer trust.

Samarth Mungali, Founder of, a platform dealing with high-end apparels and designer wear, said, “short time gains will not take you anywhere if you want to be a long term player,”

He also attributed the high growth rate of the ecommerce industry responsible for such cases of fraud as a few players under peer pressure tend to take the illegal route to get noticed. Mungali, who started off through COD now has all his transactions through online payment, which shows that he has been able to build the trust amongst his customers.

Abhishek Lal of said that for him transactions through COD have come down to 40 per cent from 65 per cent in 2011. The shoe e-tailer went live in November 2011.

Suchi Mukherjee, founder of, which started in 2012, said that such incident also end up helping the entire ecosystem as it will weed out fly by night operators.

Meanwhile, Indian Angel Network president Padmaja Ruparel said, “From an investor point of view, it highlights the loopholes and the need for deeper diligence on the promoters and his model and calls for a tougher checklist before deciding to invest in such ventures.”

A low rate of growth of online customers owing to such incidents is also not a good sign for the Venture Capital (VC) investors in this space as it impacts the growth of the investing company as well, she added.

It is not just the trust between the customer and the company that takes a hit but also the trust between the VC and the entrepreneur, said a VC investor Anand Lunia of India Quotient.

“Unlike banks which have a large portfolio, VCs only do about 3-4 deals a year and a bad investment decision in such fraud sites becomes difficult for them to absorb. However compares to young, enthusiatic and foreign VCs that invest in e-commerce, Indian VCs are tougher to cheat on.” said Lunia.

Satish Kataria, Managing Director, Springboard Ventures suggested that the emerging players should let consumer testimonials speak on their site.

They should invest more in consumer service - be it online chat, social media, consumer back office and of course the delivery logistics - reach out to consumers and attempt to listen and respond to them, he added.

“Perhaps this incident should encourage industry to join together and create an industry standard/certification and a common grievances cell/ombudsman infrastructure to handle such issues and take quick action against defaulting sites - in order to retain and strengthen the consumer interest in e-commerce,” he added.

On whether investors will shy away from startups, Kataria said such one of incident will not prevent VCs to look at opportunities in the e-commerce space.

“The potential is still huge and as with all large industrial domains - there will always be cases of some bad apples. However, it will definitely make due diligence and operational scrutiny of e-commerce investments much more stringent - which is anyways a good measure to further make this industry more accountable and transparent,” he added.

Published on April 11, 2013

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