India File

Flip side to online-offline battle

Sangeetha Chengappa | Updated on September 10, 2019 Published on September 10, 2019

No to fakes: Amazon says it empowers sellers through programmes that ensure that only authentic products are sold on its marketplace   -  REUTERS

Online players are taking steps to protect their seller-partners

When you walk into Radio House, one of the oldest consumer electronics stores on Brigade Road, you can’t miss a poster displayed by Sony.

The poster has a picture of Anurag Kakkar a student, along with his signed quote: “I bought online a Sony headphone because of compelling price. I was horrified to discover that product is fake and naturally of unreliable quality, which could have impaired my hearing. I feel cheated and am unable to trace the fraudulent trader. Please buy your product from authorised dealers of the company and protect yourself.”

Suhail Yusuff, proprietor of Radio House and Secretary of Brigade Shops and Establishments Association (125 members), says business is down by 60 per cent due to two major issues — e-commerce, which accounts for 30 per cent of loss in sales; and heavy traffic and congestion that has reduced customer footfalls. “Almost 90 per cent of the merchandise sold online is Chinese or sub-standard fakes. For eg, a seller buys a pair of Nike shoes from China for ₹500, which actually costs ₹8,000 in a retail store and sells its online at ₹4,000, which customers fall for and buy. I am selling a 55-inch TV for ₹92,000, which is available online for just ₹81,000 — how can I compete? E-commerce regulations are just an eyewash as e-tailers have found loopholes and are circumventing them,” he rues.

Ten years ago, finding 100-sq ft space on Brigade Road was impossible, but today, five stores of 1,800-2,000 sq ft are empty and awaiting tenants with brands like Lee, Cafe Coffee Day, Spykar, Shoe Wagon and Shoe Track having shut shop over the last few months, adds Yusuff.

S Rajkumar Pai, MD of Pai International, which has a chain of over 212 stores across three formats including multi-brand consumer electronics/durables stores, mobile stores and furniture stores in Karnataka, Telangana and Andhra Pradesh, agrees, with Yusuff. “While our turnover is growing as we have opened 100 stores last year, same-store sales have dipped by 25-30 per cent because of e-commerce. 40-45 per cent of all mobile business and 20-25 per cent of LED TV sales is taken over by e-commerce sales on marketplaces. Mobile and TV brands offer exclusive deals/launches to marketplaces and also hold back on supplying inventory of top-selling models to us, but push it on marketplaces. All this amounts to unfair trade practices. All we want is fair play,” says Pai, who has started selling online and is considering listing on Amazon and Flipkart soon.

The other side to the story

There’s the other side to the story: Rajeev Shankar, a 28-year-old from Mumbai, is augmenting his monthly income by selling online on Amazon and Flipkart. Rajeev sells ₹1.25-1.75 lakh worth of men’s T-shirts and hoodies and makes ₹25,000-30,000 per month after paying commission, shipping and returns charges to the e-tailers and procurement charges to the supplier of the tees and hoodies.

But the youngster says several issues — such as fluctuating commission rates that are hiked up suddenly without notice by the e-tailers, bearing the cost of COD (cash on delivery) returns from customers and fake sellers who sell sub-standard products under their names — that cut into their sales and tarnish their reputation need to be immediately addressed by e-tailers.

Amazon, Flipkart moves

On its part, Amazon empowers sellers through programmes like Brand Registry and Transparency to ensure that only authentic products are sold on its marketplace. “We have rapidly grown to have an ecosystem of 500,000 sellers, with thousands of these small businesses adopting progressive new technology and marketplace to grow their business at scale, with the number of crorepatis growing in double digits YoY. Also, more than 50,000 sellers now participate in the Global Selling programme to export to multiple global markets, so that since its launch in 2014, we have facilitated exports worth $1 billion from these small businesses and expect to generate exports worth $5 billion by 2023,” says an Amazon India spokesperson.

Similarly, Flipkart, with over 1.5 lakh registered sellers, has taken steps to hasten the growth journey for its seller-partners. For example, Flipkart’s Utkarsh programme helps MSMEs (micro, small and medium enterprises) find potential gaps in the quality of their products so they can reduce quality-based returns.

Arvind Singhal, CMD of Technopak, says while local sellers have benefited from the huge investments made by e-commerce marketplaces, the few sellers that are complaining, along with highly questionable seller union organisations, are the ones who haven’t kept pace and lived up to current market demands.

According to a survey commissioned by TECI (The E-Commerce Council of India) with Channelplay Ltd, to elicit the views of 541 independent online sellers, 94 per cent of the respondents felt that sellers controlled by marketplaces through various arrangements hurt the business of independent sellers on the platform. And 90 per cent felt marketplaces should not be allowed to sell their private labels on their platform as it creates a conflict of interest as marketplaces use pricing and demand insights to introduce private labels that put third-party sellers at a disadvantage.

Ankur Pahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India, says the new Consumer Protection Act 2019 is sufficient to regulate the e-commerce segment.

“E-commerce has uplifted the seller ecosystem by generating demand and providing national reach and hence opportunities to sell large volumes to shoppers. E-commerce firms have trained sellers, helped to digitise their operations, become compliant with GST, FSSAI, etc, and in the process immensely improved the quality of sellers’ merchandise. E-commerce firms are justified in charging commissions to sellers to offset high customer acquisition, fulfilment and returns management costs.”

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Published on September 10, 2019
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