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Future Of E commerce in India

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Today internet has made our world small enough to fit into our pockets, instant information, social networking, and convenient online services have made our lives easier beyond believe. Internet gave birth to what we all today know as ‘E-commerce’. E-commerce or electronic commerce is the process of trading through internet. Though online shopping was invented in 1979 by Michael Aldrich, it wasn't until 1994, when E- commerce came in to existence with opening of an online pizza shop by Pizza Hut.

In two decades, e commerce has spread in every aspect of a consumer’s daily life, may it be buying books, electronics or groceries. The outburst in the e commerce sector is clearly not a surprise considering its benefits, one of them being the increase in the digital population of the world. Today 40% of the world’s population is digital which is triple of the world’s digital population in 1995.Other reasons for the popular spree of E- commerce include changes in consumer’s lifestyle, 24*7 conveniences, and advantage to compare prices, easy availability of information, deals and discounts on products. However, e commerce suffers from various familiar limitations as well, including payment frauds, lack of personal touch, and security of personal data, necessity of internet and technology to assess it. 

E-commerce has not failed to expand it's roots in India. With the advent of e sellers such as Amazon, E-bay and Flipkart, it is bound to flourish further in the coming years. It is estimated that the revenue of E- commerce sector in India is likely to reach $24 billion in 2015 and would contribute to 4% of the country’s GDP by 2020. With the fast pace growth in India’s IT and telecom sector, which would contribute 10% and 15% in India’s GDP by 2020, it is likely to drive the growth of E- commerce further. Change in lifestyle of Indian consumer, increase in generation-Y and increasing digitals population which was estimated to be 137 million in 2013 are also factor driving the success of E- commerce in India.

To regulate this booming sector, there are international organizations such as International Consumer Protection and Enforcement Network (ICPEN) and Asia Pacific Economic Corporation (APEC). Many countries have realized the need of the hour and have appropriate law structures to analyse the functioning of E-commerce in their respective countries. Unfortunately India does not falls in such a category. Laws such as Cyber Law of India, Information technology Act and Consumer Protection Act,fail to focus or very mildly focus on the diverse issue faced by modern day Indian consumers in e commerce sector. Even if they exist they fail due to its weak implementation. For instance Cyber Law of India has provisions for pornography but not for selling of adult merchandises online. Thus, in India the existing laws concerning consumer right are not adequate enough to protect the consumer from issues such as frauds, unfair trade practices, misuse of personal information or any other problem faced by them in the cyber space.

One of the most recent examples of violation and manipulation of the existing law structure of India and business ethics was Flipkart.com's 'BIG billion day sale'. Similar to China's 'Singes Day' and USA's 'Black Friday', the sale was announced to be held on 6th October 2014. The sale was aggressively promoted both online and offline and was to start at 8:00 a: m on the Monday morning with the aim to tip their sales to 1 billion in a single day. The sale claimed to offer jaw dropping discounts and offers on products from different categories plus multiple items were available for merely Rs.1.

On the morning of 6th October 2014, many consumers woke up early all geared up for the sale but faced a huge disappointment when the site crashed and showed errors in loading. However these weren't the only issues that consumers faced during the big sale. The tremendous discounts that were to be provided to the shoppers disappeared as fast as they had come to life. Some were ‘out of stock’ at 8: 00 a: m itself. They received 3,00 , 000 orders in the first 6 hours, ultimately running out of both their inventory and reached the limit of orders their logistics team could process. Thus, the ‘out of stock’ status to prevent taking any further orders and failing in delivering the same. The objective was to reduce dissatisfaction among consumers, due to late deliveries or no delivery but ended up doing the inverse of it. Flipkart.com’s Facebook page was bombarded with complaints and backlashes by unsatisfied users. Frequent price fluctuations and self-cancellation of orders further aggrieved the plight of the consumers. 

On the surface it may only seem bad management but if one digs deeper, there are various violations of existing India law structure. There were clear violation of the code of self-regulation in advertising laid down by the advertising sector watch dog- ASCI (The Advertising Standard Council of India) which clearly states 'No advertising shall be emitted to contain any claim so exaggerated as to lead to grave or widespread disappointment in the minds of the consumer.'

Flipkart.com managed to use the sale to its advantage for increasing its working capital and the grace period.

One of the issues faced was the ‘self-cancellation’ through emails or messages, through the consumers facing the problem, were promised a refund in 10 days. In the matter of 10 days, the company was provided with an addition of 3 grace days of working capital. Considering 1.5 million people visiting the site, another million buying the products and the thousands/lakhs who received the ‘self-cancellation’ message, the revenues generated is enough to cover their expenses or this way, companies can “buy time” to find ways of generating the necessary revenues based on their existing capital and human resources to pay the consumers back in 10 days.

The heavy discounts and offers provided on the ‘big billion day sale’ can be categorized as the strategy of price skimming. Price skimming is the process of charging a high price for a product during the first stage of product life cycle and when the product enters maturity or last stage of product life cycle, its price is gradually lowered. However, for the sale, Flipkart.com, did not lower the price gradually but reduced the price drastically to clean out their stock of late maturity products. During the sale, the inventory turn rate ran low for the products, thus the ‘out of stock’ status. Price skimming is illegal in numerous countries, but Indian law still does not recognize it as illegal. It is however, against business ethics and marketing ethics to be followed by a company. Marketing ethics involves pricing practices, including illegal actions such as price fixing and legal actions including price discrimination and price skimming. 

Flipkart.com's sale is only a single example of the current functioning of the E-commerce sector in India. There are various other issues Indian E-commerce sector faces. 

Clearly, E commerce sector has all the perks of making profits and commerce viability.

However, the issues faced by E-commerce sector are not reducing but in turn are expanding, and are clearly are unable to regulate itself any more. Its a high time, government steps in and takes charge of the situation.

Two of the steps that could be taken to curb this booming industry are:

  1. Setting up of a separate government legal body solely for the purpose of regulating and analyzing the functioning of E-commerce in India. The body could even include keeping track of the growth of E-commerce in India.

  2. Including 'E-commerce as an individual category in different laws already existing and setting up distinctions for their operation.

With government intervention, E-commerce sector will set out to reach new heights of prosperity accompanied by societies satisfaction. After all consumer is the king!

posted Jan 10 by Rishabh Kandwal

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