All for a good bargain

Lately, all online sales have been a bargain basement for the urban shopper. Items added to cart, purchased and returned, all at the click of a button. But behind the glitz of all the sales, it's the mom and pop stores, hidden in the bylanes of India, that have been facing tumultuous times in the reign of e-commerce companies.

While media and research reports, like Anarock's latest: Customer Experience (CX) The Epicentre of Retailing, would have you believe that the new Foreign Direct Investment (FDI) rule in e-commerce, which came into effect on February 1, 2019, will provide a "level playing field" to brick-and-mortar stores, the ground reality for many small retailers remains unchanged.

"It's not a level playing field, but the government can make it one. But so far, they have been going about it in the wrong manner," says K Vaitheeswaran, an e-commerce pioneer in India, who started Fabmart, the first-ever Indian e-commerce company (later re-branded as Indiaplaza that initially offered only music CDs). He also authored Failing to Succeed that discusses what went wrong in his business venture Fabmart and why it had to shutdown. "The government is trying to protect Indian companies, but they should've allowed FDI in retail, both online and offline, ages ago," he laments. Vaitheeswaran asserts the government should've left it up to the retailers to "figure out how to run the market".

Mirage Markdown

Instead, today, the name of the game is discounts, and e-commerce websites have their A-game figured out. In the era of online sales, when buyers are trading the brick-and-mortar experience for convenience and discounts, Shyam Waghmode, 67, owner of Maharashtra Gramophone, a 90-year-old music and electronic store, makes a poignant observation, "Who is discounting whom? It is we who are discounting our sensory organs. I deprive my feet of trying on comfortable shoes or to feel a silk sari before buying it."

Going beyond the brick-and-mortar shopping experience, Waghmode gives the trader's view of the seemingly unbelievable discounts that e-tailers offer. He explains, "With appliances or any product that comes with an MRP, you can't inflate the price too much, but when your product is something like a sari, you can decide to price it at Rs 1,650 and later, under the garb of a sale, you can sell it for Rs 450 and fool people by saying you are giving huge discounts." He explains further, "Every brand has certain models that don't always work. These products are then offloaded onto e-commerce sites in a bid to get rid of the stock in sales by offering heavy discounts." If this makes you wonder why no one is keeping a check on these faux sales, Vaitheeswaran offers an explanation. He says, "It's impractical for government surveillance agencies to track the millions of products sold on e-commerce websites, and find out whether the prices are being inflated or not."

Waghmode's shop has evolved from what it was 40 years ago. He has seen music consumption change with records giving way to audio cassettes, and CDs that eventually made way for pen drives. As music appliances became compact, he started housing other electronic appliances in his shop that is now listed as Maharashtra Appliances on Google.

In a bid to keep up with instant digital times, Waghmode did make an attempt to take the online leap in 2016. Explaining the business model that online companies offer brick-and-mortar retailers, he says, "Suppose product X gives me a profit margin of 15 per cent, e-commerce sites want the majority stake ie 10 per cent and we, the shop owners, get just 5 per cent." At the time, this logic seemed sound to Waghmode and other offline retailers like him. "Partnering with e-commerce websites promised an online presence and increased sales so we assumed that would fortify profit margins eventually." He then laments on what went wrong. "In the very first month, the e-commerce company (unnamed) picked up 10 cameras from my shop but five out of the 10 were returned because of their seven-day return policy. Out of the five, two had wedding photographs on them." He even shared his qualms over the used, returned product with the e-commerce website, in vain: these cameras were now loss-making products for the 67-year-old retailer. The multinational e-commerce company paid him no heed. "They [e-commerce companies] probably receive thousands of such cases from offline retailers like me daily," he quips.

Waghmode soon adopted a 'once bitten, twice shy' attitude towards e-commerce. He now believes that the return policies offered by e-commerce websites "go against the grain of ethical dealers".

Point of no return

Several shop owners in south Mumbai's Lamington Road – home to hundreds of electronic retail shops – hold similar grudges. Nihal Sikligar, 29, shares why he doesn't dabble in online shopping. "I've seen so many cases where the e-commerce websites can't offer product warranties but keep having sales." He claims online platforms abandon responsibility when it comes to faulty products and that "customers are stuck coordinating between e-commerce sites, who direct them to the sellers and the brand". On the other hand, offline retailers usually purchase their goods directly from brands, which makes it easier for them to return the products to the source, bearing no losses in the process. However, the bitter truth for most offline retailers is that they lack the muscle to lure customers with the same discounts and convenience that e-commerce websites trumpet as their USP. Commenting on the grim situation, a peeved salesman at Ram IT World says, "Pehle khana khane ka time nahi tha abhi toh aisa hai ki din bhar bethe raho (first we didn't have time to eat, now I get to sit all day)."

Late Payments

Down the same road, another 10-year-old establishment Mccann Infosys, had their run at online sales too. After a brief experiment, they soon realised that they're happier with their small fish ponds rather than extending their reach to the ocean. "We gave it a shot, but didn't continue with online retail because of the delayed payments," says one of the salesmen behind the counter, on the condition of anonymity. "You have to delegate a separate resource just to follow up with e-commerce companies regarding the returned goods. In the bargain, we would end up losing whatever offline customers we were getting." Products being returned was not the problem for offline retailers, rather it was the reasons for the returns that got their goat. "Some products are returned on the pretext that they were not sealed properly. We then had to bear the cost of the courier to pick up these returned goods which is an added loss."

The courier charges levied by Amazon are 16 to 20 per cent of sales margins, says quality analyst a Mumbai-based MNC, Sagar Mahadik, who tried to sell plastic bottles on Amazon for four months before giving up. "I was helping out a friend sell his offline products online and found it rather easy at first. Amazon deploys employees to pick up the shipment from the manufacturing unit and deliver it. But they charge you a great deal for the shipment. To add to it, returns make great losses for retailers, who also bear the shipment costs."

In an emailed statement, Amazon's Gopal Pillai, Director & GM, Seller Services says, "While our return policy remains the same, we are constantly in touch with our sellers to address any of their issues and solve them. Moreover, our payment policies and processes are extremely transparent and timely to help sellers continue with their business smoothly." The company also insists that used products are not eligible for returns. "Once the products are returned, they are checked to verify if they are in their original condition." In the statement, Pillai claims that the company's initiatives have added sellers from non-metro cities. "Today, we have over 4,00,000 sellers on our marketplace – a number which is growing exponentially every year," reads the statement. Email queries to Walmart-owned Flipkart remained unanswered till the time of going to print.

Expert speaks

"One of the most returned items are apparel instead of mobile phones or other products," says Madan Sabnavis, Chief Economist at credit rating agency – Care Ratings. After all, clothes are the second most bought category online, first being mobile phones."

He informs that e-commerce websites get 70-80 per cent of their turnover from the sale of mobile phones ((Electronics, including mobile phone sales, takes the cake of the e-commerce party with an estimated $48 billion as per KPMG; Google AT Kearney reports). "Whereas sale of electronic items like cameras or TVs do not have that much of demand since mobiles have become the comprehensive all-in-one product," he adds.