Lessons from Uber: What online retailers can learn from its Delhi woes

The Uber episode in Delhi has a larger lesson for online buyers of goods and services under the marketplace model embraced by e-tailers. Uber in India has been allowing anyone owning a taxi to download its ride-share app and get started. It says it does a thorough due diligence of drivers back home in the USA, but doesn't apply the same rigorous norms in India in the absence of a legal mandate to do so. This argument is of piece with the self-serving and cynical rationale for shifting human trials to India because life is more precious in the USA than in India.

Under the marketplace model adopted by the leading e-tailers like Amazon and Flipkart, there are thousands of sellers using their websites to sell their wares online. The etailer provides limited services---booking order online and collecting payment either online or physically on delivery.

Uber for example deducts 20 percent from the fare and releases the balance to the taxi drivers periodically, which they do not resent at all given the ease of bagging commuters through the app by the upwardly mobile, whose tribe is swelling by the day in this country. Sellers through Flipkart, for example, too reap similar benefits with marketing, distribution and payment collection effectively outsourced to the online retailer who has put up a robust system in place (though it creaks occasionally when stretched) and has built up a brand name.

While the advantages for sellers and buyers are trite, the downside of the marketplace model should not be lost sight of. The e-tailer can and sometimes does wash his hands off disagreeable transactions on the grounds that his role was limited to bringing the seller and buyer together. The truth, however, is this is a self-serving alibi. While an online portal can wash its hands of disagreeable ads appearing on themon the ground that its role was limited to providing online space for a consideration. The customers of a e-commerce site are led to believe that the goods hawked by ane-tailer are from it,so much so that when the product does not conform to their expectations they start blaming the e-tailer rather than the anonymous seller, except when they shop online looking for specific brands.

Online selling portals can be likened to big brand names that resort to outsourcingso as to be able to cut cost. Phillips, Bata, Colgate, Hindustan Unilever all resort to contract manufacturing by others, usually small scale units, whose overheads are very low. But the buyer of their products cannot be fobbed off with the self-serving argument that even though the product is marketed under their brand name it was in fact not manufactured by them.

Small and medium manufacturers unable to invest in marketing and distribution thus are more likely to be enamoured bythe services offered by e-tailers. They do not mind the anonymity so long as their products sell and proceeds received sooner or later. The moot question is if the e-tailer would be prepared to address customer grievances or glibly pass on the buck to the anonymous seller using its online infrastructure.

The Consumer Protection Act 1985 isn't resilient enough to address issues arising out of such trade online. It's time it was amended, lest it is caught in a time warp. Unlike Philips or Colgate, an etailer has no reason to carry out a rigorous check of the capabilities of the sellers, because damage to assiduously built brand name is more pronounced and real in case of the former, with the e-tailer lending his name to thousands of products. He can afford to shrug off a sub-standard product.

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Updated Date: Dec 09, 2014 13:59:50 IST