Festivals and weddings are two wheels of the Indian economy that never let it fail and accelerate in times of downfall like a pandemic. According to the data shared by IBEF (Indian Brand Equity Foundation), retailers such as Amazon, Walmart and Flipkart saw a 55 per cent rise in online revenue from a year earlier to USD 4.1 billion in the run-up to the festival.
These festive season sales are the golden chance for the companies to earn a jackpot of profit. According to the recent report released by giant ecommerce brand Myntra, “The demand in metro cities was primarily fueled by Bengaluru, New Delhi, Mumbai, and Hyderabad. Additionally, Tier II and Tier III regions made a substantial contribution, accounting for approximately 42 per cent of the overall demand.”
These eccomerce platforms include multiple players from diverse sectors such as logistics, delivery partners, fintech companies etc., and the festive sales benefits all.
However, the data also suggests that during the same timeline, the fraudulent entities also start operating actively. With the help of technology, they hack the data log, approach the customers through fake websites and rob money from them. Even though the e-commerce companies have no fault in this, the repercussion reflects on the company's sales and revenue.
What Is Festive Sale Frauds?
Brajesh Bolia- Professor - Marketing & Intl. Business, K J Somaiya Institute of Management says that sales fraud is an act by a seller’s representative who deceives the customer or the company during the sales/purchase transactions, resulting in financial losses for the company & the customers. Sales Fraud is also an act that undermines the brand’s reputation among the target audience.
Along with the platform’s sales rate, these frauds also deescalate the customer’s trust in the ecommerce platform and online businesses which is not good for India’s aim of an extensive digitalised economy. Also, as the data suggests there is a jump in the number of customers participating in the festive sales from tier II and tier III cities, hence removing the fraud entities is important in order to hold in those customers.
How Do Frauds Take Place?
Jyotsana Shukla, an event manager who lives in Noida ordered a saree from Meesho during the festive sales last year which turned out to be a pant when it got delivered to her address. When she went to their help portal, the company reverted back that they did not have fault so they could not help her out. Further, that pushed her to X (Formerly known as Twitter), where she described her issue and tagged the company’s CEO, Vidit Aatrey Sanjeev. The CEO sincerely looked into the issue and made sure to solve out. In his reply, Aatrey wrote, “We have a no-tolerance policy towards any misuse on the Meesho platform. We have filed a criminal complaint against fraudulent users who have sent unconsented orders to our customers.”
Such cases show that fraud entities work with proper strategies and aim for the target audience, of which the ecommerce platforms are unaware. Regarding the same, Sanjay Kaushik, Managing Director, Netrika Consulting, said, “E-commerce companies see a massive overflow of traffic, especially when they give huge discounts with festive offers to capture the market. With the significant increase in sales comes huge frauds. Opportunists take advantage of system weaknesses, manipulate recommendation algorithms or misuse chatbots to carry out activities; a few defraud customers, damaging trust and negatively impacting profitability.”
A study done by Norton LifeLock in 2022 claimed that 62 per cent of Indians have faced online shopping scams during the festive season. Surprisingly, the companies which earn millions of revenue every year and have extensive network with multiple partners are not expected to be fouled by manipulators.
This chain is increasing day by day, Shikhar Aggarwal Chairman, BLS E- Services said, “Perpetrators typically manipulate sales data to commit fraud by engaging in various deceptive practices. This can include inflating sales figures to create an illusion of financial health, falsifying transactions or invoices to siphon funds, underreporting sales to evade taxes, or using fictitious customers or vendors to generate fraudulent revenue.”
Damages Done By These Frauds
Due to these festive season fraud, the revenue and reputation of the ecommerce platform really get sabotaged. However, when customers reach out to the support unit of these companies, they become unanswerable as there are multiple players involved and work at the backend. According to the industry leaders, these frauds charge the platforms more than the money.
Amit Relan, Co-Founder and CEO, mFilterIT, said, “The financial impact of sales fraud on businesses is not limited to just revenue loss. Due to fake promotion of discounts and incentives, the businesses have to incur increased costs and lower margins.”
Sometimes these manipulating activities with the customer can lead to bigger loss for a longer span of time and ultimately shut down them forever.
Ankit Gupta, Director & CEO of ExportersIndia.com says about the impact on sale fraud that the financial impact of sales fraud on businesses includes losses from fake sales, damaged reputation, legal costs, and potential fines. It can lead to reduced profits and trust, affecting the company's financial health.
Antidote To The Problem
Companies are the front faces dealing with the customers, no matter how many stakeholders participate in the business. Hence, it is necessary that they find a proper mechanism to recognise the real culprit in the chain and look into the issue with cognizance so that the customers will not lose their trust in their business.
Over the company’s preparation to combat such issue, Archit Agarwal, Co-Founder, of Crossbeats, said, “Companies can effectively detect, investigate, and assure customers of potential sales fraud by having robust internal control, utilizing data analytics for anomaly detection, and conducting routine audits of financial records. Companies should encourage employees to report suspicious activities and should be trained for fraud recognition. Engaging third-party auditors for independent reviews adds an extra layer of assurance.”
Also, employees of the eccomerce platform in different departments play a central role because they deal with the problems explained by customers. Therefore, employee training comes as an important step in the direction of eradicating the fraud during festive season.
Shikhar Aggarwal Chairman, BLS E- Services, adding to his points, emphasised the same and said, “Employee training and awareness are paramount in preventing sales fraud. Ensuring all employees are well-informed about the potential risks and warning signs of sales fraud helps create a vigilant workforce. Regular training sessions and awareness programs equip employees to promptly identify and report suspicious activities, which can be critical in fraud prevention.”
The festive season in India is not only economically important but also the best time of the year full of joy. When India is on the cusp of becoming completely digitalised, such fraud discourages years of hard work. Along with the company’s guidelines and policies, government authorities also need to be proactive in searching these entities and taking punitive measures against them. Customers on the other hand also need to be vigilant enough before sharing their personal information and buying goods from anonymous websites.
Pramod Kathuria, Founder and CEO of Easiloan suggested customer measures and said, "Stay financially strong this festive season by creating strong and unique passwords for your online accounts, including banking and loan platforms, and update them regularly. Install and regularly update antivirus software on your mobile and PC to protect against malware and phishing attempts."