French luxury brand Gucci’s decision to sue Alibaba, the world’s largest online retailer, for allegedly selling counterfeit products on its website is a pointer to the real story behind the online retail boom, which sometimes seems unrealistic.
People shop online mostly to get super discounts and it is this very phenomenon that makes them vulnerable to cheating. There are hundreds of complaints registered with online retailers all over the world for selling counterfeit products to customers.
Closer home, things are no different. The Indian market is full of such cases. Companies such as Gizmobaba, Chumbak and Sahil International have registered complaints against big online retailers such as Snapdeal, eBay, Flipkart and Amazon for selling counterfeits of their products.
However, online retailers get away because of the loopholes in the laws dealing with online retailing. Online retailers like Alibaba, Flipkart and Snapdeal are recognised as marketplaces for selling online by manufacturers. This definition gives them immunity from criminal charges most of the times.
However, cases like Alibaba bring out the fact that products sold online at dirt cheap prices always run the risk of being counterfeit. It is impossible to sell original products at 20-30 per cent discount throughout the year. While it is understandable that e-tailers are spared from the operational cost of running brick and mortar stores, but such savings are not enough to allow a company to hold discount sales throughout the year. There is hardly a week when one does not find a sale on online platforms. In comparison, offline retailers just hold end of season sales.
Today, consumer electronics retailers like Hot and Croma offer competitive discounts at their stores. On the other hand, online retailers in their mega sale offers always find smart ways to offer heavy discounts. The online retail works on two fundamentals. First, online retailers whip up a frenzy to get huge traffic on their websites so that the customer ends up buying something or the other even if he doesn’t get exactly what he is looking for. Second, these retailers, due to their large customer base, get companies to customise cheaper versions of expensive models (in mobile handsets) so they can be sold at a heavy discount to the price of the original version.
While the naïve customer may fall for such tricks a few times, in the age of information it will not be long before the customer becomes aware and e-retailers are forced to exchange their good days with the bad days of the brick and mortar players.
(This story was published in BW | Businessworld Issue Dated 15-06-2015)
