Myriad possibilities of e-commerce but ensure consumer protection

The basic objective of the economy is to increase the production of goods and services and have them reach the consumer. E-commerce is making this easy. The link between the producer and consumer is established directly. A mobile phone manufacturer can make a website and announce that he has 10 models of handsets available for sale. A consumer can pay to him directly and have the handset delivered at his address.

The consumer gets more choice. I needed to buy a handset. I visited four mobile shops but found all of them were carrying the same “popular” models. They could not provide me with a model that had the capacity to store large number of contacts, had a long battery life and had less thickness. So I browsed the internet and found a handset manufactured by a less known company that suited my requirements.

It would have taken hours of visiting many shops to get the same choice in stores. Similarly, a book publisher told me that e-commerce has enabled him to reach old books to the consumers. Bookshops, he said, wanted to place only the most recent releases on their shelves. The old stock lay dormant in his warehouse.

The web made it possible for him to get the old books to the consumers. Many consumers who wanted these books but could not get them from the bookstores had the choice to buy them from the publisher directly. And, lo! These too have started moving.

The shopkeepers and retailers are on the receiving end, though. They find customers slipping out of their hands. The net has replaced them. Such transitions have happened in the past as well. The horse-driven tonga has been replaced by the autorickshaw. The STD booth has given way to mobile shops.

Now, retail shops are giving way to e-commerce. Such changes were named as “creative destruction” by economist Joseph Schumpeter. Old trades and technologies are thrown out to provide space for new ones, just as the farmer uproots the old trees and plants new ones of new varieties. The way out is not to hold on to that which is decaying but to take hold of what is now being created.

The market of services is fast expanding. Many services cannot be supplied by the computer. The student will still need to sit with the teacher to get tuition in mathematics whether he sits across the table or through video conferencing. The teacher cannot be replaced by the computer. E-commerce can facilitate this matching of the student and the teacher.

A friend of mine has got herself listed with a tuition website in the United States. She provides tuition to American students through the web. This was possible only through e-commerce. The way forward for the shopkeepers is to enter the business of provision of services like beautician, computer teaching, yoga and the like, and sale of value added products like floral bouquets, designer dresses, and custom furniture that have an element of personalised service that cannot be provided by a computer. And these specialised services can be sold through e-commerce.

Globalisation is leading to a huge demand for translations of documents from one language to another. It is possible for a translator sitting in his home at Gurgaon to translate a document from Japanese to German and provide the same to a British multinational company. Our retailers should encourage their young to learn foreign languages. Similarly, there is a huge emerging market in tourism. Indian tour and travel agencies can provide tours to Americans for visiting Singapore. We need to look outwards to the growing markets.

Location-based services
A market for the supply of location-based services is emerging. Amazon cannot supply five kilo fresh vegetables to a homemaker at 11 am in the morning. It is possible to do this through a local website. A company in Gurgaon receives orders for vegetables in the morning; buys them from the wholesale market and delivers to the consumer at her house.

A beautician or a physiotherapist can sell his/her services over the net. It will be difficult for a large company like Amazon to do this because verification of the quality of the services provided is not easy to do on a large scale.

I once booked a hotel room with balcony and running hot water through a popular travel website. After check-in, I found there was no balcony in the room; and the wash basin had no cold water. It had only hot running water! Such mishaps are inevitable for a large e-commerce venture.

A major problem in the growth of e-commerce is the insecurity of transaction. A UK study found that consumers browsed on the net to select the product they wanted to buy; then they went to a store to buy it. They could come back to the store in case they faced a problem. I read of a person who bought software online. The CD came but not with the specifications ordered. The buyer complained and was told to return the CD, which he did.

But then came the reply that the CD returned was not the one that was supplied. It was simply not possible to get a refund

for the transaction. Therefore, the government should take steps to enact an e-commerce law and setup an e-commerce police. It should be possible for a person sitting in Brazil to recover his money from an e-fraudster located in Burdwan, for
example.

The government should setup an authentication system where the consumer can be assured that his money will not be stolen. That will jumpstart the global entry of Indian e-commerce.
(The writer was professor of economics at IIM, Bengaluru)