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Rediff.com  » Business » All's not well with e-commerce

All's not well with e-commerce

By Leslie D'Monte in Mumbai
December 21, 2005 10:49 IST
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E-commerce is booming in India. With the market expected to touch the Rs 2,300-crore (Rs 23 billion) mark next year, business on the Net is bound to happen.

However, there are many issues to contend with -- broadband connections, security and legal infrastructure, delivery of goods, credit and debit card payments, taxation laws and finally, mindsets.

Ajit Balakrishnan, chairman and CEO of Rediff.com, says, "There are several factors that will influence the growth trajectory of e-commerce. Such as, the growth of the overall Internet user base, quality of Internet access through the use of the Net arising from offices and homes versus colleges and cybercafes, quality of access enabled by broadband penetration and the extent of credit card (stands at 5 million) and debit card use on the Internet."

Can our current legal infrastructure support this boom? "No," asserts Pavan Duggal, Supreme Court advocate and president, Cyberlaws.Net.

He explains: "The Information Technology Act, 2000 is not adequate. The legal infrastructure is not ready to cope with the projected growth. The use of digital signatures is minimal (around 35,000 only). Electronic contracts that have been issued have not tested the judicial waters. The nation's expectations for an effective, efficient, legal infrastructure to support e-commerce have been belied."

Another important question is: "How safe it is to transact on the Net?" Gautam Thakar, country manager of eBay India Marketplace, is of the view that as more and more Indians get comfortable with e-commerce, there will be enhanced awareness about online shopping and the people's trust in it will deepen. Many Indians opt for cash on delivery as a payment option, thus paying for items only when they are delivered at home, he points out.

"At eBay, we educate users on safety tips like reading item descriptions fully, looking at sellers' feedback score (their online reputation) and asking additional questions to get complete clarity. In addition, we protect users through online tutorials on detecting spoof mails, phishing sites and new identity theft crimes," he adds.

Encryption also offers a safer environment.

The biggest myth about online shopping is the safety of credit card information provided on the Internet. Frauds do not happen online on sites like Sify, Rediff or Indiatimes.

Fraud happens if one has access to information regarding a credit card number and the card's expiry date, which is readily available on charge slips that individuals sign at restaurants and petrol pumps, notes Pankaj Chandra, business head, Ecommerce, Sify.com.

"Banks should provide customers alerts attached with any online transaction, done via credit or debit cards or via bank accounts, by email or SMS or both within a fixed time period. They should allow consumers to set up their own liability slabs by creating ceilings on online spends. It should also be made mandatory for banks to declare the names of blacklisted websites on their websites," suggests Preeti Desai, president, Internet and Mobile Association of India.

That said, there are other challenges faced by e-commerce Web sites in India.

Delivery of goods to consumers by couriers and postal services is not very reliable in smaller cities, towns and rural areas. Besides, shopping portals have been asking for tax holidays and waivers (like the 15 per cent tax on data services on mobiles).

"As of today, inter-state tax applied by the government to products shipped out to other cities takes away a lot of price benefit for consumers. The government should encourage and, maybe, provide sops to online malls to facilitate transfer of goods to consumers across the length and breadth of the country," says Chandra.

Dinesh Agarwal, Founder and CEO, Indiamart.com, says, "The main speed-breakers include a long pending requirement of clarification on issues like sales tax and service tax for online transactions. Many state government officials are still not clear or do not agree that web services (web-designing, hosting and e-commerce facilitation) are IT-enabled services and they try to apply sales tax to these services considering them as software/commodities. Similarly, sale of goods and services through e-commerce has not been clearly dealt with by Acts on value-added tax and sales tax.

Desai suggests that the government should simplify indirect taxation as "currently, it is incredibly complex and eats up incredible margins."

The reason behind the "online travel ticketing segment's meteoric rise in this country", according to Chandra, is the "low touch-and-feel combined with an immense price benefit for the end-user as well as the convenience of the service being available at arm's length."

Other segments will see a rise of similar proportions if more people perceive similar benefits of shopping online.

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Leslie D'Monte in Mumbai
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