Counterfeit Products Continue To Haunt E-Commerce

by Sohini Bagchi    May 02, 2018


The dependency of Indian consumers on ecommerce sites is gradually increasing. Combined with convenience, these ecommerce sites provide consumers with choice as well as discounted prices – all these from the comfort of their homes. But lately, many complaints of counterfeit or fake products being sold on ecommerce sites have been reported by consumers.

The perils of online counterfeits

In a recently concluded study by Velocity MR, one third of the online shopping consumers have fallen prey to counterfeits. The study which covered a total sample size of 3000 respondents covered key Indian metropolises including Mumbai, Delhi, Bangalore, Kolkata, Hyderabad, Chennai, Ahmedabad & Pune showed that over a third of customers have received fake products from online sites.

Earlier this year, global footwear brand Skechers filed a case against Flipkart and four sellers on its platform for fake goods being sold under its label, it cracked open the lid on one of the most persistent problems in Indian e-commerce: Counterfeit brands.

From footwear to branded apparel, beauty and personal care products, alcohol and perfume, big brands have been going head to head with online marketplaces over fakes on their platforms. And with brands threatening to pull out, the e-commerce giants have said that they are determined to combat counterfeiters. However, recent studies show that counterfeit or fake products continue to be a menace in the growing Indian e-commerce space. 

According to consumers, sellers list counterfeit products on these e-commerce sites at heavily discounted prices to gain the attention of customers. In the race to advertise highest discounts, most eCommerce sites only do basic checks on sellers and don’t really perform the detailed due diligence. Many ecommerce sites in fact offer cashback schemes and additional quantity and threshold discounts to lure the consumer to shop more and finally somewhere in this process the consumer ends up shopping for a product that us counterfeit.

 “The online retail market in India is expected to touch $100 billion by 2020, and $200 by 2026. It is estimated to grow at a whopping rate of 30% annually, and hence India is dubbed as the fastest growing e-tail market in the world. The growing Internet penetration, global players, rise in smartphone usage coupled with innovation in mobile technologies, millennial consumers and digital payments is fuelling the growth of the e-commerce market in the country,” Jasal Shah, Managing Director & CEO of Velocity MR told CXOToday.

According to him, “E-commerce is increasingly attracting customers from Tier 2 and Tier 3 cities, where people have limited access to brands but have high aspirations. However, this is not free from its share of pitfalls. Even though the e-commerce companies/platforms state a zero tolerance towards any malpractices, however considering the very nature of the business, it would not be possible to maintain a problem free zone. We decided to conduct this study to understand how consumers are facing up to this challenge which is a clouding reality in the online world.”

It is estimated that about 4-5% of businesses in India lose to fraudsters each year in online shopping. There are a variety of fraudulent activities in the e-tailing business, one such being ‘Fake Products’ under the pretext of originals. This not only causes monetary loss but also jeopardises the goodwill of the original player. Under this background, Velocity MR one India’s leading market research and analytics company’s conducted a dipstick to uncover the real perception of consumers towards fake and counterfeit products while shopping online and how they deal with it.

Another research by LocalCircles survey reveals that 38% of 6,923 respondents have received such products from an e-commerce site in the last one year. The survey also mentioned that 12% respondents out of that said they received the fake product from Snapdeal, 11% said Amazon and 6% mentioned Flipkart.  

These respondents mentioned that the fake products they received were mostly perfumes and fragrances, shoes, sporting goods, fashion apparels and bags. Owing to rising consumer complaints, the consumer affairs department is currently drawing up rules for e-commerce sites that would make them more liable in such cases.

What ecommerce companies can do?

Not only to the consumers, fake products can be a problem for the e-commerce companies as well. Along with putting their credibility in jeopardy, instances of counterfeit products could put a sizeable dent in their economy. Ecommerce platforms are realizing the problems and some of them have even taken steps to identify and remove counterfeit product listings. While many experts have predicted that India’s e-commerce market will touch $100 billion in the next 10 years, the ecommerce sites, the regulator and the consumers will have to work in-sync to fight the demon of counterfeit goods.

As mentioned in the LocalCircles survey, 80% of 6,197 respondents believe that along with accepting the sold product back and refunding the consumer, the companies should also be made to pay a penalty. The Velocity MR survey revealed that 92% of 920 respondents who received counterfeit products returned the items and got a refund.

Amazon and Flipkart have said they are keen to dispel any doubt about their ability to crack down on fakes because they have worked hard to win the trust of Indian consumers. 

Paytm Mall, in mid-2017 had delisted over 85,000 sellers, in an effort to block fraudulent sellers from signing up on their platform. Flipkart in past has said it removes counterfeit items from its platforms regularly and has a ‘zero tolerance policy’ for counterfeit goods.

Snapdeal said it regularly inspects listings to identify instances of listing/selling of counterfeit products, monitors seller practices through on-going mystery shopping exercises, and keeps a check on any unwarranted manipulations in seller ratings or pricing.

“Fraudulent transactions are a serious threat to the health of any e-commerce ecosystem. We are committed to staying one step ahead of fraudsters always, and delivering the most secure, frictionless and reliable e-commerce experience to our buyers and sellers alike. As the size of the marketplace increases, we will continue to prioritize building due checks and balances at each step of the transaction cycle,” said a Snapdeal spokesperson, who added the company has been saving Rs 3 crore every month just by launching a unique initiative countering fraud transactions..

Globally, top retailers such as Alibaba, Amazon and eBay have also struggled to weed out counterfeits and second-hand products. Counterfeit product selling is a big business worldwide amounting to almost $500 billion annually.

Many online commerce firms are also using several means to cut down courier frauds, including open delivery, X-ray examination of packages at fulfilment centers and verification of returns as part of the quality control process. Along with a more stringent last mile verification process, wherein the on-site certified engineers visit and fix customer’s problem on spot, these timely interventions can drastically reduces rate of returns.