"Frankly my dear, we don't give a damn" - The Daily Reckoning
The Daily Reckoning by Vivek Kaul
On This Day - 25 June 2015
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- By Vivek Kaul

Vivek Kaul
The internet dongle that I had been using for the past few years gave away over the weekend. I finally decided to get rid of this connection and get a new one. The shopkeeper selling me the connection was at his marketing best and assured me more than once that the connection would be up and running by the end of the day. This assurance was obviously driven by the fact that I was paying the rental for the entire year upfront.

As I write this, it has been more than 30 hours since I bought the new connection. I just finished talking to the call centre of the telecom company and was told that my name and address still had not been uploaded on to the company database. I was asked to call up four hours later, before the call centre executive quickly ended the call.

Telecom is a tough business to be in, where there isn't really much of a differentiation between what various companies have to offer. Despite this customer service sucks across companies. And the representatives of these companies regularly overpromise while they are trying to sell stuff and under-deliver when they need to execute what they had promised.

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Now contrast this to the way the ecommerce companies have been operating in India. I want to share some examples to elaborate how on most occasions the customer service of these companies is very decent, the reports in the media of an ecommerce company delivering a soap instead of a mobile phone, notwithstanding. Some such mistakes make for interesting stories, but the lakhs of deliveries that ecommerce companies get right, are not worth a story. That is how the media works.

A few months back I had bought a geyser for my parents from an ecommerce website. The geyser company refused to install it saying that they did not install geysers bought from that particular website because it offered discounts. Given this, I had no option but to return the geyser. I went online and put in the request and the time slot during which the representatives of the website could come and take the geyser away.

I did not have to speak to any customer service executive and wait while my call was put on hold. The website had a 30 day return policy. The representatives of the company came and took the geyser. No questions were asked. At the same time, the money that I had paid for the geyser was reversed into my bank account. It was a very smooth transaction.

On another occasion I had ordered some furniture for my parents. When it was delivered we figured out that I had overestimated the space that was needed for it to be installed and hence, we would have to return it. The website offered us a 25% discount on the price that we had paid if we decided to keep the furniture. This clearly told me that taking that piece of furniture back was clearly an expensive proposition for the website and instead of adding to its losses, it would be better if we kept the furniture.

Nevertheless, we still decided to go ahead and return the piece of furniture given that we did not have enough space to keep it in. There was absolutely no problem while returning the piece and the transaction was totally smooth.

While people have been talking about discounts being an important factor in the expansion of Indian ecommerce, one thing they do not talk about 'enough' is the returns policy of Indian ecommerce companies. This policy is often abused by buyers.

I know of people who are addicted to online shopping and keep regular track of prices. If the price of a product that they had recently bought falls, then they return the unit they had originally bought and buy a new one, and thus save money in the process. Ecommerce companies entertain this as well, despite the fact that it adds to their losses.

Further, one area which ecommerce has really spread is for buying clothes, shoes and accessories. Clothes and shoes are something which do not have standard sizes. Given this, if something does not fit, it is but not natural that it should be allowed to be returned.

Further, ecommerce companies allow this to ensure that customers can order multiple products, try them on and see what fits and what they like, and return the other products that they had ordered.

The thing is that this leads to the cost of logistics really going through the roof. You can order eight pairs of shoes and then at the end of the day just choose one. The money that you had paid for the remaining seven pairs will be returned to you. The thing is after the ecommerce company has done this, it has added to its costs tremendously.

What all these examples show that the way the ecommerce companies are operating currently is too good to be true. Most companies in the retail space really do not really care for the end consumer. Be it bank or an insurance company or a telecom company or any other retail company

A relationship manager at a bank will not blink twice before selling you a very high- commission product, which benefits him and the bank, and not you. An insurance salesman will be after you when he is trying to sell a product. But try returning a policy and see how quickly he disappears.

Mind you these are companies which are profitable and are not much different on what they have to offer from their competitors. They still don't care about their consumers. And economists talk about perfect competition? Where is the competition that benefits consumers?

Almost all ecommerce companies are bleeding. They continue to lose money big time. Despite this, they are running return policies, which are actually beneficial for the end consumer. In the process they are adding to their already burgeoning losses.

Once this is taken into account, it is easy to conclude that these losses cannot last forever. Also, it isn't in the nature of the Indian retail companies to think about their consumers. Hence, all this makes me wonder, when will the Indian ecommerce companies address the consumers and say: "Frankly my dear, we don't give a damn."

My guess is this will happen sooner rather than later.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

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5 Responses to ""Frankly my dear, we don't give a damn""

K.P.N.Nair.

Jun 27, 2015

Mr.Vivek Kaul,
This is regarding "Uber is a real saviour". Last week you gave your at most recommendation for this private Taxi services.
But, now since two days, you must have noticed-in France- the uproar and strikes by normal Taxi service rs against `Uber' type of private taxi system there, I need not to explain more though.

My point is, I cannot that blindly agree with your observations and Mrkt studies.
This is only for a response.
K.P.N.Nair.

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AB Pereira

Jun 25, 2015

The reasons for all the good things about e-commerce companies is their "Someone Else's Capital for my costs and losses" model. PE/VC is all over the place, splurging like hell. No one is ever bothered about protecting the capital. Their sole aim is, bring in capital from any source, build a brand. Consider all of this money spent as brand building.
Compare that with other entities - they may be profit making, but they are not attracting free or cheap capital from outside (perhaps they have public equity, but that is not cheap).
When will this end? when the e-commerce bubble bursts, like it did for the dot com one.
And yes, Vivek Kaul is right. Sooner, rather than later!

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sethu

Jun 25, 2015

These E retail companies will provide good customer service till they start making profit;I am afraid after profits they will also start behaving like others.

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sachin

Jun 25, 2015

Franakay Vivek I thought even this article must be talking like other business news papers.
But, Surprisingly there was no mention of how lucrative ecomerce companies are and if u don't hold them in your portfoilio then you are a fool..time only will tell...:)

Even I have returned 2-3 goods bought online with heavy discount.
I am still not able to digest their revenue model.

Who pumps money in these companies?
They use some different accounting standerds. Are those approved by IT dept/SEBI/GOI?

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Ravindra Duvvuri

Jun 25, 2015

It isn't in the nature of Indian retail companies to think of their customers. How true!

Yes, it will be sooner than later that the ecom companies will say "Frankly, my dear, ...." Probably, they will be forced to say it.

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