Rebellion on eBay

Logistics and grievances: The world's largest online marketplace is struggling to cope with the sudden Internet surge in India

Published: Jun 5, 2009

There’s a very tangible, melodramatic air that hovers around Amar Mudliar. A 35-year-old trader on the Indian edition of eBay, an online marketplace, he started out as a computer dealer. But wafer thin margins, his bankers and life in general dealt him a rough hand. He found solace among lawyers and a couple of whiskies every night.

Through the accompanying haze though, he had figured the cheapest places in the world to source electronic gadgets, automobile spares and other such assorted paraphernalia that he was convinced people would buy, if only he could show it to them.
Roughly two years ago, somebody pointed him to eBay (ebay.in). Apparently, almost 13,000 Indians like him — without too much capital at their disposal — displayed their wares at this virtual store where a few million people log in everyday. It didn’t take Mudliar long to figure out how the business works. Success was quick and it weaned him away from the alcohol. Peace followed. Until he woke up one morning and discovered the virtual store he operated on eBay had been taken off. As he looked around his apartment in Powai, a suburb in Mumbai, all he could see was a mountain of inventory worth a few lakh rupees. And desperation.

Amar Mudliar, ebay power seller.
Image: Dinesh Krishnan
Amar Mudliar, ebay power seller.

Over the next few days, the real issue started to unravel. As things turned out, eBay’s policies are fine-tuned to protect the interests of buyers on the site. If a buyer is not satisfied with a vendor — say, a product doesn’t match specifications, or it isn’t delivered on time — his dismay can be articulated instantly by giving the vendor a negative rating. Once the ratings cross a defined threshold, eBay suspends the vendor.


On the face of it, the idea sounds right. E-commerce in India is littered with stories of buyers being taken for a ride by unscrupulous vendors. To that extent, eBay’s policies and paranoia, imported from its experiences in other parts of the world, has worked and helped it create a brand that buyers have grown to trust. But because India is such a quirky country, the buyer protection programmes have had unintended consequences: Collateral damage in the form of vendors like Mudliar.


When Mudliar got into business, most of his buyers on eBay originated from Tier I cities. Over the last couple of months though, he started to notice a new trend. Fresh buyers were coming in from Tier II and Tier III towns in the country. In most parts of the world, more buyers ought to translate into more sales, therefore more money and subsequently more happiness for everybody in the chain. But life rarely pans out the way you imagine.

The Logistics Logjam
“I started to get orders from people in God-forsaken areas who don’t know the difference between a demand draft and a cheque, let alone internet banking,” fumes Mudaliar. What, you may wonder, is the problem with that? Simple one actually! When somebody from Mungra near Badshahpur in Uttar Pradesh sends him a cheque, it takes a few days for the mail to deliver it to his Powai office. Because it is an outstation cheque, the Mumbai bank takes some more days to clear it. Not just that, Mudliar has to pay the bank’s processing fee. When it’s a low-value item, this fee eats into his margin. By the time the process is completed, he’s already past the deadline to ship the product — which translates into him violating eBay’s service level agreement.


“The buyer sent me a cheque on December 22. I received it on 29th. By the time it was cleared, it was January 6. By which time, the buyer was upset and on January 9 he gave me a negative rating. Soon after that, I was restricted from selling anything more,” he complains.


Yet another power seller on eBay, who did not wish to be named, said the problem is amplified when it comes to delivering the product. He talks of the time he received an order for a new mobile phone, again from an address in UP.
Major courier companies do not have service locations in small towns. They invariably end up sub-contracting work to mom-and-pop shops that promise to service these places. Very often they are sloppy, deliver late, end up mishandling goods and are rarely accountable.
By the time the buyer got his hands on the phone, it was too late and mangled beyond recognition. The buyer demanded a refund and marked the vendor as an unreliable one in eBay’s system. On its part, eBay took note of the complaint and eventually penalised the vendor. Who’s to blame? Nobody was wrong. It was simply the system that failed to function.

Ambareesh Murty, country head of eBay India, is quick to acknowledge the problem. Globally, the eBay model works on multiple pick-up and drop-off points. No single company in the country has the muscle to offer a logistics solution that can resolve the problem — except, of course, India Post. “We are in talks with India Post,” says Murty. “But it’s too early for me to confirm anything will come out of it.”



Inscrutable Indians
Amit (full name withheld on request), a New Delhi-based vendor, received an order from Rajasthan for a television stand. After the buyer confirmed the product was delivered, he got a call. The buyer claimed the stand was delivered broken in four pieces and that he wasn’t going to pay for it. “How a stand made of iron can be broken into four pieces by the sloppiest of couriers is beyond me,” says an exasperated Amit. “I asked him to return the damaged goods and that I’d pay for the courier charges. He said he didn’t have the time. I didn’t see my money either,” he trails off.


If he persisted, chances are, the buyer would have given him a negative rating and he would stand the risk of being yanked off the system. For vendors, such persons are the most vicious kind of buyers — they’ve figured where the vendor’s soft underbelly is.
They know that at any given point, a medium to large seller on eBay has at least Rs. 40,000 worth of shipments in transit. A few negative ratings and the man can be thrown out of business. It’s a risk few are willing to take.


“There are around 40 sellers who have been in trouble because of these ratings over the last one year,” says Amit. He claims most of these negative ratings originate from Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh.

Ambareesh Murty, Country Head eBay
Image: Kaushik Chakravorty for Forbes India
Ambareesh Murty, Country Head eBay

“Many of us didn’t think with our heads. We left regular jobs and jumped on eBay. Nobody had a clue (that) such kind of problems could emerge,” says Thapar (full name withheld), a Mumbai-based seller with warehouses in Bhandup, a Mumbai suburb.
Which is why many of them have opted out of fulfilling orders that originate from these parts of the country. The flip side is that these states comprise a huge market and not delivering crimps the ability to scale up their businesses.
Murty of eBay puts a different spin to the story: “I don’t think buyers are trying to game the system. Given the medium, expectations are high.” But once again, he acknowledges there are issues that need to be sorted.


Over the last couple of months, he has put into place an online court where the aggrieved party can lodge a complaint and a jury of peers decides on the case. They’ve also instituted a system of mentoring that handholds a new seller through his first 20 sales. The attempt is to teach new vendors how to navigate the treachery that exists.
But it’s not good enough, say sellers. “We’re collateral damage as eBay tries to figure India out,” said a former power seller who is no longer part of the system. Murty hates the sound of that. For the moment though, he has to grin and bear it.


THE COMPLAINANT

Amar Mudliar
eBay Power Seller

  • Bad infrastructure and lack of accountability by courier companies results in late deliveries. Buyers complain and eBay penalises the seller
  • Ignorant first time buyers often make a hash of things, assume they were taken for a ride and complain to eBay. Once again, sellers are put in the dock
  • Some people threaten to give a seller negative ratings after taking delivery of a product, unless payment is waived off. A negative rating can knock a seller off eBay

THE DEFENDANT

Ambareesh Murty
Country Head, eBay

  • We are in talks with India Post to provide better service and accountability.
  • We are aggressively educating buyers on how eBay works and the process is now as simple as 1-2-3
  • A grievance addressal mechanism is being set up to provide sellers a fair hearing. Mentors are being deployed into the system to guide inexperienced sellers on the challenges they may face on eBay


     

(This story appears in the 19 June, 2009 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Atul Prashar

    Two things about the information in the article are worth noticing. One, it addresses a problem that is quite alien to many online buyers. Two, the painstaking efforts by ebay India to analyze the situation from the minutest possible perspective and coming up with creative ideas like mentoring, and designing a system to check future occurances of such situations. Truely, a Case Study!!

    on Jul 3, 2009
  • Sudhansu

    well put. I can understand the pain sellers are going through. The Indian selling model is different from how it works in UK and US.

    on Jun 25, 2009
  • Lubna

    An excellent article. The hard work that went into it, is so visible. I didn't even realise that these problems existed. I sure am hoping for a better tomorrow for e bay sellers, without any compromise being made for the buyers protection.

    on Jun 23, 2009
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