The steps range from physical checks to spending more on analytics to monitor marketplaces. For instance, in the case of Amazon India, internal audits with employees posing as shoppers is a regular feature. While there is no foolproof mechanism to screen the sellers joining a marketplace, each portal has come up with its own mechanism to weed out merchants who don't make the mark.
Though the marketplaces are facilitators, they are required to carry out due-diligence of the merchant ahead of signing them up.
"Legal aspects like entity structure, background checks of the entity or persons in charge of the business and commercial aspects like its key customers, etc have to be considered. This would go a long way in helping e-commerce companies manage their reputation risk as they cannot afford to completely wash their hands of the products sold on their platform," said Sharanya Ranga, partner at law firm Advaya Legal.
While physical checks form one aspect of it, spending on analytics to monitor marketplaces is on the rise. The suspect sellers are not formally informed but are de-promoted from homepage and category lists. In the case of Amazon India, random sampling by mystery shoppers keeps a check on quality of items shipped by sellers who directly pack and ship items.
Where sellers use the company's packing and shipping service, mandatory checks at the fulfilment centres are carried out to prevent shipping of counterfeits and damaged products. "We scrub our platform periodically to test random sample products and take action," said an Amazon India spokesperson. The marketplace has 16,000-plus sellers of which more than 14,000 were added over 2014.
Flipkart uses mystery shoppers and on-ground teams to monitor sellers. "We have a three-tier rating review system for our sellers. Customer rating, returns and seller cancellations are the key factors which determine a seller's rating," said Ankit Nagori, senior vice-president at Flipkart Marketplaces.
It evaluates new sellers on the basis of business registrations, documentation related to PAN, VAT, TIN and TAN numbers, as well as a check to see if they were blacklisted at other online marketplaces.
Multiple cases of counterfeits being sold online spurred eBay to introduce its Verified Rights Owner Program though the company was looking to scale down its Enhanced Member Reporting programme (EMR) dating back to 2008 for reporting counterfeits. "VeRO Program participants have the ability to identify and request removal of allegedly infringing items.
Sellers are evaluated using a parameter called as Defect Rate. Sellers having a Defect Rate of more than 5% have certain restrictions. Each merchant can see their defect rates on their individual dashboards," said Girish Huria, official spokesperson at eBay India which currently has 50,000-plus sellers registered with it.
"Customer stickiness is essential for the online players to scale up, especially in the absence of a physical element. The online marketplaces are learning as they go-along, adapting various mechanisms — through audit, qualification system for vendors and tracking the merchandise and customer feedback," said Ankur Bisen, senior vice president at Technopak Advisors.
Online sellers evaluate merchants on their marketplace based on various criteria. "There are multiple parameters to evaluate a seller's performance. The rate at which the items are selling, conversion rate for a particular seller (number of actual transactions vis-a-vis product views) and the rate of return are basic criteria.
Also, an internal team monitors a new seller for an evaluation period which varies according to the category of goods," said Janakiram Ganesan, co-founder and chief executive of MineWhat, an analytics firm which provides merchandising solution for online stores such as Myntra and social marketplace GoCoop.
Legal issues when it comes to consumer grievances for online deals, the Consumer Protection Act extends a cover as long as the consumer is willing to fight the complaint in the jurisdiction specified by the online marketplace. "When it comes to consumer disputes on defective product or deficient service, most companies limit the jurisdiction to a specific city where most of their operations are based or where their registered office is situated.
Also, they build in a limitation of liability in their terms and conditions wherein liability is limited to a specific amount or the value of the purchase affected by the consumer on the website. All indirect or consequential damages are expressly excluded," said Ranga of law firm Advaya Legal.
With the success of online commerce resting on building consumer trust and a brand, online marketplaces are catching on to minimising the surprise element.
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