How reliable are warranties for online sales?

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Even as online retail sales continue to shoot up with the e-commerce industry expected to touch Rs.216 billion ($3.5 billion) in the current fiscal, the sector has recently come under fire with both manufacturers and consumers questioning the reliability of warranties for online purchases and the consequences of this.

Indian e-commerce retail has a fantastic story to narrate. The nascent sector, according to research firm PwC, grew at almost 55 percent CAGR over 2009-2013 and the growth continues to be as impressive this fiscal too.

With the formation of the new government at the centre, investor confidence has increased, and the e-tailers have received aggressive funding.

“High value product categories have also received acceptance on online channel and will contribute significantly in shaping the size of the online market”, Sandeep Ladda, India Technology leader at PwC, said.

In this all-rosy picture, India retains its tag of price sensitivity. Ladda opined that a marginal difference for even a high-value item can change consumer preference. But the problem is only marginal in case of low-value goods.

When it comes to low valued goods, the story could be much different and the “attachment” towards warranty may not necessarily be there.

“In fact it could be that the only “warranty” that the consumers could likely think of at the time of booking the order for these low value goods is whether he would be able to return the goods in case the piece delivered is damaged/doesn’t work and probably not beyond this point,” said Ladda.

But for high priced items, a substantial section of consumers are warranty-sensitive.

“Some consumers are indeed cognizant of the fact that warranty on such high valued goods could be an issue and unless the price difference is very high, they would like to act cautiously,” Ladda said.

International brands have time and again declared that some of the products, if purchased online, are not eligible for a warranty. However, the third party online seller issues a warranty in some instances.

For instance, while Tissot issues a two-year international warranty in the name of Tissot S.A, some of the sellers on popular e-commerce websites post it as “one-year Tissot India warranty”. Thus the warranty is not honoured by the manufacturer and the buyer has to be satisfied with only a sellers’ warranty instead of an original manufacturer’s warranty.

This is not the case with Nikon, Dell, HP, Lenovo and several others.

“Customers are aware of the price and warranty issues. Nothing is hidden when one buys online. Now, if customers are still unaware, it is their problem,” partner and head of management consulting at KPMG in India Ambarish Dasgupta said.

Despite a plethora of complaints post-purchases online on warranty issues, India’s laws fail to provide any respite.

Declaration of warranty online is not mandatory and most of the e-commerce sites are mere facilitators between the buyer and the actual online seller which is difficult to address with legalities.

“There have been no concrete steps by the government to address warranty issues. Laws regulating e-commerce – globally as well as in India – are still evolving and lack clarity,” Ladda stated.

Dasgupta differed.

“With the industry maturing in India, more and more procedural issues are coming up. I don’t think Indian laws are incompetent to address e-commerce cases of fraud, taxation, consumer protection and the like,” he said.

Under the present regulations, e-commerce platforms have to comply with various Indian regulations but mandatory warranty policy declarations are still not in place.

“Presently there is no proposal for a separate regulatory framework for e-commerce under consideration. The Directorate of Enforcement conducts investigations under the Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA),” Minister of State for Finance Jayant Sinha recently informed the Lok Sabha.

Although PMLA can address cases of e-commerce fraud if registered by a proper law enforcement agency, the bane of non-warranty remains still ultra-vires.

According to consultancy firm Gartner, India’s e-commerce market will reach Rs.371 billion in 2015, a 70 percent increase over the projected 2014 revenue of Rs. 216 billion. However, primordial laws will continue to be in place.
By Avishek Rakshit