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Sellers Also Jump In To Fraud Flipkart As ECommerce Sites Face Another Set of Ingenious Scams

Flipkart just got gypped by a vendor:

“Ramesh Kumar would order items using fake addresses.Flipkart would pass the order to him. Ramesh would pack cheap items in the boxes of original items and diligently hand it over to the delivery boys, knowing fully well that the items would return undelivered as the addresses were fake. When it returned, Ramesh would claim that he had packed the original items but was given cheap items in return. In the past one and half months, he had claimed close to Rs 1.5 lakh in this way from Flipkart,” police said.

A Hyderabad guy did something similar:

The youth, Veera Swamy, 32, of Vanasthalipuram in the city allegedly duped the company by booking orders and returning the goods upon delivery. He would place the orders for valuable electronic items in the name of mother, father, wife, brothers and other known people in the neighbourhood. After the items were delivered, he would call up the call centre complaining that the goods delivered were of poor quality.
When the company sends representatives to pick them back, he would retain the actual item received and would stuff in the box fake item, writing the model number and item code as received.

Why do people do such things?

It’s not just sellers of course. Customers have duped sellers – by doing the same thing, i.e. putting cheaper items and returning the package back. (See Amazon seller thread). Sellers have duped buyers too – by packing the wrong thing in the first place. Competitors have placed orders on ecom sites, just to return the product, because the seller is supposed to bear the courier fees and the sales transaction commissions even for returns – if you do this in large quantities, using prepaid numbers and different addresses (or us COD), you can hurt a competitor big time.

Much of this is why many stores don’t have a policy of free returns. For ecommerce sites, they don’t have a choice – if there are no easy returns, no one will buy from them. The abuse cases are supposed to be edge cases, and typically, ecommerce sites have taken it on themselves to resolve situations so that neither the buyer nor the seller will hurt. But in that process, people who know that the ecom site is taking the hit will abuse them – by doing stuff like the above.

The cases registered are of small amounts, but there are obviously cases of much larger amounts out there. And many are legal. For example if a vendor sells something for Rs. 10,000, and Flipkart tells you that they’ll sell it at Rs. 8,000, a discount and absorb the difference, the vendor has an incentive – just order it for himself at Rs. 8,000 and then get paid Rs. 10,000 instead. This is entirely legal.

The ecommerce space is a minefield for fraud, as is most trading. Players would do well to start working together to identify and share fraud incidents. People who unlawfully abuse the system should be blackballed. Whether they are customers, vendors or any other partner. However, I believe that in a system that is focussed on insane growth and growth alone, anything that ruins a metric (growth of customers, sales or vendors) will face roadblocks. That’s how incentives work for the ecommerce giants too, since they don’t currently have to care about that one metric that really matters – profit.

  • Deepak Honnalli says:

    I had a problem when the package did not contain the camera I had ordered from Flipkart, and Flipkart did resolve it to my satisfaction even though the proof I provided that I had not received the camera was insufficient. I was wondering whether Flipkart would reject my statement, even though my claim was genuine. To its credit, it did not. On the other hand, it is entirely possible that a customer can cheat Flipkart too. I have made it a practice to capture video of me unboxing the product, after that experience. At least, I can cover the case where a product has not been delivered as promised.

  • Pradeep says:

    Hi Deepak,
    This is Pradeep from http://www.niftytrader. in
    Saw your commentary on CNBC today. Well done… Keep up the good work.
    Regards,
    Pradeep
    http://www.niftytrader. in

  • One of my friend working in flipkart told me that flipkart is now tryung everything to be profitable. In the news it was said they want to be profitable in coming 3 years bur internally they want it to be dont very soon. I can’t understand this..first you ruin the complete market for valuation & funding..and they you try to chnage the rules of game.

  • Sandeep says:

    “The cases registered are of small amounts, but there are obviously cases of much larger amounts out there. And many are legal. For example if a vendor sells something for Rs. 10,000, and Flipkart tells you that they’ll sell it at Rs. 8,000, a discount and absorb the difference, the vendor has an incentive – just order it for himself at Rs. 8,000 and then get paid Rs. 10,000 instead. This is entirely legal.”
    Flipkart might be aware of this kind of fraud.This also helps to build valuation.Seller doubled as buyer,shouldn’t be a problem for Bansal boys.However,if listed in markets and for global investors, this amounts to fabrication.