Paytm culls most sellers to avoid Alibaba's problems with fakes
Paytm Ecommerce Pvt., the latest entrant into India’s online retailing market, is taking a hard line with suspect merchants to avoid backer Alibaba Group Holding Ltd.’s reputation as a haven for fakes.
In one fell swoop, Paytm Mall de-listed 85,000 sellers, leaving just 30,000 on its platform. The move is designed to build trust with customers from the very start.
“It is a drastic measure but we need to do that to create the right kind of e-commerce platform,” said Amit Sinha, the newly-appointed chief operating officer of the Indian company, which received $200 million in a funding round led by Alibaba. “We wanted to clean up our house and reset Paytm Mall on the trust count,” he said by phone.
Alibaba, China’s biggest e-commerce operator, has struggled to shake a reputation that last year saw it return to the notorious markets list put out by the Office of the U.S. Trade Representative. Paytm has made it mandatory for sellers to furnish brand authorization letters as it takes on entrenched rivals, from global giant Amazon.com Inc. to homegrown startup Flipkart Online Services Pvt.
Amazon has more than 200,000 sellers on its platform and Flipkart about half that. While both are known to de-list dubious sellers, neither has come close to Paytm’s cropping in scale. The three companies are competing for a slice on an Indian online retail industry projected by Forrester Research Inc. to grow at compound annual rate of 31 percent through 2021 to reach $64 billion.
While not as widespread as in China, counterfeits still present a problem for Indian e-commerce. Fake Swarovski jewelry, Lacoste shirts, Apple iPhones, Mont Blanc pens and Harman Bluetooth speakers are plentiful, often selling at dirt cheap prices. The country does have a legal framework to protect trademarks but the processes are cumbersome and consumer protection laws don’t cover e-commerce effectively.
“Online commerce offers even a small seller of fakes a national footprint instantly,” said Devangshu Dutta, chief executive officer of the New Delhi-based retail consultancy, Third Eyesight. Any e-commerce company that does not vet its merchants is risking selling fakes, stolen and damaged goods, he said.
Noida, Delhi-based Paytm said it has authenticated all its current sellers, even the smallest ones. Among those jettisoned are hundreds of smartphone merchants with no authorization from the brands they are selling along with purveyors of branded cameras, laptops, eye wear and watches. One of the most commonly faked items is perfume, with fakes actively driving customers to brick and mortar outlets to avoid being duped.
Sellers will undergo audits for their business registration, shop location, photos and goods & services tax number. Despite the drastic drop in sellers on its website, Sinha said Paytm Ecommerce will still have millions of product lines and will add 3,000 agents to scour smaller Indian cities to digitize catalogs of neighborhood shops and brand-authorized stores.
“There are no faceless names, no ABC whom no one knows, no sellers who do hanky-panky,” said Sinha. “We’ve had sellers working out of a warehouse and then one fine day, when we want to take action, the sellers have vanished.”
Paytm Ecommerce was spun off from parent One97 Communications earlier this year and soon after raised the new funds with backing from Alibaba.