This article is written by Saumya Krishnani who is pursuing a Diploma in Business Laws for In House Counsels from LawSikho.
Table of Contents
Introduction
Hundreds of millions of users now make up the Indian internet and e-commerce world, but it is still far from mature. Indian internet users are only just 50 percent of the total population of 1.37 billion, with a whopping 560 million internet users. While India is still a low-income country, Indians are increasingly getting used to e-commerce and its convenience, using mobile devices mainly to access the internet and shop online for an increasing variety of products and services.
Since the Indian market is still evolving technologically, there is a lot of space for growth. Competition is still quite fierce, however as many local and foreign players are trying to catch a hold of this rapidly developing market. Amazon has also been able to take the lead in India, thanks to its historic success in the United States and other developed countries, but local players, especially Flipkart, acquired by Walmart in 2018, have still managed to become strong competitors in this promising market.
Benefits of Setting up an E-sale platform
The Internet is a powerful medium that provides a wide awareness of websites for e-commerce. There are millions of people browsing the internet daily, looking for goods and services. Internet shopping is rising year after year and is seen as a convenient way to buy goods, where you can also order products at any time of the day.
In addition e-commerce websites allow you to use a variety of marketing and sales tactics to provide customers with extra reasons to stay on your website and purchase your goods.
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Less Time Consuming
When you have initially set up your e-commerce website, you do not have to spend too much time running it. This is because the entire process for customers buying and making payments will all is triggered by the online system.
This will allow you more time to find new items that you want to sell, to launch promotional deals that you want and to control how effective your sales are. In terms of which goods sell more effectively, you would also be able to evaluate any patterns.
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Higher rate of Margin
An e-commerce website would allow you to sell at higher margins if your company is involved and sells within the trade industry market. This would make the sales you make on your goods even better.
On these platforms, the shopping cart and payment options also mean that you automatically receive a 100 percent payment from the client. This will boost your cash flow, particularly as you are typically provided with payments in multiple installments by customers.
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Non Requirement of technical skills
One of the biggest misconceptions still prevailing is that to work in an online marketplace, one need to have certain technological skills. But the reality is that you are technically skilled enough to become an online seller if you can browse the Internet, surf websites and check emails.
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Easy Advertising
The best way to reach out to the maximum number of clients and boost your sales is through advertising. But it requires a heavy investment and does not guarantee an investment return. This means you may not see a spike in your numbers, even after advertising. E-commerce is helping solve this issue.
The leading e-commerce companies in India, such as Flipkart, offer you the opportunity to promote your products on a small budget. You are charged according to the number of clicks that your products receive. More clicks, more turnover.
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It can be operated from anywhere
E-commerce websites reduce any geographical restrictions that an office-based company would normally face. You can be anywhere around the world and still oversee your e-commerce business successfully. To monitor your e-commerce website from anywhere, the essential items you need are: access to emails, the Internet and phones.
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Scalability
In order to ensure the stock levels of these products are increased, e-commerce websites are very effective in allowing you to determine which products are successfully sold. In addition, it is possible to diversify these successful products to develop a larger range of products to be sold through the website. In terms of sales, client base and income, this will allow you to develop your company.
The online shopping website of Amazon has been successfully built around scaling their product selection and closely watching what customers sell. Consequently, this has allowed them to diversify their product portfolio into several sectors dramatically.
Risks Associated with E-commerce
E-Commerce businesses are growing rapidly and the rate of profit is increasing. Whereas, E- Commerce business consists of various risk which can affect your business slowly, below various risks associated with E-Commerce;
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Security Breach
Your e-commerce business is susceptible to violations of online security and cyber-attacks. Phishing, website hacking and unprotected web services may include some of these online security risks. There are many hackers that can breach a company’s network and access sensitive information. It is therefore essential that the security of your e-commerce website is very strong.
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Disputes of Clients related to refund policy
In the e-commerce industry, one of the greatest problems with online shopping is that customers can claim refunds on disputed orders. The dispute arises most of the time when the product never arrives and the amount has been charged from the account of customers. Sometimes the customer has been charged twice and sometimes the description of the product does not match the real product. In addition, there may also be several refund frauds. There are various risks associated with e-commerce business.
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Scams of credit cards
Common e-commerce business risks are suspicious transactions and stolen credit card information. Hackers or someone can make an online transaction using a stolen credit card. Your online security should be secure and tight enough to catch a suspicious transaction.
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Intellectual Property
Intellectual property infringement is also one of the common security risks to e-commerce businesses. In the e-commerce industry, IP security is very necessary and involves website logos, text, taglines, goods and other images and icons. Breach of the laws of copyright and intellectual property will lead to a huge loss.
Measures for the risks
E-Commerce business consists of different risks while running the business, but there are various solutions and measures to run the business properly without risks.
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Educate the staff on the danger of e-commerce
The extent of your risk exposure depends to a large extent on your business procedures, operating processes, the fraud detection and prevention tools you have introduced, security controls, and the kinds of goods and services you offer. The risks associated with online transactions should be understood by everyone in your company and be able to follow the defined risk management procedures.
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Find the best processor for payments
Effective risk management assistance will be provided by the right credit card processing company and will help you understand the particular risk and responsibility of e-commerce fraud. When making your pick, appropriate consumer data security capabilities are also something you may want to remember.
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Build critical content on websites
Your website must have your anonymity, delivery, return and refund policies and have them displayed prominently.
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Intellectual property
Do not copy any other firm’s IP. Implement strong copyright laws. Train IP security personnel. Never share confidential information during live chats because they are not safe at all Use strict written procedures and implement security policies and practices.
Legal Compliance required for E-commerce business
To start an E-Commerce business, you will require registering various legal compliance to run business.
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LLP
Before starting the e-commerce business, it is good to have a company or LLP for the ease of doing business and the transparency of records. It is difficult to have limited liability protection in the event of litigation in the case of partnership and ownership business, so it is safer to incorporate a company or LLP for smooth functioning.
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Opening of Bank account
A payment gateway is necessary for the processing of customer payments in the e-commerce website business. It provides a means of accepting debit cards and credit cards, as well as net banking payments from various banks and credit cards issued by businesses. It is necessary to have a payment gateway to accept online payments for every e-commerce business. The amount received from the customers is sent/ transferred to the company’s bank account through the payment gateway.
In the case of a company or LLP, it is convenient to open a bank account on behalf of a company or LLP at any bank. It is necessary to open a bank account in the name of the enterprise, i.e. the name of the enterprise or the name of the LLP, to receive payment from the payment gateway. It is important to have GST registration before opening a bank account in a partnership or proprietorship business.
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GST Registration
GST registration is mandatory in order to start an e-commerce business. To have a GST registration, a business with a turnover of more than Rs.40 Lakh annually and doing business interstate outward supplies of goods, regardless of turnover, is required. GST registration can be achieved through the online GST portal by attaching all the required documents to the form.
Case Laws
Amway India Enterprises V. 1Mg Technologies Pvt. Ltd
In the modern world, the old adage that translates to great responsibility comes with great power, popularized by a famous movie based on a comic book series, will be applicable to e-commerce sites that have penetrated all modes of exchange, trade and industry. The contribution of e-commerce in providing open global platforms for merchants, craftsmen, traditional artists, home designers, housewives etc., along with the credit for development of large infrastructural facilities such as warehouses, transportation, etc., as also jobs for thousands of people, is well acknowledged.
However, some precautions that needs to be followed in order to ensure that existing companies and industries are not adversely affected by e-commerce development without the required controls in place. The current cases illustrate the tension that may occur between Direct Sale Businesses and e-commerce sites, one such existing type of business/trade. The legal complexities in this respect
Skull Candy Ltd. V. Shri Shyam Telecom & Ors
Especially in the case of luxury goods, the trademark owner loses its enormous client base. If the goods turn out to be fake or not upto the mark, then it is the brand value of the trademark owner that is diminished. The vendor himself is not suffering. Such immunity is beyond what is envisaged under Section 79 of the IT Act for intermediaries. Although the protection of legitimate intermediaries is protected by Section 79 of the IT Act, it cannot be violated by expanding the protection to individuals who are not intermediaries and are active participants in an unlawful act. In addition, if the sellers themselves are located on foreign shores and the owner of the trade mark does not exercise any recourse against the said seller who sells counterfeits on the e-commerce website, then the owner of the trade mark cannot be left unresolved.
Future of E-Commerce in India
India is rapidly developing and how can we ignore the role of e-commerce in it if growth is to be measured? India’s internet user base might only be a mere 100 million, which is much less compared to its penetration in the US or the UK, but it is definitely rising at an unprecedented pace.
The number of new entrants in this sector is rising daily, and with growth rates approaching their zenith, it can be expected that traditional retailers will feel the need to turn to online business in years to come. According to figures, India’s e-commerce sector in 2009 was worth around $2.5 billion. By 2011, it had risen to $8.5 billion, showing a definite increase in the last two years.
These figures will reach up to $12 billion by 2012, according to a statement released by the Internet and Mobile Association of India (IAMAI)! We can divide e-commerce into three broad categories, which include physical services, physical goods and virtual goods, to understand this scenario. The 1st category of physical services is certainly the main contributor, including travel ticketing, jobs, websites for marriage and event management, with travel sites accounting for 75 percent of all e-commerce industries! It also offers enticing deals.
Thanks to the hype created by new startups/stores being launched daily, the 2nd category of physical goods is the one currently gaining considerable attention. Flipkart, Infibeam, Homeshop18, India times, Naaptol, Lets buy etc are leaders in this division.
Conclusion
For any kind of business, electronic commerce requires the global transfer of knowledge over the internet. This offers a forum where two business people communicate directly with customers and resolve the deal without a physical meeting. In the e-commerce market, electronic mail, mobile commerce and electronic interchangeable data play a vital role. Businesses move parts of their activities to the internet, blurring traditional trade as a consequence. As e-commerce is a business strategy, technology is used to achieve the objective of optimizing business and benefit by promoting the distribution of goods and services.
References
https://disfold.com/top-e-commerce-sites-india/
https://blog.jdrgroup.co.uk/digital-prosperity-blog/ecommerce-website-benefits
https://intelicle.com/7-risks-of-e-commerce-business/
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