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Regulate online shopping

DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - January 8, 2021 - 12:00am

The pandemic lockdown did not convince me to do online shopping. Like online banking, I do not trust and still don’t, what we have here.

I have this feeling that our online shopping industry is basically third world… inefficient and not trustworthy… with poor customer service. My wife recently bought some kitchen aid contraption costing about a thousand pesos and it arrived damaged.

We could not get them on their consumer hotline and they did not respond to our e-mails. That’s a thousand pesos gone, tuition fee to make us wiser in using local online shopping services.

There was, however, one time when my wife was able to return a product that did not come up to her expectations. It shows that performance of online shopping vendors is spotty.

We also tried buying from an online service that claims to help farmers sell their produce. The vegetables and fruits were not fresh and we did not have the heart to send the stuff back because the courier was working on a per delivery basis.

I have seen my kids do online shopping in the US and their experience was good. If you have a problem, they respond immediately. Damaged item? Delivered item left on doorstep got stolen? They send a replacement right away… no red tape.

Here, you also worry about the safety of sharing your credit card number. Early this week, Sen. Win Gatchalian’s credit card was used to pay for P1 million worth of food from foodpanda within a few hours. How could foodpanda allow such a large purchase without checking with the senator?

The business of online shopping is growing, but unless the industry cleans up its practices, the growth will be stunted.

Indeed, there has been increasing calls for better government regulation of the online shopping sector. The government-owned Philippine News Agency reported in November last year that the country’s two biggest online shopping applications have the most number of complaints based on DTI records.

DTI Undersecretary for consumer protection Ruth Castelo told the House Committee on Trade and Industry that 6,907 of the total 14,869 online purchase-related complaints from January to October this year were against shopping apps Lazada and Shopee.

“Compared to the full year of 2019, complaints against Lazada grew more than triple from 1,014 complaints to 3,475 for the first 10 months of the year. Those against Shopee increased over five times in just 10 months from 607 complaints at end-2019 to 3,432 complaints from January to October 2020.”

Because they are the largest, it is no surprise that 90 percent  of the total online complaints from October 2020 are against two of the more familiar platforms. But how many just did not bother to complain?

The DTI official said most of the online complaints of consumers were: violations of the Price Act, defective product, and deceptive, unfair, or unconscionable sales acts or practices. The House committee conducted the hearing due to mounting complaints about online fraud.

There was this story of a student from Guimaras who ordered a laptop on Lazada, but only received stones upon delivery. Another online shopper also reportedly received wooden blocks instead of two cellphones she ordered online.

Those two examples are probably extremes. The large volume of complaints is mostly easily remediable if the platforms have functioning consumer complaints systems. Lazada and Shopee are big enough to have that.

Protection of online shopping consumers is important enough to get the Asian Development Bank to fund a study that was carried out by PIDS, the government economic think tank.

The PIDS-ADB study concluded that with the increasing use of platform economy nowadays, regulatory frameworks must be in place to ensure that consumers are protected.

According to Jose Ramon Albert, PIDS senior research fellow and author of the study, the emerging platform economy benefits both producers and consumers. However, it also “brings many risks to fair competition, trustworthiness, consumer rights, including data privacy and decent working conditions”.

Albert called for the creation of new regulatory frameworks. He pointed out the obvious: regulations and policies need to be in place as these can enhance people’s trust in the platform economy, particularly on digital payments.

“Encouraging platforms, especially logistics and ride-sharing providers, to only make use of digital payment instruments will require a strong consumer protection policy framework, including a return and refund policy.

“Consumer confidence in the right to return a defective product and receive a refund can likely improve trust in digital payments. The difficulty is sometimes on the part of enforcement of laws,” Albert pointed out.

But, Albert reminded that “regulations should not easily stifle innovative activity.”

Albert urged regulators to create an enabling environment for the platform economy that promotes wealth creation. These benefits, he said, should be shared among the people for a more inclusive and sustainable growth.

It is doubtful that the government is able to measure the business that goes through online platforms. Such measurements have wide policy implications…  Usage data in platforms can be a possible proxy for economic value. We need to know what is going on before we can talk of effective regulation.

The pandemic has forced many of us to do our shopping online. It is not enough for platforms like Lazada and Shopee to claim that the ordered product was pilfered or damaged while it was being delivered to the customer. The platform must be responsible from end to end.

In the case of the computer that turned to rocks, Lazada made good and refunded the student.

As Sen. Gatchalian observed, the online market environment is also a scammers’ paradise. Lazada and Shopee must carefully screen those who want to use their platforms and must take full accountability for problems that arise. Their platform’s credibility affects customer pre-purchase perceptions of an online retailer’s reliability.

Self-regulation is still a better option. Self-regulation characterized by good customer service is the most viable path for the leading platforms to become the local Amazons of the future. Otherwise, the government must step in to protect consumers.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

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