Shoppers buying online in Dubai will be able to return the goods within seven days if something prompts them to change their minds. When the new consumer protection regulation comes into effect, online shoppers get to have the rights as their counterparts in the brick-and-mortar world.
“The returns policy is ingrained on all transactions done at physical stores — what the Dubai authorities (the Department of Economic Development) are doing is just extending the scope to the e-commerce space as well,” said Prakash J. Bhojwani, President and CEO of Time Machine Group, which operates the Big Brands label. “All that the shoppers will need to do is retain the original receipt to confirm the return.
“At just about each and every big store in Dubai, there is literature put up clearly stating the rights of consumers. These are now gradually being reflected online as well.”
Some of the bigger eCommerce portals already offer a robust returns policy, though there is a higher cost involved in it. But many see it as the natural progression for the local e-retailing industry.
“Such costs will need to be absorbed by the retailers, more so to ensure consumer retention wherever possible,” said Vijay Samyani, Managing Director at Concept Brands Group and owner of brandsbay.com. “We have started to print the returns policy on our online invoicing and I think most other e-tailers are also doing so even before the actual regulation comes into effect.
“When a consumer starts believing that he gets to have the same rights as shopping at physical stores, it creates another favourable environment for online sales.”
It remains to be seen whether all portals will be able to absorb such cost add-ons. Most portals already sacrifice some of their margins by waiving delivery charges completely or only putting in a nominal charge.
If the additional costs come to bear, they could end up having less flexibility in setting product pricing on their portals. In a marketplace where the prevailing consumer sentiment is that buying online should be cheaper, raising prices could prove detrimental.
According to pricena.com, a price comparison portal, of the 73 online stores it tracks, only six do not offer free delivery. The others offer free delivery beyond a certain order amount, typically above Dh200-Dh300.
“In electronics, the typical margin for a retailer is about 8 per cent, and the average delivery cost is about Dh20 within Dubai,” said Haneen Dabain, Founder of Pricena.com. “So any order above Dh250 is profitable for the retailer. In fashion the typical gross margin is 40 per cent, so any order above Dh50 is (nominally) profitable for the retailer.
“Nonetheless, consumers should take into account the total price when comparing, as some e-tailers can offer free delivery as a way to attract buyers but will actually pass on the cost of delivery in the product’s price.”
Meanwhile, some online retailers are offering other incentives such as extended warranties to convince shoppers they will not be shortchanged in any way. “Consumers are wary of purchasing a product without a warranty and this point became evident to online retailers who are starting to offer better services and after-sales ... although we think there’s still room for improvement,” said Dabain.
“To appear more attractive, some e-tailers are offering a price stripped out of the warranty, leaving the consumer with the option of purchasing the warranty separately at an extra charge. A small number of e-tailers are offering extended warranties as an additional way to increase profit.
“Although the average cost of a warranty for a manufacturer is typically 2 per cent of sales, some stores do not shy away from trying to make a profit of the warranty surcharge, sometimes marking up the price by more than 10 per cent.”
According to pricena.com data, buying cameras online could be cheaper by anywhere up to Dh600, while for computers the price advantage is around Dh350 on average. For smartphones, the online trumps physical stores by Dh300 or thereabouts.
By Manoj Nair
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