E-Commerce Product Safety

DIGITAL PURCHASES, PHYSICAL DANGER: IS E-COMMERCE SAFE?

"E-commerce has the same product safety considerations as brick-and-mortar stores. Consumers should not be afraid to ask for product safety testing documentation."

Mr. Kapil Bansal
Senior Vice President for Consumer Products and Retail, TÜV SÜD

Thursday, November 23, 2017

E-commerce has come a long way since entering public consciousness in 1994. This year, global e-commerce sales breached the US$2 trillion mark, with more than 20 percent of the world’s entire population making an e-commerce purchase in any given month. It is a phenomenon best underscored during 11 November which is Singles Day in China – the world’s largest 24-hour online sale. During Singles Day in 2017, sales smashed records with figures amounting to US$25.3 billion, an increase of 40% from 2016. In US, Black Friday sales have also been picking up momentum over the last few years. This year, both Amazon and Walmart are riding on the event, having a pre-sale before the main event kicks off on the 24 November.

E-commerce has indeed proven to be a resilient industry, surviving through an ever-evolving technological landscape, as well as industry-wide collapses, such as the dot-com bubble bust of the early 2000s.

Today, e-commerce giants are part of our daily lives. Take Amazon, for example. Founded in 1995, it continues to be a pioneer on many fronts, using data to improve the retail experience for consumers, opening up innovative advertising avenues, and incorporating artificial intelligence through the launch of computerised personal assistant Alexa. It has become the largest Internet company in the world, with revenue reaching US$136 billion in 2016.

The dragons of Asia are also sharpening their digital claws. Chinese giants, JD.com and Alibaba, have chalked up more than US$53 billion in e-commerce sales, and their combined worth surpasses US$247 billion. JD.com has also pioneered the use of drones to deliver goods in universities and areas with safe air space.

And then there is eBay, the popular platform for both e-commerce and e-auctions. Along with its 2004 acquisition of Craigslist, eBay has democratised the e-commerce process, making it possible for anyone to sell anything – including land.

The risks online

As popular as these websites are, they are not without their safety risks. Amazon, for example, has not maintained safety standards across its wide range of products. A botched recall resulted in the sale of E. coli-contaminated soy nut butter. And more recently, users of faulty solar eclipse glasses sold on its platform suffered eye damage. JD.com, has been caught “brushing” fake orders to inflate sales and “buy” positive product reviews, resulting in false product reviews. In the case of eBay, it has come under a lot of criticism for allowing potentially harmful items to be sold on its platform – including fake cancer cures.

As you can expect, a safety audit for e-commerce is not as easy as one performed for brick-and-mortar retailers. Kapil Bansal, Senior Vice President for Consumer Products and Retail at TÜV SÜD raised two major issues when upholding e-commerce safety.

The first is the speed of the e-commerce process.

"E-commerce affords a seller quick access to consumers, and their products can be offered for sale via e-commerce ahead of product safety checks."

Mr. Kapil Bansal
Senior Vice President for Consumer Products and Retail, TÜV SÜD

Second is the sheer quantity of stock-keeping units (SKUs). “E-commerce sites offer a mind-boggling assortment. Some products are offered via suppliers and some are private-label or direct imports of the e-commerce site,” Mr. Bansal explains. “The consumer may not be able to distinguish between the two channels, and could ascribe any product safety issue to the e-commerce site.”

But those aren’t the only concerns. E-commerce has allowed suppliers to sell their products globally, thereby erasing the traditional boundaries of country and region-specific product safety regulations. While this gives the consumer limitless choices, it also opens them up to more product safety risk, as regulations are not standardised globally. What is considered a safe product in one country might be considered unsafe in another.

E-commerce has also allowed consumers to sell to each other, like the mobile marketplace app, Carousell. How can these platforms take greater responsibility to ensure transparency among consumer-to-consumer transactions?

Other issues cited include the anonymity of sellers that e-commerce affords, and the increased demand for fulfilment solutions with an increasingly complex marketplace, allowing for risks to enter at multiple stages of the e-commerce process.

Changing consumer perceptions

But are consumers adequately informed on the online product safety regulations?

“E-commerce has increased the distance between the consumers and the sellers, but the consumers are assuming the products sold via e-commerce are just as safe as those bought in a traditional brick-and-mortar store,” said Mr. Bansal.

This is a dangerous assumption to make. Products sold online are harder to screen, track and monitor. Goods that are unchecked, banned or recalled can very easily land in the hands of consumers, as compared to products bought in physical stores. E-commerce also makes it easier for consumers to purchase products with inadequate product labelling and safety warnings. The need for safety compliance assessments can be dire in some markets.

However, consumers today also have greater access to information worldwide. Product safety regulations and laws are just a click away. Both consumers and suppliers, who are no longer bound by cross-border regulations, have to assume increased responsibility in ensuring and adhering to product safety.

Mr. Bansal encourages consumers to take precautions, saying, “Consumers need to be aware that e-commerce has the same product safety considerations, and therefore should not be afraid to ask the e-commerce website for a copy of the product safety testing documentation.”

In the US, product safety regulations apply to e-commerce the same way they apply to products sold in brick-and-mortar stores. Product safety is the responsibility of the Importer of Record or Domestic Manufacture, who need to ensure that products have a CPC, a tracking label, and testing, tracking and reporting in accordance to the “Reasonable Testing Program”.

In China, e-commerce platforms such as Alibaba provide supplier verification services. Suppliers are subjected to authentication and verification checks as well as onsite checks. Those that pass these checks are denoted with the ‘Gold Supplier’ tag on Alibaba, indicating to consumers the reliability of said supplier. Suppliers are also assessed regularly by independent and impartial inspection companies, on all aspects of a supplier’s operations – from its legal status to its production capacity and capabilities.

These regulations, however, are not applied in many parts of the world. In such cases, e-commerce entities can seek out product safety certification entities such as TÜV SÜD to perform trader audits, as well as product performance and endurance testing.

Assurances from supplier to consumer

The need for product safety will only continue to grow as e-commerce burgeons. The e-commerce market for businesses is projected to be worth $1.1 trillion, compared to the consumer e-retail market, projected to reach $480 billion by 2019. Emerging markets are expected to contribute largely to this growth. More and more e-retailers are also expected to move to platforms that utilize cloud-based technology, allowing them to save on computing infrastructure and migrate all operations to the Internet. This will not simplify the industry but will also result in increased selling speed and scale. With such rapid advancements, the knowledge and awareness gap in safety standards could increase further – for both e-commerce players and their consumers.

The e-commerce market is notoriously difficult to regulate. But not impossible if safety and certification experts can keep up with the latest technologies, and identify the stages at which they can step in to ensure checks throughout the product journey from supplier to consumer.

Does this mean establishing a global standard of e-commerce goods? That would be ideal, but challenging, considering how different countries and regions develop at different rates. So, while e-commerce has allowed consumers to feel more empowered in their purchases, varying standards globally could result in greater liability issues.

For retailers looking to ensure their customers have peace of mind, it should continue providing assurances of product safety, through testing and certification throughout the e-commerce product journey – from supplier to trader to delivery to consumer. Consumers will purchase with more confidence as more e-commerce brands strive to meet safety standards.

With sales projected to top US$4 trillion by 2020, and emerging markets bringing more and more new consumers to the fray, the need for product safety in a rapidly expanding e-marketplace is becoming increasingly important. If companies can glean anything from the past 23 years of e-commerce, meeting product safety standards can keep them relevant and ensure they continue growing well into a future driven by e-commerce.

Find out more about product safety and certification here.