Demonetisation of Rs 500 and Rs 1000 notes – which make for 85% of the total currency circulation in the country – will have a deep impact on the otherwise fast-growing e-commerce business.
The e-commerce business, which did $2 billion in sales during the festival season, is facing a slowdown.
According to various estimates, the removal of the notes might cause a drop of 25% to 30% in the online sales, as cash-on-delivery (COD) gets affected with the growing cash crunch across the nation.
According to Red Seers, COD makes for more than 70% of all online transactions. What is more surprising is that over 40% of high-value items are delivered over COD, which will almost become negligible as the country faces cash crunch.
“It is a temporary disruption … only cheaper products are being sold,” said Radhika Aggarwal, co-founder of ShopClues, which has witnessed a 15% drop in traffic.
A Flipkart spokesperson said that COD went down from 70% to 50%. The company has witnessed a rise of alternative pre-paid mode of payments.
Top executives at e-commerce companies said this was just the beginning. “Most people paid in the notes that were removed,”said Kunal Bahl, co-founder and CEO of Snapdeal.
{{/usCountry}}Top executives at e-commerce companies said this was just the beginning. “Most people paid in the notes that were removed,”said Kunal Bahl, co-founder and CEO of Snapdeal.
{{/usCountry}}Some say there won’t be any respite soon. “There will be some relief after four to six weeks. People are more worried about taking out money … sales will go down by 25-30%,” said Amit Bagaria, vice-president of Paytm.
Others, such as Amazon, who had withdrawn COD, reintroduced it after two days. The dip is evident despite e-commerce firms taking a large number of measures to promote cashless transactions.
“Our delivery agents have been trained to help customers who opt for card payments, and accept genuine currency, including the newly introduced ₹500 and ₹2,000 notes,” said an Amazon spokesperson.
Most companies have equipped delivery boys with card-swiping machines, and have introduced mobile wallets-on-delivery, but only a portion of the users have adopted it.
The problem will continue with e-commerce companies as the logistics business and the sellers’ working capital conditions are hit.