Demonetization of ‘500 and 1,000’ 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 cashon-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 Flip kart 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, cofounder and CEO of Snap deal.
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 Others, such as Amazon, who had withdrawn COD, reintroduced it after two days.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.