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E-comm players feel the heat of demonetisation; online sales dip 30%

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E-comm players feel the heat of demonetisation; online sales dip 30%

The government’s recent demonetisation move has not just taken black money hoarders by surprise but also several established e-commerce players. Ecommerce in India, which had been riding high during the recent festive season, is now witnessing a sudden slump in revenue post the demonetisation drive.

There are several factors that have resulted in this slump, one of the main factors being the use of cash on delivery (COD) facility, which according to industry insiders accounts for 60 per cent of total e-commerce sale in India.

Though ecommerce players have extended their full support to the demonetisation drive, the fact is that online sales have dipped by almost 30 per cent after the announcement by PM Narendra Modi, according to analyst firm RedSeer Consulting. Major e-commerce players such as Amazon and Flipkart have put the cash on delivery option on hold for now.

As a result of demonetisation, it is largely believed that the percentage of COD will eventually lower and the cash crunch will help to strengthen the non-cash payment channels. The demonetisation move, however, will have an impact on the sales volume of major e-commerce players, with predictions that the November 2016 sales are bound to witness a 6-10 per cent dip.

To ensure that the cash on delivery module does not have far reaching repercussions on sales, e-commerce players are promptly adopting card on delivery, gift cards and mobile wallet payment options, but it will still take some time for these to match the popularity of cash payments.

Speaking about how e-commerce companies are tackling the payment challenges, Amazon India spokesperson said, “We are re-introducing cash on delivery to enable options to pay at the time of delivery. This accommodates customers who face challenges of paying online but are still able to use electronic instruments at delivery. Customers can continue to order as before, and pay conveniently at their doorstep with credit or debit cards or valid currency notes. Our delivery agents have been trained to help customers who opt for card payments, and accept genuine currency including the newly introduced Rs 500 and Rs 2,000 notes.” 

 Explaining the fast adoption of alternative payment channels to compensate for the cash on delivery crunch, the spokesperson further added, “Electronic payments at doorstep have gone up by a factor of 10X. This clearly indicates that customers are able to adapt to electronic payment methods when cash is constrained. We continue to focus on incentivising and helping people shift to making payments electronically online, aligned with the government's focus. Today, we have launched an offer for customers to go cashless - customer can load their Amazon gift card balance and get an instant incentive of 15per cent/max. Rupees 300 discount, at checkout. We will continue to improve serving our customers on electronic payment methods both at the time of order and at the doorstep.”

Accepting the fact that the demonetisation move has impacted e-commerce sales, a Snapdeal spokesperson while explaining the shift from cash to online payment said, “The prepaid salience for Snapdeal is more than 50 per cent. That said, since the announcement, we have recorded a marginal dip in order volumes but nothing very significant.   Snapdeal is uniquely positioned in the industry as the only significant online marketplace to also have a digital wallet that is fully integrated. Snapdeal and FreeCharge had launched ‘Wallet on Delivery’ within 24 hours of the demonetisation. The crucial impact of this was that customers who did not have ready access to usable currency notes, could simply pay using their FreeCharge wallet at the point of delivery.”

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