The country is still recovering from the sudden demonetisation of Rs. 500 and Rs. 1,000 notes. Business everywhere has seen a change in its routine, and the ecommerce industry hasn’t been spared either.
Browntape takes a look at how the move has affected Indian online sellers and the potential future impact on the ecommerce industry.
The low points
- The incidence of Cash on Delivery (CoD) has reduced considerably. This can be celebrated as well as mourned. This might also indicate that sales have dropped. Snapdeal co-founder Kunal Bahl said that the move had negatively impacted the company’s CoD. He lauded the move and said that it would be beneficial in the long run and support pre-paid transactions. However, this can well be a blessing in disguise. While companies may lose out on their revenue from CoD in the few months following the move, it would encourage customers to pay for the purchases in advance or using debit or credit cards.
- The predicted value of the ecommerce industry has been reduced. American market research company eMarketer has noted that the earlier approximation of 75% of growth in the Indian ecommerce industry was now cut to 55.5%.
Director Monica Peart said, “This new system will lead more people to use traditional banking services like credit cards, which is a key factor in allowing consumers to buy online but it will take time for this kind societal change to take effect, so our forecast numbers for the out years are still lower than previous estimates.”
- The immediate impact was a reduction in sales. There was a 30% fall in the average sale figure. This was a direct result of reduced CoD service, and customers cancelling their orders. Shopclues reported a fall in its sales.
- It could possibly slow down the country’s gross domestic product (GDP). According to investment advisory firm Ambit Capital, the country’s GDP for the year ending 2018 could be lower than the previously projected figure. The company says that thanks to demonetisation, India’s GDP could drop to 5.8% from the earlier estimate of 7.3%.
- Companies will be unable to meet their year-end targets. Leading research companies like Forrester and RedSeer forecast that ecommerce companies will fall short of their projected figures for the year.
“This month is extremely important for business. If we fail to catch up, we won’t be able to achieve the year-end target,” rues Sanjay Thakur, president of eSeller Suraksha.
While pointing to the low morale that could also impact the situation, Satish Meena, forecast analyst at Forrester Research says, “Post Diwali, the e-tailing industry was looking forward to this month and the early days of January next year, when there is festive euphoria among people. However, considering the cash reality on the ground and the mood of buyers, e-tailing companies will not be able to meet the target of this quarter and the next.”
The winning points
However, it is not all gloom and doom. Some good has come out of all this hullaballoo.
- Snapdeal briefly relieved sellers of the CoD charges on returns. The company offered to take up the charges on returned products from the 9th to the 15th of November. The company also took up measures to ease things for its sellers including increased locations for card swipe machines, encouraging the use of Freecharge.
- Companies are observing an increased rate in sale. In a recent function, heads of leading online marketplaces including Flipkart, Shopclues and Snapdeal lauded the move.
Sanjay Sethi, CEO of Shopclues, said that there was a drop in sales, however, “our business from smaller towns and cities has seen a 15% increase.”
- Investors are hopeful of good business in the coming days. Snapdeal CEO Kunal Bahl said that investors hailed the move.
He said, “There is homogeneous positivity from the investors community because typically investors are long-term oriented. And, their response is: This (demonetisation) is going to have positive impact on the industry and also on the company.”
While there will be an initial inconvenience, in the long run, everyone is hopeful of a better growth, reduction in CoD, and a quicker return in investment.
Do you think the demonetisation drive will be beneficial or detrimental to Indian ecommerce? Let us know in the comments section below. If you need help with your ecommerce needs, contact Browntape. We are India’s largest ecommerce services provider, and can help you manage your online business.
