Near and Middle term Effect of the Demonetisation Move on the Ecommerce Sector in India
1. Near and Middle Term Effect of the Demonetisation move on the Ecommerce Sector in India
The demonetisation move by the Union government is turning out to be a mixed bag in the near- to
medium-term for the e-commerce players. They are feeling the heat in this transition period. It is
because per various estimates Cash on Delivery is equal to 70 to 90 per cent of e-commerce players’
revenues. To counter the step, major ecommerce companies have either stopped or capped the cash on
delivery options to different amounts. Further, they are encouraging consumers to opt for other
payment options. Such measures have impacted daily operations of these players and it is no wonder
that these companies are preparing themselves for a drop in sales in the immediate future. In the long
term though, the ecommerce companies are expected to reintroduce cash-on-delivery payment option.
According to various industry estimates, the cost incurred over COD orders is 2-2.5% of order value
or Rs 30-50 (whichever is higher). This also amounts to be a major cost center for ecommerce
companies. Further, relying on COD also means more returns by customers. Knowing all this, cash
usage is actually not considered a completely positive option for ecommerce companies. This move is
expected to incentivise cashless payment options for all ecommerce transactions. People may become
more inclined towards using digital payment options as Unified Payments Interface (UPI), plastic
money like debit/credit cards and pre-paid cards, e-wallets and net banking.
Newest payment options: Unified Payments Interface (UPI) was officially launched on April 11. It
allows seamless real-time transfer of money between bank account using smartphones. This feature
allows you to pay directly to merchants (online and offline) without the need for manually feeding in
card details or codes or passwords. E-wallets are online prepaid accounts where money can be stored
for present or to be used later to pay for services or buy a variety of products.