E-Commerce, E-tailing, and Online Cab Booking Business Affected the Most due to Demonetization

The recent initiative by Narendra Modi to put a ban on old currency notes of Rs, 500 and 1000 has put many business in trouble especially the E-Commerce, E-tailing, and Online Cab Booking, while it is also considered to be a boon for Hyperlocal Grocery and Food-Tech sectors.

Various sectors within consumer internet have been affected very differently by the government’s currency demonetization initiative, which came into effect on 9th November 2016. Even various researches by RedSeer and Economic Times revealed that E-commerce, Cab bookings and E-Tailing suffered a huge loss in their business for the past 27 days. This is because the most favored means of transactions in these sectors is hand-cash.

While Food-Tech and Hyperlocal Grocery sectors have seen a significant increase in their transaction volumes due to their business models encouraging more cashless transactions; e-tailing and Online Cabs have seen a decline due to larger dependency on CoD.

According to the report of Economic Times, Amazon India stopped accepting cash-on-delivery on Wednesday, while Flipkart and Snapdeal limited such orders to below Rs 1,000. These companies also stopped accepting old denomination notes of Rs 500 and Rs 1000, asking customers to instead use electronic payments or keep valid currency at hand.

These measures have impacted daily operations as companies ranging from the country’s largest online retailer- Flipkart- to food discovery and delivery portal Zomato accept cash for an estimated 60-70% of orders.

Commenting on the findings of the research, Anil Kumar, CEO, RedSeer Consulting said, “Hyperlocal Grocery and Food-Tech are clear winners as customers don’t have any ready-cash to do the daily offline purchases; but for E-tailing and Online Cabs, the month of November has been a hiccup in their growth stories – both dependent heavily on cash transactions. However, the positive side of this is the number of customers becoming comfortable with cashless transactions, over the longer run this will enhance the pre-paid model for these companies.”

A representative for Amazon said the company is “working on alternatives to make doorstep payments easier for customers by introducing a variety of electronic payment options.”

Flipkart executives admitted that business will be impacted over the next few weeks, but he expects CoD to contribute a significant part of sales as new currency notes roll out. “Most of the online retail industry is still in metros and tier-I and tier-II cities,” he said.

As there is a huge scarcity of cash online e-commerce companies like Flipkart and Amazon mentioned that their delivery executives will carry card swipe machines so that customers don’t face any kind of problems and they are also reintroducing CoD within a week’s time.