First Tuesday in November, late evening in India, majority of Indians along with the whole world, were glued to their TV sets waiting for updates on US Presidential polls. And most unexpectedly, comes the breaking news, “Rs. 500, Rs. 1000 to be discontinued starting midnight of 8th November 2016.”
What a brilliant move by the government and completely in the stealth mode!
Dubbed by the media as surgical strike on Black Money, this is definitely an unprecedented and bold move. It has taken all of us by surprise but has been welcomed alike by the common man, industrialists, politicians, eCommerce industry and many others.
We know, we might have to face chaos for a few days or may be weeks, as there is confusion over the matter and processes need to be streamlined. Cash heavy industries and businesses, especially eCommerce, have to brace for a slow sales season for a short period. However, the overall impact in the long run is going to be profound and positive for every industry.
Why etailers should welcome 500, 1000 Rupee notes discontinuation?
eCommerce is going to be one of the biggest beneficiaries of this demonetization. In the long term, we are going to see many benefits some of which are:
1.Lesser COD a boon for eCommerce
COD comprises more than 50% ( up to 80% in some cases) of eCommerce sales. This decision is definitely going to slow down COD and hence impact the revenues of all eCommerce players. But, in the long run this move will improve margins with lower volume of COD orders.
2. Online Wallets get an instant Boost
Payment wallets are going to be biggest beneficiaries of this move. Despite being around for long, this payment mode had not yet picked pace as expected. With the reduction in cash transaction Pay wallets have already started sending alerts and incentivising the use of their services.
3. No impact on Big Ticket items
eCommerce big ticket items are usually paid by cashless transactions. So, all big-ticket items are going to remain more or less unaffected by this move.
4. Gems and Jewelry eCommerce to pick up
Indians have a weakness for the yellow metal and as an immediate impact of loss of value of money, gold prices have shot up. People are going to invest more in gold as security and this would give a boost to online sales of gems and jewelry also.
5. Incentive for new start ups
COD cuts into profit margins and was one of the biggest demotivating factors for many SMEs. This push towards cashless transactions, would make it easier for entrepreneurs to take their business online and get better ROI.
Looking beyond short term benefits for eCommerce Industry
There is an air of uncertainty among eCommerce players after the latest demonetization.The initial reaction of majority of online retailers to this decision has been panicky. Many of our clients at StoreHippo (SaaS based, mobile ready eCommerce platform) reacted to the news by immediately asking us to stop COD on their web stores.
Their panic is rooted in the fact that October-December quarter is the most lucrative season for eCommerce sales. With the slowdown in COD, sales are bound to take a hit during this period, which would pinch many etailers badly in short term.
However with this step, India has taken a big leap towards a cashless economy. Once the initial hiccups subside, the eCommerce industry will see unprecedented boom. Increase in cashless transaction will make our economy and businesses more convenient and transparent.
Let’s take a bit of inconvenience during the initial stages in our stride for a bigger, brighter future of the nation, eCommerce and all related industries.
*This article was published on Linkedin.