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Impact of demonetization on online shopping in 2017


India is one of the key growth countries when it comes to e-commerce but it is still at a nascent stage and has a huge potential for growth. The Indian Government’s sudden and unprecedented move on November 8, 2016 to take high-value currency notes out of circulation sent the Indian economy in a tizzy.

Impact of demonetization on online shopping in 2017
Post the demonetization announcement, CoD faced a major hit while major e-commerce platforms such as Amazon, Flipkart, Snapdeal et al faced an onslaught as many of their shoppers canceled their orders immediately

Demonetization meant that Rs 500 and Rs 1,000 are now no longer legal tender, eliminating nearly 86 per cent of the currency in circulation, creating a huge cash crunch in the economy.

The effects of this move have been seen at an individual as well as at an industry level. For online shopping in India as well, the impact has been major. Listed are some likely effects of demonetization on online shopping in 2017:

The Rise and Fall of CoD (Cash-on-Delivery)

India has always been dependent on cash for almost 90 per cent of its transactions. As far as online shopping is concerned, nearly 80 per cent of the transactions are paid through Cash on Delivery (CoD) method. Post the demonetization announcement, CoD was majorly hit while e-commerce giants such as , , et al faced consequences with many shoppers cancelling  cash orders immediately.

However, this short-term pain will result in a long-term gain.

The ubiquity to pay for online shopping through digital methods like debit/credit cards, wallets, and net banking will drive people towards these channels and lead to the growth of this method. It will also benefit e-commerce platforms by cutting handling costs and risks related to cash. In the coming years, as digital payment methods better penetrate, CoD will be as good as extinct – a change that is good for e-commerce companies as well as users.

Cashless Becomes the New Norm – Mobile Wallets Reign

The cash crunch caused due the bold move by the Indian Government has driven people towards digital payment methods such as mobile wallets, Internet banking, and debit/credit cards. The country was essentially put on the fast track towards becoming a cashless society. While these changes were taking effect, mobile wallets gained major traction. Popular mobile wallets such as , , , enjoyed a manifold increase in users.

In the coming year, payment through mobile wallets will become the most preferred online shopping payment method. This is due to the fact that wallet payments are snappy, safe and make for easy refunds. Online shopping portals will fare well by partnering with mobile wallets and giving wallet offers to their customers. Such a move will indubitably increase sales on these websites.

Grocery and Consumables Go Online

Online grocery shopping was already gaining momentum when the cash crunch took effect. Post demonetization, shopping grocery online saw a massive growth as local vendors refused to accept demonetized notes and consumers were yet to get their hands on new ones.

We can safely say that a major chunk of consumers will turn towards online shopping for groceries and everyday essentials. While some will continue to visit retail stores and use plastic money, websites like Amazon, , and Snapdeal will see a great surge in sales in this category. Discounted prices, quick deliveries and good quality of these products will lead to changed consumer behaviour and loyal customers. Revenue is therefore set to increase by leaps and bounds.

Cashback and Coupons Take Charge

As Indian’s we love a good bargain every time we shop. In fact, a large number of people turn to online shopping just for the discounts and deals provided to them through the medium. The announcement of demonetization has brought a lot of value consciousness among shoppers.

People, therefore, will turn to cashback and coupon sites, such as CashKaro.com, which add to their savings, especially during this cash crunch. Online shopping destinations that partner with affiliates offering cashback and coupon benefits will come to the forefront, providing dual benefits in the form of savings for users and increased sales for e-commerce websites.

All in all, demonetization may look it will spell doom in the short run, in the larger scheme of things, it will only result in better performance, increased sales and amplified revenues for e-commerce platforms.