Demonetization has taken the country by storm and affected every business sector in some way or the other. In a bid to understand its repercussions on the F&G industry, Progressive Grocer India spoke to two industry stalwarts – Bigbasket’s Seshu Kumar and Aaramshop’s Vijay Singh – to find out their views on how they are handling the note ban…
How has demonetization affected the F&G retail landscape? Seshu Kumar ( SK), National Head – Buying and Merchandising, Supermarket Grocery Supplies Pvt. Ltd (Bigbasket): The demonetization saga offers a tremendous opportunity for both offline and online customers to convert their customers toward cashless transactions.
Vijay Singh (VS), MD & CEO, Aaramshop: The retail trade overall has seen a dip and more so the F&G retail, especially the neighbourhood-based stand-alone retailers. The dip is largely on account of consumers hitting the pause button, but also because a lot of these retailers had not prepared their operations to accept other modes of payments, and were very heavily dependent on cash.
Will demonetization prove to be a boon in disguise for online retailers?
Seshu Kumar: It is a short-term opportunity for online retailers to showcase themselves to a larger customer base who will try them out because they can transact without using cash. Once the customer tries the retailer because of the current cash crunch, he / she will continue with the online retailer only if he/ she is happy with the overall experience.
Vijay Singh: A huge benefit to the online retailers would be the slowdown of COD option. Hence, lower cost of operations. However, that would, also in the short-term, mean a dip in orders. However, I do not believe there would be any exclusive online-only advantage as all retailers (including offline) would enable cashless transactions.
Roughly, what percentage of your consumer base prefers making digital payment over cash and by how much do you see your digital transactions growing?
SK: Our transactions through digital payment options have grown from 50 per cent to 85 per cent after demonetization. Eventually, they may stabilize between 75 per cent – 80 per cent.
VS: I can imagine that in the next few quarters it would be difficult to find any person who is not using digital mode of payment. I think the current aggressive move by e-wallet companies and banks will ensure massive adoption. On our platform, we have seen a massive shift to digital payments in the past weeks. So far, the shift is on account of demonetization. However, we expect the trend to continue towards digital payment options.
What kind of opportunities does it provide to the offline retailers?
SK: Cashless transactions are easy to execute, track, and reduce the risk of fake notes, theft, etc. It also exposes retailers to new risks like card and online frauds. Online retailers should develop systems and processes to mitigate the new risks.
VS: More number of consumers will switch over to cashless payment options because of the ease of transacting. We, at Aaramshop, have come up with new initiatives to support and leverage this huge opportunity by re-engaging with the young consumers who are more comfortable with digital money. We are working with the retailers to leverage their traditional ‘udhar’ options to their community, by linking it to digital payments options.
Which tools and technology have you put in place to facilitate digital payment?
SK: We have in place fully encrypted secure systems to facilitate digital payment. We have also enabled card on delivery technology wherein our customer experience executive can swipe card and accept payments at the time of delivery. We have all digital wallets enabled to facilitate payments.
VS: AaramShop is well placed to facilitate digital payments – both for the consumers and also for our retail partners. For the consumers, we enable digital payment options on our mobile apps (both on android and iOS) and also on our website. This enables the consumers to shop and pay digitally to our over 18,000 retail partners. We also enable in-store payment via JioMoney at all our retail partners.
For the merchants we have benefits that include enabling the merchant to accept digital money the minute they download and register with our merchant app (aaramOn on android and iOS). The app has digital payments acceptance pre-loaded, and comes fully integrated with our cloud and in-store POS and store marketing services. AaramOn tech stack is free to use for the retailers anywhere in India.
What is your assessment of the impact of demonetization on top-up purchase and on small kirana shop owners?
SK: Top up purchases on a weekly basis will continue. The daily / impulse purchases will reduce and customers will be inclined to go for weekly top-up purchases.
VS: Th ere is, and will be, a short-term dip in the off take. However, we believe that smaller retailers are best placed to counter the situation. The effect of demonetization is that consumers do not have access to low denomination money or are in the mindset not to spend the limited cash they have with them. We have enabled a great feature on our mobile apps for our partner retailers keeping in mind the scarcity of money on account of demonetization.
Neighbourhood retailers, especially grocery stores, have been adversely effected as the number of shoppers and volumes have dipped due to the lack of availability of cash with the customers. But rather than getting pulled down by that, we have worked with our partner retailers to ensure they can leverage their years of relationships within their community.
Our retailers can now extend informal credit to their known consumers, using our merchant app (AaramOn). Th e retailer himself decides the amount of credit to be extended and the duration. Aaramshop communicates the info of the credit amount seamlessly to the customers.
This informal credit line by the retailers to their customers means that the consumers can shop for the daily needs without needing to worry about cash in hand. The shopping can be done not just on the app and the website, but also in-store. The customer can pay at the end of the credit term, using cards, JioMoney, cheque or even cash.
This service has been extend to all retailers at zero cost to them and to their customers by Aaramshop. This is to ensure that the pain caused by demonetization is eased by the years of relationship and trust between the retailers and their customers.
What according to you would be the long-term consequences of this situation in the context of offline and online retailers?
SK: The retailers who would quickly change their internal processes and systems to facilitate cashless purchases will benefit irrespective of whether they are offline or online. Those retailers who will continue with only cash-based transactions will take a hit.
VS: I believe this new development will only make the grocery retailers more organised. Some of the business practices will change. But largely, the trade will need to respond to the payment preferences of the consumers. And hence as the consumers go with digital payments, the trade will need to follow the same.