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Impact of Demonetization on E-commerce Sites

With the big economic change that happened lately, regarding the ban of Rs 500 and Rs 1000 notes, public almost experienced tremors no less than a Tsunami. While half of the population in India hailing it as masterstroke step taken by PM Narendra Modi and the other half was and is still suffering from a cash crunch.

Especially businesses like e-commerce platforms where most of the revenue is made depend on COD (Cash on Delivery) are now witnessing currency problems. Not just e-commerce sites, even e-commerce website and web & mobile app development companies have put a hold on them.

The ban on Rs 500 and Rs 1000 notes have kind of restrained the shopping ability of customers through cash. In addition to this, ATM withdrawal limit is Rs 2,500 a day and in some places the limit is still Rs 2,000 has complicated the cash crunch a bit further.

The impact of demonetization is increased in every industry, Let us now take a precise look how the demonetization move has affected the e-commerce sites and its revenue in a big way.

Cash On Delivery

Ever since our honorable Prime Minister Narendra Modi announced the ban of Rs 500 and Rs 1000 notes e-commerce sites were forced to put a tentative full stop to “Cash on Delivery” option. A few e-commerce platforms like Snapdeal and Flipkart have even applied restrictions on the order purchase value to below Rs 1000. Meanwhile, Amazon.in stopped CoD after a day of the big announcement.

cash on delivery

The e-commerce sites instantly have stopped accepting Rs 500 and Rs 1000 right after they saw the news. This paid more importance on other means of digital payment methods since customers are saving whatever little amount of cash they have in hand for their daily essentials and requirements.

The demonetization step has had a bad impact on e-commerce conversions of several companies from Snapdeal to Zomato, which is an online food search and delivery that mainly happens through liquid cash that accounts for more than 60% of total orders.

With a significant fall in Cash on Delivery purchases, demonetization move has led to a long jump in online payments, either through credit card or debit card. Demonetization also affects the latest and upcoming ecommerce mobile app trends; as it mostly focuses on online transactions.

Statistics

According to OfficeChai, here is the graph that shows what exactly happened to e-commerce sites on that night.

demonetization

There was almost 27% drop in user sessions between 8PM and 9PM.

There is one more research done by Forrester Research, “The cash on delivery option will witness a significant fall and thus it will force customers to make online payments at least in the first 1-2 months. This revenue drop was further attributed to the edge on black money as this demonetization move which earlier was used to make the shopping through different e-commerce platforms.

According to the statement by PayU India CEO, Amrish Rau, “Nearly 40% of cash on delivery orders was driven by accounted money according to a study that was done a couple of years ago.” He also added, “This move will also have an effect on Gross Merchandise Volume (GMV) as not every CoD order will move to digital payments.

People in the rural economy are still not that pleased with digital payments and people who are just getting used to paying online will stay away from e-commerce sites for some time.”

Conclusion

It is definitely difficult to estimate how long it takes for the recovery in consumer demand but our hope is that we will see a hike in e-commerce platforms once the daily withdrawal limits are lifted.

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