Effects of Demonetization on E commerce in India


Demonetization is a process through which currencies are stripped off their status hence cannot they cannot be used as legal tender. New currency units are brought in to replace the old currency units.

The Indian government, in the year 2016, demonetized the 1000 and 500 rupee notes. Coincidentally, these were the notes with the biggest denomination in circulation. These was done majorly to counter tax evasion, fight money laundering and accelerate the cashless payment system.

Different sectors of the economy received looked at this strategy in different ways depending on its impact on their operations and bottom line.

Stakeholders in e-commerce had to change their payment modes. Cash-on-delivery method was stopped in favour of other online payment modes which were more convenient. Cash on Delivery accounted for at least 60-70% of the sales. Other companies were, however, forced to limit the prices of items bought to slightly below Rs 500. In this case, the companies were only accepting lower value denomination notes.

Videos on Demonetization Impact on E commerce 

The once skeptically viewed demonetization shocker caught most Indian punters literally sleeping on the proverbial switch.

This resulted in :
1  Drastic increase online payments
2. Decreased Brick-and-Mortar Sales Volumes
3. Massively More User-Tailored Marketing Campaigns
4. Marketing Dwindled Luxury Purchases
5. Almost Double Website Traffic were reported.

The online payment method is still not popular become the populace in Indian believe in paying for goods after they are satisfied with the quality. Further to this, consumers in the rural setup still do not have access to money in digital form and this will definitely lock them out.

It is being argued that companies will adopt measures like cutting prices to increase volumes. Other sectors that support ecommerce will greatly benefit. Mobile application developers will now be forced to come with more platforms to link ecommerce sites and banking institutions

Another benefit of demonetization is that e-commerce companies like ebay, Amazon, Snapdeal will introduce coupons and cashbacks. These options will give shoppers savings and increase sales made by the e-commerce companies. If prices are offered at a discount, products are of good quality and deliveries made on time, a group of loyal clients will emerge.

Another major challenge of demonetization of currency is the impact that it will have on the conversion rate optimization (CRO). Under CRO, companies are able to increase the number of visitors to their sites buy observing the buying and shopping trends. In this case, prices can be adjusted to achieve this objective. When cash on delivery is stopped, it will be difficult to observe the buying trends of clients.

In conclusion, the first few months may have a negative impact on ecommerce but with clients slowly adopting the online payment methods, sales will definitely pick in the long run. With internet users currently at only 350 million, analysts feel that e-commerce in Indian is at a nascent stage and there is still a lot of potential to grow. The growth is expected to leap to US$120 billion by the year 2020 from the current level of US$30 billion in 2017.

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