How Currency Demonetization Is Affecting Indian eEommerce Marketplaces?

Currency Demonetization is Affecting Indian eCommerce Marketplaces

Objective : To understand overall impact on marketplaces, changes in selling pattern and buying behavior of people in India while dealing with currency denomination

It is about three weeks from announcement of denomination change in India, and it has impacted drastically on marketplace sales, valuation and customer psychology. All eCommerce owners shall consider this while taking strategic decisions on online sales & digital marketing for year 2017. It is not estimated to be permanent effect, but it has certainly hurt current e-com giants in India.

How currency demonetization is affecting Indian eCommerce Marketplaces?

The decision of currency ban by Indian Government is getting mixed reactions across the country. On one side, it’s a bold move to bring out black money into the regular banking system. Contrary, it’s also affecting daily works and expenditures of common people. Small hawkers and traders are witnessing slowdown in their business. The unorganized and informal sector of domestic help like drivers, maids, cooks, electricians and plumbers will witness short-term problems with this.

Traditional sectors, such as real estate, garment, jewelry or cement, which used to have larger incidence of high-value cash transactions, will likely go through a bad patch, chaos and restructuring in the next few weeks. And same is for B2B wholesale trade in India.

E-Commerce sector is highly affected by the decision and the major players are taking immediate actions as a ripple effect of the currency ban. Though in past few years, online shopping has really gone up for Indians but the mode of payments has still been more physical (CoD) than digital. People are still apprehensive about carrying out online transactions and thus around 60% of the purchases were made around COD mode.

Most of the e-Commerce giants welcomed and changed their ways to deal this situation as below,

  1. Flipkart – As per the statement of spokesperson from Flipkart, “We welcome this bold and historic initiative by the Government of India. This will enable India to move faster towards digital payments and will be a game changer for Flipkart and for the ecommerce industry. Meanwhile, we urge our customers to opt for alternative payment modes such as card on delivery, internet banking, credit and debit cards, gift cards, and our easy and convenient PhonePe wallet. We are also working on a slew of measures to help customers easily transition from cash to digital payments.” [Source: ]
  2. Snapdeal – Another eCommerce biggie also shifted to similar options of putting off COD orders and increasing the order limits for the same. They have also urged customers to defer the delivery of placed orders by few days till new currency is in place. They also increased COD limits for the next few days.
  3. Amazon – As per article published on Business Standards, amazon has stopped accepting cod for larger value orders on their site.

Reality Ground after three weeks,

It will be bit early to predict about the changes in buying behavior of customers due to currency ban in just less than a month’s time but the move has opened up he awareness about online payments and cashless society in strong ways. And effected numbers / valuation of ecommerce giants in adverse ways. Some interesting facts,

  • After this roll out in a month time, delivery returns climb 50% for major e-commerce marketplaces. Online sellers say even many consumers who made their orders on cash on delivery mode after the Demonetisation are asking delivery boys to accept old notes or take back the parcel. As per All India Online Vendors Association (AIOVA), this has added lot of loss to vendors / sellers.


    E-commerce marketplaces had stopped COD — which accounted for 55-60% of online shopping in the country — immediately after the Demonetisation announcement, but subsequently started it again with new notes. High product return rate is a double whammy for online sellers as sales are down by up to 70% since the demonetisation drive, the AIOVA spokesperson added to above comment. [Source:]

  • Demonetisation pushes e-commerce firms to offer heavy discounts. Amazon, Flipkart offering discounts of 50% in some categories even as they push customers to go cashless. Top e-commerce firms, led by Flipkart and Amazon India, plan to significantly increase discounting over the coming weeks to drive sales, after the recent withdrawal of high-value currency notes hit the nascent recovery in online retail.

    Over the weekend, Flipkart and Amazon India began handing out discounts of at least 50%, even as they pushed customers towards more cashless transactions. Amazon India is handing out flat discounts of 40-70% in its crucial fashion category, where it competes with Flipkart and Myntra. Rival Flipkart is offering discounts of 40-80% in most of its key categories, while Flipkart-owned fashion retailer Myntra offers discounts of up to 70%. [source:

  • As per Financial Express article, Demonetisation windfall for consumers: Flipkart, Amazon offer big discounts up to 20%. After witnessing drop in sales post-demonetisation due to curbs on cash-on-delivery orders, online retailers are providing various deals and discounts if consumers pay through digital channels. It is important to know that “Electronic payment on the platform has risen by 50% after Demonetisation kicked in” – as mentioned by Flipkart official
  • And as mentioned in most headlines, Demonetisation is impacting sales and giving undesirable effect on valuation of Indian E-Com giant Flipkart
  • delivery returns climb 50% for major e-commerce marketplaces

In such a scenario if you are looking to invest and start your own marketplace which may be vertical specific, business to business, or business to customer, we recommend that instead of investing heavy in technology, one should look at cost-effective and robust solution.

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