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Has Demonetisation shown an exit door to COD?

Before mid night of November 8, 2016, who could envisage that the following day would transform the way business is done in India. Doing justice to the quote ‘Actions speak louder than words’; the present government took the baton to disrupt corruption, black money and illegal transaction of wealth. Nationwide ban on currency (Rs 500 and Rs 1000 note) instantly came as a shocker for brands, businesses and corporate giants, not to forget the working class. Where at one side, India was awakening to become a cashless society, heavily depending on digitisation, on the other hand, hell broke loose for people who still had old currency with them.
No doubt, the idea of this change was in long run supposed to benefit Indian economy, for people, the whole procedure was nothing less than a wild goose chase experience. Brands comfortable doing daily business started acting fast and the first step taken was discontinuation of Cash on Delivery (COD) for online orders. Demonetisation has compelled ecommerce brands to shift their focus on online transactions, even so, brands like ShopClues made sure their delivery boys carry smartphones, which enables consumers to instantly pay at their door step. If we notice on a broader scale, there are two kinds of consumers who are opting to pay through COD. Type 1 consumers, who use COD option because they are not very comfortable using electronic transactions at all, which means, they might opt out of online shopping for some time. Type 2 consumers, who opt for COD out of choice, who most likely would shift to online mode of payment using their debit, credit card or wallet. This can fetch them attractive offers provided by the sellers. Few brands preach that consumers should opt for online shopping and keep the new currency for buying only essential commodity. Amid this transforming scenario, people who are not used to digital payments or who don’t have a smart phone, feel the pinch and are left with no options, other than waiting for the new currency.

Experts view
Swait and Rohan Bhargava, Founders of CashKaro.com comment, “We welcome Prime Minister Narendra Modi’s bold decision to phase out the circulation of Rs 500 and Rs 1000 bank notes as this will bring transparency and stronger accountability. The move has definitely given a boost to digital payments and has encouraged people to shop online more. Wallets like Paytm have seen significant growth. We have seen an increase in the number of people clicking through CashKaro and going to our partner sites to purchase daily essentials and consumables. One of the main reasons for this increase is that the Cashback that members earn from CashKaro is paid over and above applied discount coupons, bank & wallet offers. CashKaro Cashback is in the form of Real Cash and can be transferred to user’s Bank Account.”

As per Mr.Harsh Shah, Co-Founder FYND, “It has been unfortunate that such a right minded initiative has been executed not so well. This has resulted in major short-term heartache for the retail sector. Having to face discount driven ecommerce on one end and cash starved consumer on the other, the retail sector will take another 7-10 months to recover fully. However in long term, it is a great “stick (instead of the carrot)” approach to get money into the official and digital channels. As an eCommerce platform, we are happy that over the long term, this will lead to lower cash management. While there have definitely been depression in the orders we have seen, since even now, the bulk of orders is Cash on Delivery, but are hoping that in the long run, this helps everyone, the customers, merchants and marketplaces.”

Key Insights
According to a recent survey, I have observed the following:

  • 78% consumers agreed that since demonetisation and because of cash crunch, they have started shopping online.
  • Going Cashless is the new norm: 35% of the respondents have started using ‘Plastic Money’ even while shopping at local vendors for daily needs and consumables. Others prefer the below sites for buying groceries and daily items:
    – Amazon.in – 25%
    – BigBasket.com – 15%
    – Flipkart – 7%
    – Grofers.com – 7%
    – Snapdeal – 5%
  • Paytm has become the undisputed leader when it comes to being the preferred payment wallet with 50% user share. Freecharge ranks second with 35% with Mobikwik, Citrus Pay and Oxigen follow thereafter.
  • Preferred payment method used after demonetisation of Rs 500 & Rs 1000 notes when shopping online:
    – Using Wallets like Paytm, Mobikwik etc. – 59%
    – Net Banking – 23%
    – Cash on Delivery (CoD) – via using Debit/Credit card – 18%
    – Cash on Delivery (CoD) – via Cash – 1%
  • 91% of the respondents agree that ‘Cashback offers’ by retailers, banks and sites like CashKaro.com are definitely helping them to ‘Save & Earn’ during this cash.

As per my observation and analysis, keeping demonetisation and its fruitful impact in mind, it seems that brands and consumers mostly prefer paying for what they order online. This can be because they want to avoid the scenario of shelling out money, when they can use it for buying urgent commodities or it can be because of convenience. For now, it’s clear that online transaction is running away with the cake, with COD still trying to take baby steps. Please do share your thoughts and inputs on the tug of war between COD and online transaction.