All top e-commerce companies including Snapdeal and Jabong worked overnight conceptualising upon multiple offers to ensure that customers chose pre-paid options over cash on delivery for new orders placed, as they were forced to stop accepting Rs 500 – Rs 1000 notes, starting November 9.
In a bid to curb black money, Prime Minister Narendra Modi on November 8 announced that Rs 500 and Rs 1000 denomination notes will not be legal tender. This move will force ecommerce companies to cut cash on delivery (CoD), which had become an unwanted menace for them. Some may now charge a fee for a CoD order others might stop it temporarily. A declining CoD contribution will reduce cash burn rates and improve working capital cycle for struggling e-commerce companies.
Amazon India said that customers can pay by any electronic means for high ticket items. “Our delivery associates will not accept notes with high denomination of Rs 500 / Rs 1000 effective midnight, in compliance with the instructions issued by the Ministry of Finance through a press release dated 8th November, 2016,”
Amazon India said. Flipkart and Jabong also deliberated similar measures. “Plan is to have a clear message on the app and web that currency of Rs.100 or below are only accepted,” said a senior Jabong executive requesting anonymity.
“We will also be communicating to customers proactively whose cash on delivery orders will be pending. Besides there will be more and more pre-paid card offers, so that the customer chooses pre-paid over cash on delivery,” he added.
However, even as the companies celebrated the move, according to experts, the move will not have much impact on the acceptance of e-wallets unless the companies gave customers the option of paying through wallets when the delivery happens.
“People use wallets largely because of cash back not because there are no other means of payments. What I do is that I transfer money from my credit card into a wallet and use the wallet where I get the cash back. However for the interim number of period it will be give customers early exposure to e-wallets. But at offline outlets such as restaurants etc, customer still will have the option to pay through debit/credit cards,” said Sreedhar Prasad, partner, ecommerce, KPMG India.
“If quickly e-commerce firms can create something on an app that the customers can paying wallet transaction on delivery, then it works,” he added. The problem with Cash on Delivery There is a very high cost of returns for all CoD orders. Returns are also likely to reduce as a result when people turn to paying upfront or digitally. Non-CoD buyers in India are generally less prone to return products unless they are not faulty. Thefts and fraud of high value item cash received from buyer will also reduce.
The move by Modi government came as a surprise to almost every industry especially a sector such as e-commerce which on a very conservative estimate gets at least 60 percent of its business through cash on delivery model. Of these a good chunk are high ticket size products such as electronics. For example the cost of a basic smartphone on an online portal is at least Rs 4,000.
Source: moneycontrol
