Bengaluru/New Delhi: The withdrawal of high-value notes from circulation has had a mixed impact on the country’s online businesses. Sales at e-commerce companies, which are heavily dependent on cash payments, have suffered badly while digital payment start-ups have seen a sharp rise in daily transactions. Others such as cab hailing services have seen a slight drop while food ordering and grocery delivery start-ups have seen a slight increase in business.

In the short term, however, demonetisation has reversed the nascent recovery in e-commerce after the likes of Flipkart and Amazon India posted record numbers during their festival sales in October.

Online retailers have seen a 20-40% decline in daily orders, according to a report by advisory and research firm RedSeer Consulting. Experts say that it may take at least one month for business to get back to normal.

Smaller e-commerce firms have been the worst hit, with the likes of fashion portals Voonik and Wooplr witnessing 50-60% drop in sales, according to at least four e-commerce executives who requested anonymity. Naaptol and Homeshop18 have also witnessed a drop of nearly 80% since most of their sales were in cash, these executives said.

Amazon India Chief Amit Agarwal, however, said business is now back to normal, despite the initial setback.

“There was an initial setback, but we are back to normal… to our triple digit growth rates”, he said in an interview in Delhi on December 5th . “We see (a) 10X growth in users paying by debit or credit cards (at the time of delivery) through the PoS (point of sale machines) available with the delivery person.”

Flipkart said business is getting back to normal.

“Sales were down for initial few days by about 20%; however, with the fast adoption of electronic payments, business was back to usual in a week’s time,” a Flipkart spokeswoman said in an email.

“There was an initial big impact– orders reduced by 40%, but 25% of that we already recovered,” said Sujayath Ali, Co-Founder of Voonik.

Immediately after the demonetisation announcement, Voonik began calling customers whose orders were in transit. “We called the customer to confirm the order, ask if he wants to make it prepaid, or opt for later delivery”, said Ali in a telephonic interview. He said the company was giving later delivery option till 24 November, which made 30-33% of the orders. Prior to 8 November, 85% of Voonik’s orders were cash-based and the startup has now brought those levels down to 65-70%, said Ali.

To be sure, demonetisation has also benefited some digital businesses immensely.

While e-commerce continues to suffer, digital payments and online wallets firms have received a tremendous boost, while online food delivery startups have also thrived.

Paytm has benefited significantly in terms of volumes because of its massive advertising campaign, according to a report by digital analytics firm Kalagato. Average refill values for wallets are up across the board, Kalagato said.

Paytm added over 10 million new users in November and expanded its offline merchant network to over one million merchants, a Paytm spokesperson said. Paytm claims its user base has grown to over 160 million.

Snapdeal-owned FreeCharge said online food ordering has seen the biggest increase in business on its platform. The company also said it has seen a 10-fold increase in number of merchants sign-up queries. “Most of the queries coming from grocery stores, pharmacies and food joints to immediately sign up to start accepting digital payments. In the last fortnight, FreeCharge has seen an 8X surge in the wallet load transactions”, a Snapdeal spokesperson said.

Food ordering and hyperlocal startups have seen a significant increase in their transaction volumes due to their business models encouraging more cashless transactions, even as large e-tailers and cab aggregators such as Ola and Uber have been hit due to a relatively large exposure to cash transactions, according to a report by RedSeer Consulting.

“Hyperlocal grocery and food-tech are clear winners as customers don’t have any ready-cash to do the daily offline purchases; but for e-tailing and online cabs, the month of November has been a hiccup in their growth stories – both dependent heavily on cash transactions. However, the positive side of this is the number of customers becoming comfortable with cashless transactions, over the longer run this will enhance the pre-paid model for these companies,” said Anil Kumar, Chief Executive of RedSeer Consulting.

 Source: livemint