How the currency ban will impact the event planning industry
When I logged onto Twitter at 19:45 on November 8, 2016 and saw a tweet that said “The Prime Minister of India, Narendra Modi, is about to address the nation,” I had no idea that the industry I consider myself a part of was about to change in four hours.
For those of you who aren’t yet aware of the masterstroke in the fight against corruption, black money, and fake currency, here are the salient points:
- Beginning November 9, currency notes of Rs 500 and Rs 1,000 have lost the status of ‘legal tender’
- New notes of Rs 500 and Rs 2,000 have been in circulation from November 10
- People can deposit notes of Rs 1,000 and Rs 500 in their banks from November 10 till December 30, 2016
- Those unable to deposit Rs 1,000 and Rs 500 notes by December 30 for some reason can change them till March 31, 2017 by furnishing ID proof along with a declaration form
- Currency notes of Rs 1,000 and Rs 500 will be just paper with no value
- Cashless fund transfer won't be affected by this
The event planning industry has been plagued by a large set of problems. As a result, there is a need for the rise of technology-first companies that can solve most, if not all, of them.
- Discoverability: A huge chunk of event service providers have minimal or no online presence and lose access to a shadow market that has high buying power. This is an issue that affects both vendors and consumers.
- Pricing: Unfragmented industries such as the eventplanning industry do not come with rate cards or fixed-price menus. The prices vary based on seasonality, the car a consumer drives, the locality she lives in, and several other factors.
- Price anchoring:Anchoring refers to the tendency to rely heavily on the first piece of information offered when making decisions. Price anchoring is a common practice in event planning negotiations since most consumers do not require these services often enough to know what the prevalent market prices are.
- Outdated: We live in a world where Amazon informs us about the delivery professional’s schedule, Uber keeps us posted on where our cab is, and Pizza Hut tells us as soon as our pizzas are out of the oven. However, on the day of an event, a host still has to step away from her guests to check if the service providers are on time and arriving with the right material.
- Inconvenient:The process of planning events in general has not really changed in several years. People ask for recommendations from other people who may have used these services recently, the only difference being that while previously it happened at the community temple or park, it is now done on ‘Put Me in Touch’ groups on Facebook. Then there are calls, meetings, and negotiations, after which, depending on the kind of service provider, there’s a discussion about the payment mode and here comes the magic term “How much in cash?”
- Payments: Event service providers (especially ones who do not have an online presence) have shied away from any forms of payment other than cash. There is a new generation of buyers who prefer to shop using their plastic money and payment portals, and forcing them to transact in cash instead of adapting to a more legitimate world is another huge blunder.
Impact of the currency ban on the event planning industry
The event planning industry has always been one that has helped a lot of people get rid of their black money. This is especially true in a country like India, where each of us has attended at least one big, fat wedding on which vulgar amounts of money were spent.
You see, here’s the thing about fragmented markets — they are hard to track and have players who have not been part of the several tax systems at all. For example, there are several pandits who may not even have a PAN card or worse, may not be willing to share their PAN card or bank details for fear of accounting for their income. Service providers like pandits who only offer services may not run up huge bills, but on the other side there are caterers, decorators, venues, and event management companies whose income so far has been via large cash transactions. These are transactions that they are happy to be part of since there are no taxes levied on such income.
Let’s look at venues. As one of the founders of an event planning marketplace startup, I spent a lot of time meeting several stakeholders and asking them to become a part of the platform we were building. Nobody was ruder than venue managers. There were several who kicked my co-founders and me out as soon as they heard the term ‘online payments’ or ‘startup’. I don’t really blame them for the latter. Jokes aside, these very people are now forced to legitimise all their transactions.The surcharge on venue bookings which existed on busy and auspicious dates was almost always dealt with in cash and will now have to be dealt away with or legitimised.
The introduction of these new rules incentivises the issue of invoices and receipts. On the flip side, however, consumers may feel the pinch when there are taxes amounting to almost 15 percent being levied on the services.
Apart from personal events such as housewarming ceremonies and weddings, there are corporate events that take place in large volumes. These range from team dinners to company outings and everything in between. The lack of accountability and proper invoicing allowed a new breed of middlemen to thrive in this environment. These middlemen, who are usually part of the “planning committees” at organisations, would deliver bloated bills to their bosses and pocket the difference after coming to an understanding with the vendors or event managers. This move makes it almost impossible to pull off such stunts because now the vendors will be very particular about the billing and the taxes to be paid.
Will there be people who will try to circumvent these rules? Most certainly. Gold biscuits. Foreign currency. There will always be people who try to find ways around the system. On the whole, though, this is a welcome move and startups such as mine who are in the space and have been trying to digitise and legitimise payments in the space will find it easy to put our foot down and also compete on a level playing field. There is hope that this newfound transparency will lead to a better, reformed event planning industry, and technology startups are in a unique position to help both the service providers as well the consumers with this transition.