E-tail and foodtech to be hit by currency demonetisation in short term, cabs and grocery to gain: Report

11th Nov 2016
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While all sectors are facing the impact of demonetisation initiative by the central government, digital payment startups are having a ball. Paytm, Freecharge, Mobikwik, and PayU are witnessing a steep surge in traffic, sign ups, and of course, users. The sudden demonetisation of currency is expected to slow down overall transactions of online retailers as they had to stop taking cash on delivery (COD) orders .

The recent RedSeer Consulting report reveals that the various sectors within consumer internet would be affected very differently by the government’s currency demonetisation initiative. 

The report notes that while e-tailing and food tech sectors are expected to bear the brunt of the move in the near term, both online cabs and hyper-local grocery services should see a growth in transactions, as customers look to save precious cash and look to online channels to serve their transportation and grocery needs.

In the mid-term, as the liquidity conditions stabilise, most sectors would return to business as usual. However, the online cabs sector is likely to be an exception and should see a growth from usual transactions, as the customers that got added in the near term are likely to stick around in the mid-term as well, driven by the strong value proposition offered by the online cab players.

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Speaking on the finding of the research, Anil Kumar, CEO of RedSeer Consulting, said: “In spite of the small impact in the short term of the currency demonetisation move, we see things moving back to usual in the mid-term for the consumer internet sector.”

The impact on e-tailing and retail is going to be visible for the next two-three months, especially in white goods category and non-essential purchases. Although majority of online buyers have access to online payment methods, including net banking/cards/wallets, the shift from COD to online payment will not be very sudden as almost 60 percent of online order are COD and customers still prefer COD.

Satish Meena, Forecast Analyst at Forrester India, said: “Online grocery shops may see some increase in orders for short duration but it is not expected to survive for long as once the liquidity is back in the market, customers will go back to the old channels of buying grocery.” He further added,

Consumer internet companies have to work hard in improving the customer experience of paying and delivery so that they can use this opportunity to move a major chunk of customers towards online payment and also train new customers with this mode of payment.
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