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About 70% of the e-commerce orders are still paid for in cash, according to research firm Redseer Management. Photo: Aniruddha Chowdhury/Mint
About 70% of the e-commerce orders are still paid for in cash, according to research firm Redseer Management. Photo: Aniruddha Chowdhury/Mint

Flipkart, Amazon, Snapdeal limit cash on delivery option after Rs500 notes scrapped

While Amazon has suspended cash on delivery services, Flipkart and Snapdeal have limited payments to Rs1,000 and Rs2,000, respectively

Flipkart, Amazon, Snapdeal and other online retailers have either temporarily stopped offering cash on delivery services or capped the value of such orders after the government demonetized high-value currency notes from midnight on Tuesday.

Such a move may temporarily impact the volume of business as cash on delivery is the most popular mode of payment for shoppers in India, industry experts said.

Flipkart Ltd, Snapdeal (Jasper Infotech Pvt. Ltd) and Shopclues (Clues Network Pvt. Ltd) have put a cap on the maximum value of cash-on-delivery transactions, while Amazon India has temporarily stopped cash on delivery, the companies said in statements.

For instance, Flipkart and Shopclues are enabling cash payments for orders less than Rs1,000, while Snapdeal has limited cash transactions to Rs2,000.

These companies, apart from the likes of BigBasket (Supermarket Grocery Supplies Pvt. Ltd), will not accept Rs500 and Rs1,000 currency notes. Amazon, on the other hand, has suspended cash payments completely.

BigBasket’s nearest competitor, Grofers, will accept cash payments, but not in Rs500 and Rs1,000 denominations.

The companies are instead encouraging consumers to resort to payments through debit and credit cards enabled by the point of sales devices carried by delivery personnel.

“We have temporarily stopped cash as a payment option for new orders. Customers that had already placed CoD orders before midnight on 8 November can pay for their orders using debit or credit cards or currency of valid denominations. For future orders, we are working on alternatives to make doorstep payments easier for customers by introducing a variety of electronic payment options. We will shortly reintroduce cash payment on delivery," an Amazon spokesperson said in a statement on Wednesday.

According to research and advisory firm Redseer Management, about 70% of the overall e-commerce orders are still paid for in cash, a large portion of it being accounted for by the smaller towns and cities.

Consequently, a temporary roadblock in cash payments may hit business volume for e-commerce companies, though temporarily, after a significant increase in sales for the recently concluded festive sales.

According to Redseer, e-commerce companies clocked gross sales of $2.25 billion in October, riding on festive sales.

“There will be temporary disruption and by that I mean we have already seen a dip in traffic today. A couple of days from now will be slow for commerce across the nation because people will conserve cash. This will not have a very significant impact on us because about 25-30% of the orders are cash on delivery," said Radhika Aggarwal, co-founder and chief business officer at Shopclues.

According to industry experts, the absence or an upper limit on cash on delivery may lead to cancellations or clog logistics networks.

“More than 30 lakh orders are in the pipeline to be delivered as cash on delivery. Unless a new model where wallet transaction replaces CoD at the time of delivery, many of them may get cancelled, or clog the logistics network with significant delays in delivery. Many customers may still be hesitant to adopt wallets in a short span of time. Today’s online customers use wallets more because of the cashbacks and convenience, than for not having another digital mode of payment like cards or online transfer, etc.," said Sreedhar Prasad, partner, e-commerce and start-ups at KPMG, India.

Snapdeal is giving consumers an option to defer deliveries, a spokesperson said.

E-commerce focused logistics companies such as Ecom Express and DotZot, the e-commerce delivery arm of DTDC, are either scheduling orders of lower value first or informing clients about probable delays in delivery.

“We are sending out low-denomination shipments first because people can still give Rs100 denominations for Rs400, Rs500 or Rs1,000 orders. But we expect it will be difficult for high-value shipments, so those are not going out right now in any case. Further, in case of rejection where a person is saying I don’t want the shipment, we put it on hold and we will attempt it later," said Sanjiv Kathuria, co-founder and chief executive officer, DotZot.

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