Demonetisation pushes e-commerce firms to offer heavy discounts
Bengaluru: Top e-commerce firms, led by Flipkart and Amazon India, plan to significantly increase discounting over the coming weeks to drive sales, after the recent withdrawal of high-value currency notes hit the nascent recovery in online retail.
Over the weekend, Flipkart and Amazon India began handing out discounts of at least 50%, even as they pushed customers towards more cashless transactions.
Amazon India is handing out flat discounts of 40-70% in its crucial fashion category, where it competes with Flipkart and Myntra. Rival Flipkart is offering discounts of 40-80% in most of its key categories, while Flipkart-owned fashion retailer Myntra offers discounts of up to 70%.
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Over the next few weeks and months, Flipkart will launch sale events to attract customers, many of whom have shied away from online shopping after the e-commerce firms withdrew the cash-on-delivery (CoD) option, company executives said.
According to research and advisory firm Redseer Management, about 70% of the overall e-commerce orders, a large portion of them coming from towns and smaller cities, are paid for in cash.
Until October, India’s e-commerce industry had seen a worrying drop after Snapdeal and to a lesser extent, Flipkart, were forced to cut advertising and discounts because of a cash crunch. In October, Flipkart bounced back and, along with Amazon India, posted record numbers. But demonetization has hit that recovery. Company executives expect e-commerce will only return to normalcy some time in the next quarter.
Flipkart confirmed that it will launch sale events starting next week.
“Our objective is to be highly relevant to our customers and help fulfil their shopping needs. With that in mind, we will have multiple sale events coming up ahead of the holiday season. Besides, in reference to the demonetization drive, we have a bunch of incentives on prepaid orders such as instant wallet cashbacks. We have seen a 50% spike in prepaid orders post the demonetization drive, proving customers are moving towards a cashless economy,” a Flipkart spokeswoman said in an email.
“Sales were down for the initial few days by about 20%. However, with the fast adoption of electronic payments, business was back to usual in a week’s time,” she added.
Experts tracking e-commerce said that while the move to hand out heftier discounts and hold more sale events is likely to boost sales in the near term, it will hurt margins further, especially after the October sale, when companies sacrificed margins for market share.
Amazon India said that it does not plan to hold any specific sale event over the next few weeks, but it will continue to hand out other benefits to customers, adding that it had also reintroduced CoD payments.
“While we saw limited short-term impact due to the recent currency change announcement, we have already seen tremendous customer response in adopting electronic payment methods at delivery with 10x growth in electronic payments at the doorstep. Additionally, we saw exciting response to our launch of an offer for customers to go cashless where customer can top up their Amazon Gift Card balance and enjoy an instant incentive of 15%. We have also reintroduced cash on delivery starting 11 November. Customers continue to value the vast selection, great value, and fast and reliable delivery on Amazon.in, and we are back to growing over 100% year-on-year,” said an Amazon India spokeswoman.
E-commerce companies are also ramping up their infrastructure to handle more card-on-delivery transactions and are deploying more point-of-sale (PoS) machines, the executives said.
Experts said that while companies are scrambling to ensure more digital and online transactions, most of them are still unprepared and ill-equipped to handle the increased volume of online orders and are likely to struggle to complete orders over the next few weeks and months.
“We significantly ramped up our card-on-delivery facility by deploying more PoS machines. Majority of our pin codes are covered under card-on-delivery, even reaching out to remote towns such as Asansol, Bhuj, Burdwan, Bharuch, Amravati, Guntur, Dibrugarh, Jorhat, Darbhanga, Bhillai, Sambalpur, Siliguri, Bellary,” said the Flipkart spokeswoman.
“Also, given the high interest from banks and other brands, to collaborate and provide cashback/discounts to Flipkart customers, we have been running various offers on multiple payment instruments like wallets and debit cards,” she added.