COD payments at e-commerce firms back to pre-demonetisation levels3 min read . Updated: 16 Nov 2017, 05:00 AM IST
Cash on delivery (COD) payments have returned to 60-65% of all e-commerce orders after falling to 45-55% following demonetisation last November
New Delhi/Bengaluru: A year after the government’s all-out effort to reduce cash usage and push digital payments after the invalidation of high-value banknotes, cash transactions at e-commerce firms have already returned to pre-demonetisation levels.
That’s an indication that hopes of a transformational shift toward digital payments in the aftermath of demonetisation, which caused an unprecedented cash crunch, are unlikely to be realized in an e-commerce market estimated where, according to Redseer Consulting, transactions reached $14.5-15 billion last year.
Cash transactions, which accounted for as much as 60-65% of all e-commerce orders in India until November 2016, dropped to as low as 45-55% after demonetisation took out 86% of the currency in circulation by value, according to executives at online retailers and logistics firms.
But as cash availability increased starting early this year, many shoppers immediately shifted away from digital payments. Now, cash again accounts for 60-65% of all e-commerce orders, these executives said.
Mint had reported on 8 November that demonetisation has failed to make a dent in cash usage in the Indian economy because of poor digital infrastructure and the ingrained habits of consumers, besides other reasons.
“Cash transactions are back to their old levels, or even higher very slightly," said T.A. Krishnan, CEO of Ecom Express Pvt. Ltd, one of the largest logistics providers to online retailers. “E-commerce companies are going deeper into the country and in these areas (Tier 2-3 cities), consumers are paying by cash. Eighty percent of our deliveries are paid (for) with cash."
According to Krishnan’s estimates, some 70% of all e-commerce orders currently are paid for with card or cash on delivery.
“We see no positive shift towards credit or debit cards and the COD (cash on delivery) orders have gone back to old levels. In smaller markets (Tier 2 and 3 cities) this number is up by 5-7 (percentage points)," said Abhishek Chakraborty, executive director at DTDC Express Ltd, a logistics firm.
DTDC ships close to 1 million orders a month. The firm had seen prepaid orders touch about 70% of the overall e-commerce business soon after demonetisation, and this number is now back to about 60%.
Hyperlocal delivery firm Shadowfax Technologies Pvt. Ltd said it has also seen a jump of 5 percentage points in COD orders in the last three months. Shadowfax is one of the biggest external logistics providers to online food and grocery delivery companies.
According to Sanjeev Kathuria, CEO of courier firm Dotzot, COD orders saw a sharp fall after demonetisation but returned to normal levels soon after.
“The overall orders for the e-commerce industry saw a dip post November 2016 but we have not seen people switch to credit or debit card transactions, as was anticipated," Kathuria added.
Flipkart and Amazon India, India’s two largest online retailers, have seen a slight decline in the proportion of cash orders delivered by their own logistics units, executives at the companies said on condition of anonymity.
Flipkart and Amazon, which also use third-party logistics providers, have been pushing customers to use their digital payment platforms, PhonePe and Amazon Pay, to pay for orders. But on an overall basis, a large number of their orders still continue to be paid by cash.
Flipkart declined to comment for this story. Without giving numbers, Amazon India (Amazon Seller Services Pvt. Ltd), the second-largest e-commerce firm, said the proportion of its cash orders has reduced this year compared with the levels before demonetisation.
“Due to the demonetisation in November 2016, people began to adopt electronic payment methods resulting in reduced cash usage. While cash began returning by end of Q1FY17, by then, we had taken several initiatives to encourage digital payments include providing point of sale machine delivery agents and supporting customers in making electronic payments when they deliver across thousands of pin codes across the country. COD (cash on delivery) share in Tier 2/3 cities is higher than Tier 1 but the gap is narrowing, as a result of our initiatives to drive electronic preference," an Amazon spokesperson said in an email.