Flipkart, Snapdeal, Shopclues say demonetisation good for e-commerce industry

Honchos of leading consumer internet companies in India have jointly hailed the demonetization move of the Central government. In an industry forum organised in New Delhi on Wednesday, top executives from companies such as Flipkart, Snapdeal, Shopclues, CCAvenues, 1mg Technolgoies, Ola and Oyo Rooms, welcomed the move saying it will pave the way for digital payments, aid the process of financial inclusion and the overall transformation in the economy will translate into long-term benefits for the industry.

While most of those present at the event admitted that demonetization of Rs 500 and Rs 1000 notes had adversely impacted their cash-on-delivery (CoD) business, they argued that the drive will push consumers to opt for digital transactions, which was the industry's ultimate goal.

Arguing that CoD was "always a temporary move", Flipkart co-founder and chairman Sachin Bansal said: "When COD started three years ago, we knew it was a temporary thing, and digital is way more efficient for e-commerce companies." Addressing the gathering through Skype from Bengaluru, Bansal also said that while there was short-term dip in the business because of withdrawal of Rs 500 and Rs 1000 notes from the market, "digital payments is the future, and we expect it to make our business efficient in the long term".

Flipkart's rival Snapdeal's co-founder and CEO Kunal Bahl dubbed the move by the Central government as "ground breaking". "CoD returns are a big pain point from economics' and logistics' perspective…this will significantly get mitigated going forward as more and more payments move to digital," Bahl said.

The discussion at the event was moderated by BJP IT Cell's national head Arvind Gupta and those who participated in it included Shopclues CEO Sanjay Sethi; Prime Ventures' managing partner Sanjay Swamy; CCAvenue's founder Vishwas Patel; 1mg Technologies founder Prashant Tandon; Ola's VP-operations Pranay Jivrajika and Bansal and Bahl among others

The speakers at the event were unanimous that the move by the Central government will quicken the pace of financial inclusion and will benefit people and the economy at large. Shopclues' Sethi, for instance, said even as the company's CoD business dropped 30% post demonetization, its pre-paid orders went up 15-20%. "We saw a drop of 7-8% in sales (in the days following demonetization) but things are stabilizing now," Sethi said, adding that "our business from smaller towns and cities has seen a 15% increase".

Shopclues boasts of a strong presence in Tier I and II towns and Sethi said the move by the Central government will hasten the process of financial inclusion in the markets outside of metros. "Our population is becoming our biggest strength. India 2.0 is about 400 million people who do not live in metros and whose annual household income is Rs 6-10 lakh. They are actually coming into this financial inclusion and this is what we have seen in the last four-five days with the uptake in digital payments," he said.

Most present at the event thought the slowdown in the business wouldn't last beyond a month and even as the top-line of the digital commerce companies got hit by the move, it will have a positive and far-reaching impact on the bottom-line in the longer term.

Snapdeal's Bahl said demonetization had already boosted the digital payment business. "The logic behind people opting for COD was paying once the order is delivered, and to solve that we launched 'wallet on delivery' through FreeCharge last week. And, ever since we launched this service, 15% of our transactions have happened on wallet on delivery. This is extremely encouraging," he said.

CC Avenue's Patel said his company saw a 40% jump in the overall volume of transactions in the days following the announcement of demonetization. "Good time for all of us. Lot of people have for the first time come online. From the economy part, all is good but on the payments side, a lot needs to be done by the banks and other parties," he stressed.

1mg's Tandon said digital payments will help in addressing issues such as rampant availability of fake products in the market while budget hotel aggregator OYO Rooms' executive said demonetization and digitization will inspire hotel owners to move online, thus, giving a boost to online aggregation ecosystem.

Allaying the fears that the blip in the CoD transactions, which, so far, made a significant contribution to most e-commerce companies' sales, will hurt valuations as well as the prospects of fund-raising, Bahl said: "There is homogeneous positivity from the investors community because typically investors are long-term oriented. And, their response is: This (demonetisation) is going to have positive impact on the industry and also on the company."

While so far e-commerce businesses were valued on the basis of gross merchandise value, Bahl said the industry and investors were moving away from such metrics and focusing on unit economics and digitization triggered by demonetization "will improve unit economics".

Bahl's sentiment was echoed by venture capital firm Prime Venture's Swamy who hinted at some new deals in the coming months.