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Demonetization effect: Flipkart, Amazon, Snapdeal witness 50% spike in undelivered COD orders

According to sellers, these marketplaces have added credit on delivery options but that hasn’t compensated for the loss incurred over undelivered COD orders.

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The current cash crisis is palpable yet India is shopping. But it hasn’t been a smooth ride for e-commerce platforms which have been reeling under pressure over undelivered orders as a lot of customers have opted for cash on delivery or COD, but are offering only the old currency notes. On November 8, 2016, Prime Minister Narendra Modi announced a ban on the use of Rs 500 and Rs 1,000 currency notes and asked the citizens to get their old cash exchanged for the new Rs 2,000 notes. While this led to a rise in use of cashless services, e-commerce platforms such as Flipkart, Amazon, and Snapdeal are finding it difficult to fulfill orders that have been marked for COD.

On one hand, digital payments have shot up over demonetization of the old currency notes. However, on the other hand, undelivered online purchases too have gone up by over 50 percent. Online sellers who list their products on these portals say that consumers who place online orders and opt for COD mode for payments, ask the delivery people to accept the banned notes or take back the order. This has resulted in a surge in returns, ET Tech reports.

“This is a further loss to us as Snapdeal and Amazon charge us shipping fees on such orders,” said a spokesperson of All India Online Vendors Association (AIOVA) that represents 1,500 online sellers. Following the announcement on demonetization, e-commerce platforms had stopped COD mode which accounted for close to 60 percent of online shopping in the country. However, with the introduction of new Rs 2,000 currency notes, the COD payment option had been resumed. According to the AIOVA spokesperson, high rate of undelivered returns is more concerning as overall e-commerce sales are down by up to 70 percent since the demonetization.

One of the four large online sellers, ExclusiveLane, which sells on top three marketplaces, said returns increased by 35 percent since the demonetization drive as a lot of orders were already in transit when the announcement was made. Meanwhile, for e-commerce portals the demonetization has had impact on sales and returns, which sellers estimate to have increased over 20 percent. ALSO READ: Flipkart plans to move into groceries; build furniture business in 2017: Binny Bansal

COD has been one of the popular payment options for a significant section of the Indian consumers which shops online. This is due to the sheer convenience it offers to consumers who prefer to receive their orders first and pay later. It is also preferred because there are times the orders are delayed or cancelled over unavailability, for which refund is not possible in cash. Also, given that people now have to get their old currency notes exchanged by December 31, 2016, the rise in returns is bound to be steady for a while. Online marketplaces have also tightened their return policies in the last two years which has helped them to bring down the return rate from 25 percent to 10 percent.

To tackle the after-effects of demonetization, e-commerce platforms have added credit card on delivery as one of the payment options to put customers running out of cash at some ease. Websites like Snapdeal and Flipkart have also been offering more discounts on online payments and zero cost EMI schemes. Amazon spokesperson said that the company witnessed ten times growth in credit card on delivery mode. However, this hasn’t been helping the sellers much which have complained that such efforts do not compensate for the loss incurred over COD mode. ALSO READ: Demonetization effect: Telecom operators waive off mobile banking charges till December 31

  • Published Date: November 23, 2016 2:10 PM IST