This assignment analyzes the impact of demonetization on the e-commerce field in India and examines whether it had a positive or negative effect. It discusses the changes in payment methods, sales, and profitability during the period of demonetization and the long-term implications for the e-commerce industry.
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To assess the influence of demonetization on Indian e- commerce field
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Table of Contents INTRODUCTION...........................................................................................................................1 Main Body.......................................................................................................................................1 CONCLUSION................................................................................................................................4 REFERENCES................................................................................................................................5 .........................................................................................................................................................5
INTRODUCTION Demonetization is refer to as an act where currency is stripped out form the economy as a legal tender. This can happen when there is a change in the national currency. Thus, in this action either the note is discontinued or it is replaced with new currency. Demonetisation is not new as its history can be traced in the year around 1873 under The Coinage Act, of United States. In this silver was demonetised and nation adopted gold standards. Recently, in the year 2016, Indian Government thought of demonetize 500 and 1000 rupee note and this was considered as one of thebigactiontakenbytheregulatorybodiesbecausetwobiggestdenominationswere discontinued as a result, 86% country's circulating cash was affected. Therefore, this assignment is based on the analysing the impact demonetisation on e-commerce field so as to understand whether it acted as a positive or negative manner(Agarwal and et. al., 2018). Main Body Demonetization is determined as a radical monetary action in which tenders which are legal are declared as invalid. This generally takes place when government of any nation make changes in their national currency. However, after this action old notes become null avoid and it cannot be used for further transaction in any manner. In context with India this step was taken back in the year 1978 and denominations Rs 1,000, Rs 5,000 and Rs 10,000 were discontinued. Later, on November 8, 2016,this action was repeated once again Prime Minister of India Narendra Modi through television address the citizen about making Rs 1,000 and Rs 500 note made invalid. This move was taken in order to eliminate corruption and black money. Following action has created a lot of chaos amongst people as they had to stand for a longer period of time outside bank so as to change their notes of Rs 500 and Rs 1,000. But at the same time new notes of Rs 2,000 and Rs 500 were introduced. Other than this, Cash Withdrawal was limited as weekly people can only withdrawal Rs 20,000 which was further increased to upto Rs 24,000. Henceforth, according to the report released by Reserve Bank of India in the year 2017-2018, approximately 99.3 percent of money were returned (Annual Report,2017-2018). Therefore, economy of India was shifted from informal to formal due to which most of the e-commerce companies were benefited. E-Commerce websites in India such as Amazon, Flipkart, Snapdeal etc., accept payment in the form of digital or cash on delivery. Thus, sudden action of demonetisation turned the whole country into turmoil. This action has bring tremendous 1
change in the field of digital marketing including some of the negative as well as positive points. Major benefits which assisted e-commerce in having maximum benefits is online transaction. But this had some limitations as well as due to the scarcity of cash most of the customers cancelled their order. In terms of India, people moved towards cashless economy and citizen start making payment through digital payments. People started using alternative funds for making any kind of payments like most of the customer switch towards Paytm, MobiKwik etc., as a result, it has increased application download upto 300 percent. In response to demonetization usage of debit card raise to around 84 percent. As a result, users after demonetization there was an increase in the number of transaction up-to 400 percent. There was a short term effect of demonetisation on E-Commerce as demonetisation has crack down or forced citizen to adopt digital technology. Due to this action e-commerce had a decline on it sales and the reason behind this was because customers who are living in tier-2 and tier-3 cities mostly prefer payment mode of Cash on delivery(Gupta and et. al., 2018). Although Demonetization in the first quarter of 2017 acted as negative factor but it bought some kind of positive changes as well. For India, it has pushed consumers for using digital payments which gradually contributed to a cashless economy (Impact of Demonetisation on E-Commerce, 2018). With the help of an article published by NITI Ayog, because of digital technology around 271 percent of whopping surge was seen. Other than this, approximately from 17 lakhs to 63 lakhs wallet transaction was increased and Paytm was one leading player as within the duration of around 3 weeks of demonetisation company served to over 45 million people. Despite of so much chaos in the initial years of demonetization, the act is considered as one of the beneficial move for the growth of e-commerce in India. This has reduced the payment through Cash on Delivery. Most of the retail online companies such as Amazon, Snapdeal, Flipkart etc., welcomed this act thinking they have a great chance of increasing their profitability in a speculated time frame. Therefore, the action of currency ban by the Government of India provided a mix reactions from people, companies and other components. This was a bold move in order to turn black money into legal currency so that it can be regulated banking system. The act of Demonetization has affected working of daily activities of common people. Not only small business enterprise even large company faces issues while operating its business in an effective manner(Sivathanu, 2018). Apart from the traditional business E-Commerce was highly affected 2
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by the action and for increasing its sales they had to make some kinds of modification in their strategies like for a particular period of time they have closed the option of COD (Cash on Delivery). For most of the companies demonetization worked as a game changer most of the E- Commerce companies urge to adopt digital technology. In order to analyse the reality of Demonetizationby gettinginformationof threeweekscan provideeffectiveresults.For example: after one month of Demonetization delivery return raised around 50 percent because most of the customers were asking delivery boys in terms of cash accept the old notes or they can take their parcel back. Ultimately this added loss to e-commerce companies. Therefore, closing the process of Cash on Delivery accounted in the decrease of around 55 – 60 percent of online shopping within the country. Subsequently, its consequences was faced by people because the rates of COD was increased to around 20 percent by some of the companies such as Amazon, Flipkart etc., but spokesperson of the company said that although it has reduce the sales bit if it is looked for a long run than after Demonetization growth can be seen of around 100 percent. In relation with some of the E-commerce industry a downfall was seen from 25 percent to approximately 10 – 12 percent. Therefore, because of this most of the E-Commerce company made changes in their post-delivery return norms like they limit or reduce the return period. Major reason behind this was because of high cost included in logistics and delivery system (Demonetisation, 2018).In context with Demonetization, it has pushed e-commerce companies to minimize its rate or provide heavy discount to many of the products (Demonetisation pushes e-commerce firms to offer heavy discounts,2018). For example: during this period companies such as Amazon and Flipkart provides discount of around 50 percent for online transaction. As a result, this assisted in overcoming the loss of one month in couple of weeks. During this period great competition was going on as both Amazon and Flipkart was offering discounts so that maximum number of customers can be attracted and revenues can be maximised. Therefore, according to the article published in Financial express, because of demonetization a downfall of sales was witnessed but after providing various offers an increase in sales was increased by 50 percent. Other than this, expansion of payment options was also affected by the action of demonetization. For instance: credit and debit card were the existing option for making online process but after the act of demonetization many options were added such as wallet service. For example: providing no cost EMI for online transactions so that the process can be made easier 3
for consumers(Sarkar and Dutta, 2017). In addition to this, lucrative discount options provided by the company is aiding these e-commerce industry in attracting a large number of customers towards them. Therefore, digital technology or e-commerce played a crucial role and has impacted business of companies who are dealing in this sector. For instance, scarcity of cash forced customers in using online payment mode because of which increment in delivery return was faced. In the upcoming four years of demonetization after 2016, it has changed daily life activitiesasE-Commerceinfluencethemindsofpeopleforbecomingfullydigitalised. Therefore, it can be said that despite of fall in the growth rate of the E-Commerce it has put some positive change. Therefore, with the help of this research paper it has been identified that demonetisation hasalthoughadoptedforhavingcontroloverblackmoney.Butsomeareaswhichare underdeveloped are untouched and lag behind and this is because of financial inclusion. As technological infrastructure was not there. If compared than demonetization happened in 2016, was one of the largest act which was ever seen. It has stimulated the process of transaction and made approximately 80 percent digital. Henceforth, E-commerce has developed a path for coping up with this situations and formulated policies and strategies for overcoming this situations(Rajesh, 2018). CONCLUSION From the above mentioned report, it has been evaluated that demonetization has put both positive as well as negative impact on business operations. In terms of E-Commerce platform it has provided a better options for payment. During the period of demonetisation there was an decrease in sales and profitability. Because of this most of the e-commerce industry closed the option of Cash on Delivery for a limited period of time. Other than this, renowned e-commerce company offered discounts in some of their products so that despite of decrease in sales through this they can attract large number of customers. In India, despite having so much of negative aspects it has provided country with benefits as according to today's scenario, most of the people are aware about digital technology and purchasing goods and services from these e-commerce sites. As a result, GDP of the nation is becoming higher which is ultimately enabling country in generating more and more revenues. Therefore, it can be said that demonetization has provided opportunities to e-commerce industry which is gradually taking country into prosperity. 4
REFERENCES Books and Journals Agarwal, S., and et. al., 2018. Demonetization and Digitization. Gupta,D.C.,andet.al.,2018.TraditionalCommercev/sE-commerceandImpactof DemonetizationonE-commerce.InternationalJournalofEngineeringand Management Research (IJEMR).8(2). pp.136-142. Sivathanu, B., 2018. Adoption of digital payment systems in the era of demonetization in India: An empirical study.Journal of Science and Technology Policy Management. Sarkar, A. K. and Dutta, D., 2017. Impact of Demonetization: A Study on Healthcare and PharmaceuticalIndustry.InternationalJournalofEngineeringandManagement Research (IJEMR).7(3). pp.583-594. Rajesh,R.,2018.DemonetisationanditsEffects.PARIPEX-INDIANJOURNALOF RESEARCH.6(6). Singh, N. and Chahal, R. K., 2017. STRUCTURAL EQUATION MODELING APPROACH TOUNDERSTANDMEDIATINGIMPACTOFCUSTOMERSATISFACTION (SAT) ON ESQ-BI LINKAGE: A STUDY OF INTERNET BANKING.Indian Journal of Commerce and Management Studies.8(3). p.113. DALAL, M., 2017. A STUDY ON THE TRANSFORMATION OF INDIAN ECONOMY INTO DIGITAL ECONOMY.BIMS International Research Journal of Management and Commerce.2(1). Bhat, I. A., 2018. Demonetization and its Impacts on Indian Economy.International Journal of Current Trends in Science and Technology.8(03). pp.20521-20530. Balakrishna, S., 2018. Government Electronic Services Delivery and the Digital Divide: The Case of Andhra Pradesh, India. Firdous, S. and Farooqi, R., 2017. Impact of Internet Banking Service Quality on Customer Satisfaction.The Journal of Internet Banking and Commerce.22(1). pp.1-17. Raghavan, V., Wani, M. and Abraham, D. M., 2018. Exploring E-Business in Indian SMEs: Adoption, Trends and the Way Forward. InEmerging Markets from a Multidisciplinary Perspective(pp. 95-106). Springer, Cham. Pal, A., and et. al., 2018. Factors facilitating Adoption of Mobile Payment Services over Credit/Debit Cards: An Investigation after the Demonetization Policy Shock in India. Mathur, A., and et. al., 2017. Moving Beyond Market Research: Demystifying Smartphone User Behavior in India.Proceedings of the ACM on Interactive, Mobile, Wearable and Ubiquitous Technologies.1(3). p.82. Yadav, P., 2017. ACTIVE DETERMINANTS FOR ADOPTION OF MOBILE WALLET.i- Manager's Journal on Management.12(1). p.7. Online AnnualReport.2017-2018.[Online].AvailableThrough: <https://rbidocs.rbi.org.in/rdocs/AnnualReport/PDFs/0ANREPORT201718077745EC9 A874DB38C991F580ED14242.PDF>. India'sDemonetizationDrive.2018.[Online].AvailableThrough: <https://www.forbes.com/sites/nusbusinessschool/2018/09/01/indias-demonetization- drive-a-necessary-jolt-towards-a-more-digital-economy/#6f8987653dc3>. 5
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