Comprehensive Analysis: Demonetization's Impact on Indian E-commerce

This report investigates the multifaceted impact of demonetization on the Indian e-commerce landscape. It examines how the policy shift affected various aspects of the e-commerce sector, including sales, payment methods, and consumer behavior. The analysis explores the initial decline in sales due to the disruption of cash-on-delivery transactions and the subsequent adoption of digital payment methods such as Paytm and MobiKwik. The report highlights the benefits of demonetization in pushing consumers towards a cashless economy and the challenges faced by e-commerce companies in adapting to the new financial environment. It also discusses the strategic responses of e-commerce platforms, such as offering discounts and expanding payment options, to mitigate the negative effects and capitalize on the changing market dynamics. The report draws upon various sources, including academic journals and industry reports, to provide a comprehensive overview of the long-term effects of demonetization on the growth and evolution of e-commerce in India. Furthermore, it provides valuable insights into how demonetization has transformed daily life activities and influenced the minds of people for becoming fully digitalized.

To assess the influence of
demonetization on Indian e-
commerce field

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
the big action taken by the regulatory bodies because two biggest denominations were
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
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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
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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
Demonetization by getting information of three weeks can provide effective results. 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
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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
activities as E-Commerce influence the minds of people for becoming fully digitalised.
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
has although adopted for having control over black money. But some areas which are
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.
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REFERENCES
Books and Journals
Agarwal, S., and et. al., 2018. Demonetization and Digitization.
Gupta, D. C., and et. al., 2018. Traditional Commerce v/s E-commerce and Impact of
Demonetization on E-commerce. International Journal of Engineering and
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
Pharmaceutical Industry. International Journal of Engineering and Management
Research (IJEMR). 7(3). pp.583-594.
Rajesh, R., 2018. Demonetisation and its Effects. PARIPEX-INDIAN JOURNAL OF
RESEARCH. 6(6).
Singh, N. and Chahal, R. K., 2017. STRUCTURAL EQUATION MODELING APPROACH
TO UNDERSTAND MEDIATING IMPACT OF CUSTOMER SATISFACTION
(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. In Emerging 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.
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