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🖈 Standard / 👨 by Shipyaari / 📅 January 25th, 2016

Demonetization effect on ecommerce Logistics Provider in India

The moment demonetisation of Rs 500 and Rs1000 note was announced, the thriving nation of India came to a standstill.Although the decision is largely being appreciated for its outcome, the immediate effect on many sectors including e-commerce logistics is very adverse. While many may argue that the online sales have skyrocketed, there’s a huge downside too.

To completely understand the adversity on the ecommerce logistics companies in India, it is imperative to appreciatetheir significance in the present scenario. As per a report by the Merrill Lynch, the ecommerce industry in India will reach a dream figure of $220 billion by the end of 2025. Based on the present scenario where speed of delivery is as important as the quality of the product; it would be apt to call ecommerce logistics the backbone of the Indian e-tailing industry. This is one of the reasons why giants like Amazon, Jabong, Firstcry and Flipkart have developed their own in-house captive logistics arm. Even the conventional logistics providers like Blue Dart, Gati, FedEx, Safe express and more have come up with a special ecommerce wing.

Now, when it comes to ecommerce logistics business, more than 65% of the orders happen on Cash on Delivery (COD) mode. This mode is profitable for the logistic providers also because they are able to charge premium rates on these orders. According to the sources, Blue Dart that receives over 75% of their total orders in COD, has experienced a 20% dip post the demonetisation. While Snapdeal and Flipkart have reduced the COD order acceptance limit to below 1000, Amazon, for the time being has completely stopped COD orders. The e-tailers who are accepting it have blocked the acceptance of the old currency notes and are suggesting the customers to be ready with the cash at the time of order arrival. So, in a country where ecommerce logistics is dealing with over 70% of COD orders every day, it is needless to say, that the sudden demonetisation move has brought down their purchases drastically.

There are logistics providers like Xpressbees who are incentifying their buyers to convert their COD orders to prepay in order to tackle the current dip in the business. Also, there are many third party merchants who are reluctant to accept online payments as they don’t want to run the risk of putting themselves on the record for taking out the transactions. Such providers are bearing the worst brunt of demonetisation and waiting eagerly for situation to normalise.

Although the current scenario of demonetisation is temporary, the move has highlighted the need for the ecommerce logistics provider India to warm up towards online payment modes and ensure that such situations do not cripple down their business in the future.Along with managing a wider presence even in the 2 and 3 tier cities, it is not very important for these providers to develop a strong multi modal mix with better cash handling capabilities and the transformation from Cash on Delivery to payment on delivery where payment at the time of delivery can be possible either by cash or card; is extremely important.

Young companies have been continuously trying to bring out new and easier ways to improve logistics in the country. Shipyaari, a dynamic shipment company is the youngest in the industry to have pin codes for prepaid and COD orders. This helps in ensuring smooth delivery without the recurrent confusions. The company has supported over 1500 start-ups in the past two years. Another young company, Lastmilemobi has tied up with the international logistics company Aramex and are soon trying out their new technology that enables payment on delivery through the specially made biometric devices for customers interested in giving card or UPI linked options. This move might not be too relevant in the current scenario but once the liquidity of currency is stabilised, it can bring the cost incurred on the cash on delivery services to an all-time low.

This demonetisation move might have temporarily affected the ecommerce industry but it has brought out a very significant flaw that needs to be handled carefully to ensure smooth growth of this industry. Who knows, in the near future, we might just thank the government for this step.

📅 8th Nov 2016