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Sambhav Karnawat

Sambhav Karnawat is the founder of a platinum jewellery e-commerce portal, Jewelove.

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Thoughts on the Impact of Demonetisation on Jewellery eCommerce

The impact on precious jewellery e-commerce will be similar, with one exception, that some consumers preferred to buy precious jewellery offline just because they were not comfortable using cards online.

Photo Credit : Reuters,

Demonetisation has been a very hot topic since 8 P.M. November 8, 2016 when it was announced by PM Narendra Modi. And it should be. It is one of the most dramatic steps in Indian monetary & financial history. Some may say, almost as historic as liberalisation in the early 90s.

Everyone knows & feels the dramatic impact of this move in their daily lives. But I, being an internet & technology person, would love to share some key insights into how this move has affected e-commerce in general & jewellery e-commerce in particular.

In my opinion and analysis of the situation, the short term & long term impacts may be significantly different. Hence, this article is segmented into 2 parts :

Short Term Impact of Demonetisation :

As you may have guessed, the short term impact on all industries, including e-commerce has been tragic. Even though, being completely (or mostly) online, e-commerce businesses have been impacted negatively in the short term.

Depending on the customer demographics, studies show that anywhere between 50%-74% of all online orders in India are paid as COD. That is, more than half of the payments for even online orders are paid in cash. This is huge. With the short term liquidity crisis that has struck the Indian consumers, most of these orders are gone, in a day.

That is a huge impact.

This impact has been across industries, in almost all e-commerce verticals except medicine. Online fashion, apparels, jewellery & electronics have been hit the worst. To the extent that major players have already lowered their GMV1 expectations by 20%.

1 GMV is Gross Merchandise Value, which is the sum total of all sales made by an online portal. It may or may not differ from the revenues of the company depending on operational & company structure.

Long Term Impact of Demonetisation :

Long Term. Now, this is where things get interesting, because no-one really knows how this will play out. Partly, because no-one knows how much cash & liquidity will the RBI & the Government pump back into the system.

Now, there are several factors affecting the long term view. I am discussing some of them below :

1. Expected Liquidity Release by RBI

Given the Finance Minister’s statement on reducing cash circulation as a percentage of GDP, let us assume that the new infusion is ₹ 8 lac crores instead of the ₹ 14.6 lac crores taken out. Once sufficient liquidity is available with the consumers, spending may increase. A significant liquidity release will let people resume business as usual in about 6-8 months.

2. Unexpected Surprise - Increase in % serious queries

Most consumers who would now be enquiring about products are serious buyers. Most buyers would know that they have to pay online, which in itself acts as a filter for many window-shoppers.

3. Reduction in No. of Returns
COD has one of the highest return rates. Many customers simply change their mind in the time it takes for something to reach them & refuse to take delivery of COD orders. This would significantly reduce with online transactions. Which brings us to our next point,

4. Digital Penetration

Can the likes of PayTM, Bank wallets, UPI & other digital payment systems leverage this opportunity & really become an integral part of the customer’s life & mainstream payment channels? It is a question that can make or break many hearts (& wallets, pun intended).

5. Changing Consumer Behavior

This is not going to come easy. We have seen a sudden surge in digital payments, from the local fruit & vegetable vendor to kirana shops. However, the digital penetration in rural areas is still very low where most e-commerce orders are being paid in cash.

This is going to be very difficult to fathom. Whether the increase in digital transactions is temporary & consumers will revert to cash once significant liquidity is available. Or, will it continue & people will refrain from using cash as the preferred payment method, is a question that only time can answer.

The impact on precious jewellery e-commerce will be similar, with one exception, that some consumers preferred to buy precious jewellery offline just because they were not comfortable using  cards online. If this set of consumers can undergo a behavioural change and become used to of using cards online, that could be a silver lining in the clouds for the online jewellery sector.

What really happens, we will only know 6 months from now.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

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