India’s leading eCommerce retailers are struggling with a sharp slump in sales and order cancellations following the scrapping of high-value currencies, raising fears that this would erode some of the profits from the just concluded festival season.

Since the announcement of demonetization there has been sudden decrease of 50-60 % in order volumes. As per ET interview, In India, at least 60 per cent of online purchases are still paid by cash. The paucity of currencies that are still legal tender as the country re-calibrates its money supply in its fight against corruption is discouraging such online purchases as well as resulting in high order cancellations.

As per experts “If it takes about two more weeks for the country to come back to normalcy, that means 60 lakh orders are at the risk of not getting placed, which will have a considerable impact on cumulative sales.”

Flipkart and Amazon India declared blockbuster sales from their flagship events last month, which offered much relief to an industry that had been weltering under a funding crunch. Now, fears of another slump, even if temporary, seem inevitable. “On the 9th, there was a general drop in sentiment so orders decreased from that perspective. The drop in business across the board is real,” said Sanjay Sethi, chief executive of online retailer ShopClues.

While eCommerce executives said it was too early to be able to gauge the full impact of the recall of the Rs 500 and Rs 1,000 bills, the immediate fallout is evident. “The orders placed a week to two weeks before the announcement also have been impacted and the logistics supply chain is choked,” said a top executive at an eCommerce company. “There is very less liquidity in the market, which is causing a temporary disruption.”

“We do not foresee any long-term impact on our sales in this (fiscal) year,” the Flipkart spokesperson said. “We see a great opportunity and responsibility to move customers from COD to prepaid channel. We expect the situation to stabilize rather quickly.”

It might take 45-60 days to stabilize and hope the orders get their numbers back to previous stage.
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