In the wake of the momentous decision of the Indian Government that made high-currency notes of denominations Rs. 500 and Rs. 1000 invalid from November 9, 2016, the country has been left reeling. Not surprising, given the fact that nearly 85% of the cash in the market was rendered useless in one stroke.
There has been considerable debate amongst economic and trade gurus about the advantages and drawbacks of demonetization. Despite the varied takes though, one conclusion can be drawn here for sure; the demonetization of high-currency notes is a not-so-subtle move in encouraging India towards becoming a paperless economy.
This is bound to be a difficult idea to digest for the Indian public, as we are way more comfortable with cash transactions as opposed to using plastic money. Consider this: although the number of online shoppers in India has increased exponentially in the last five years, 70% of the shoppers still opt for the Cash on Delivery option (including me!), rather than completing the transaction online. This is probably born from the inherently skeptic mentality of the population, where we have been taught to trust only as far as we can see.
However, on a national scale, these very physical cash transactions make it nigh impossible to keep track of the currency in the market, which then leads to the generation of black money and illegal transactions across the country. Now that this choice has been effectively taken away by the government, for the time being at least, the general public has started viewing plastic money in a favorable light. Not only does this mark a decisive step towards creating a ‘Digital India’, it also has significant implications for businesses all over the nation.
What Does Demonetization Signify for Businesses?
Taking Businesses Online
The very first step that needs to be taken by businesses to survive in the rapidly imminent cashless market is going online. Whether it is small-scale vendors like bakers and confectioners, grocery stores, and independent service chain suppliers, or mega-corporations like Amazon, Snapdeal, Zomato, etc., provision of online services to clients is bound to become imperative.
Though it is true that the shift from a cash-based economy to a cashless economy is going to be slow, and rather difficult to adapt to, as well as the fact that hard currency is never going to be completely replaced by soft currency, it is inevitable that people will turn towards online transactions more and more in the long run. Given this, it is a good idea for businesses to start developing and maintaining a strong online channel right away, instead of having to scramble later.
Building Your Website, or Modifying It
When it comes to developing your business online, it all starts with a website, and an e-commerce website at that. It is obvious why developing a website is a must here; the website becomes your identity, it is a showcase of the products you offer, a place for your customers to go to for making purchases. To build a good website though, is far from an easy task. Considering the thousands of similar websites out there, you need to create one that sets you apart from the crowd and highlights that difference.
Building a website or an e-commerce store can be done using CMS platforms like WordPress with WooCommerce or Easy Digital Downloads (if your store sells digital goods), which let you develop extensive stores with their myriad capabilities. Most of these platforms are extremely user friendly, provided you dedicate time and effort to building your website; if not, you can always avail of professional website building services that discuss your requirements with you and present a full-fledged product, ready and prepped to use.
Don’t get complacent, merely building the website is not going to be enough. Even if you already have your e-store up and running, you need to make sure that it is optimized, maintained, updated, and revamped at regular intervals. This helps enhance your search engine rankings, which in turn drives more customers to your store via organic search.
Determining User Interaction on the Website
There are many criteria of what makes a good website. Quite like a real store, completing a transaction on an online store is dependent on how well the customer can interact with the store, and how well the site responds in turn. One of the best selling points of websites like Amazon is their easy navigability and clear directions. From product availability to the final amount of purchase, Amazon has a well-defined, logical process that ensures that customers know exactly where they are.
Depending on the kind of e-store you are building, the optimization requirements will differ. However, every website needs to be optimized for basics such quick navigation, easy product search, transparent costs, and efficient payment processing (more on that later). These are all the more important if you are aiming for an eventual transition to a completely online store, as the country goes paperless.
As we have seen before, Cash on Delivery is by far the most popular option chosen by online shoppers. Over the last year though, online marketplaces have reported a marginal decrease in the number of customers availing of this option, with more and more customers making payments online. This heralds a positive change for plastic money, as websites beef up their payment processing methods.
As an online store, you need to incorporate several options for your customers to choose from. These include multiple payment platforms, like Paytm, InstaMojo, Mobikwik, etc. You can also choose region-specific gateways, for quicker payment processing. Needless to say, these transactions have to be encrypted and secured appropriately, to ensure client confidentiality and reduce cyber-crime.
Discounts, Cashbacks, Credits, and More
To encourage your customers to shop at store e-store, despite the lack of a Cash on delivery option, you can use perks like discounts, coupons, and cashbacks. Snapdeal has successfully used this strategy to boost sales, following the lack of currency in the aftermath of demonetization, by offering a flat 10% discount on all card transactions. This encourages customers to go cashless, thereby facilitating a more secure payment process.
Another way of alleviating your potential customers’ apprehensions can be offering cashbacks, or store credit. This sets the mind of the customer at ease, as they know that they can demand a cashback in case they are not pleased with the product. On a logistical scale, this can be difficult for you to manage, nevertheless, offering cashbacks goes a long way in building the trust of your patrons. An alternative to cashbacks can be offering store credit. This implies that the customer can opt for a replacement from your store, if they are not satisfied with the original product, instead of a refund. As a store owner, this is a more viable solution for you, as you are assured of a transaction, no matter what the product.
Optimizing your site for mobiles and integrating mobile payment apps is of high import when you develop your online store. There has been a marked increase in payments via mobile phones recently, especially for online food orders, recharges, and online shopping. This indicates the need for mobile app integration on your website, as it lets your customers shop on the go.
Additionally, you can also integrate barcode and card-scanning applications which customers can use to safely complete transactions, email responders that convey all the details of the transaction to the customer, and user accounts/members’ areas where the customers can view and track their orders.
As we slowly, but steadily march towards a completely cashless economy, businesses need to proactively start working on these aspects so that they can establish a firm hold in the industry.
What Does Going Cashless Entail for the Consumer?
The end-user’s reaction to demonetization has been mixed. While most of public welcomes and supports this reform, small businesses, where daily wages are a significant part of payment, and villages with a scarcity of banks and ATM’s have been hit the hardest. In the long run, however, going cashless has myriad advantages from the customers’ point of view as well.
Here is a glimpse of these:
Transparency in Transaction
As the entire transaction takes place online, customers do not have to worry about hidden costs, or cash security. In addition, the processing time is less and customers have no hassles like tendering exact change.
Keeping track of your purchases is easy, as is demanding refunds for the product, if it is found to be unsatisfactory. Customers can order, receive, and request a refund from the convenience of their home, in case the product does not match the specifications provided by the store.
Efficient Management of Accounts and Expenses
Online payments are updated automatically into the customers’ bank accounts, which makes identifying expenses and managing accounts very easy, since the tally is practically already present in the financial statements.
Incentives from Banks
Various banks across the country award points for every card transaction, which customers can redeem alter, as per the policies of the said bank.
Despite all these and many other advantages of a cashless economy, people in India are reluctant to use plastic money to its maximum potential. Part of this resistance stems from the fact that the population has become too used to physical cash and hence finds it difficult to adapt to the paperless concept. The lack of familiarity with the necessary paraphernalia required for making online payments (computers, swipe-machines, and the like) is also one of the major factors of opposition.
This begs the question; does India really need a cashless economy? The simple answer is yes, it does.
Why do we Need a Cashless Economy?
India is a strong market from the business perspective. However, due to the rampant prevalence of black money and illicit currency, the potential of this market is severely diminished. The recent demonetization of high currency notes provides an opportunity for the economy to negate this black money from the equation and paves the way for an eventually paperless system of transaction.
Eliminating cash transactions makes redundant the infrastructure necessary to handle the same. For example, imagine a world where all your bills, taxes, and fines would be handled online, by the government. It would eliminate all the printing, distribution, and management charges that have to be endured in the process.
There is no scope for bribery, when the payment is online. The corruption that is present on a massive scale in the country today can be curbed, if not completely eradicated, if the entire population starts using plastic money on a regular basis.
Another disadvantage of carrying hard money is one most experienced by foreign travellers. Hard cash is susceptible to theft, misplacement, or loss. If on the other hand, you carry credit/debit cards with you, it is far easier to keep track of it as well as the money you spend. Sweden recorded a significant reduction in the rate of petty theft, corresponding to the reduction in the usage of cash in the country.
Several countries across the world have successfully managed to create paperless economies and experienced the benefits of the same. Sweden, Kenya, Norway, Denmark, Somalia, and Canada are some examples where cashless systems are in place today, and are working flawlessly, so much so that even the smallest vendor has a wireless card-swipe machine for making payments.
What Does This Imply for the Future of India?
India needs to come to terms with the fact that cash is soon to be an obsolete method of payment. Young and old, rich, and poor, all of us have to work towards understanding the benefits of a cashless economy and start implementing the same in our day-to-day lives.
The transition is bound to be painful, the GDP is expected to take a severe hit in the short-term, and the economic growth is going to be practically nil for the next quarter, however, the long term macroeconomic benefits of this reform include lower inflation, lesser budget deficits, lower interest rates, and an overall decrease in unaccounted money and crime rates.
From the businesses’ point of view, it will be far easier to tide over this crucial time period and sustain later, if they start working proactively to develop their respective online channels. The recent demonetization signifies a concrete step in taking India towards a Digital Age, which is why there is no time like the present to start building your e-commerce store and preparing for it!