With consumers saving every single penny post the Government’s recent decision to demonetize Rs 500 and Rs 1,000 notes, offline retailers are extending and encouraging consumers to use digital payment alternatives, in order to counter the short-term loss in consumption emerging from lack of enough liquidity in the economy.
Consider the fact that India is among the most cash-intensive economies in the world, with a cash-to-GDP ratio of 12 per cent. That is almost four times that of countries like Brazil, Mexico and South Africa. The recent decision has led to retail shops and malls wearing a deserted look, albeit even for a short period of time.
As per analysts, sectors with a sizeable magnitude of cash transactions – such as real estate, construction, jewellery, high-end retail and travel and tourism – are expected to be adversely affected. White goods demand, a source of strength for the economy, is also expected to take a hit.
To stay afloat and conquer the challenges demonetization has posed, offline retailers are encouraging consumers to move away from cash and are giving various payments solutions alternatives to avoid purchase hindrances.
“In our urban stores, around 40 per cent sales happen through cards. In smaller towns and cities, that number is around 25 per cent. We will introduce cheque payments and encourage people to go digital. We are also going to promote debit card, digital payment and gift cards,” CEO, Future Group, Kishore Biyani was quoted as saying in an interview.
In a similar vein, CFO, Panasonic India, Manish Kumar Gupta said, “Our customers can now upgrade to a niftier, cashless, e-commerce option to overcome the current situation. Ruling out the higher currency notes is an integral step towards creating transparency, weeding out corruption/unaccounted-for cash, enabling a seamless business ecosystem.”
The old currency ban, however, is expected to impact small merchants way more than big retailers, who cannot offer choice and convenience of digital payments to consumers.
“Non-Corporate Small Business Sector (NCSBS) forms the economic foundation of India. It is also counted among the largest dis-aggregated business ecosystems in the world, which sustains upwards of 50 crore lives. The biggest threat to the NCSBS comes from online/e-commerce players along with large corporate/organised players who offer choice and convenience of digital payments. We feel it is about time that both small business owners/merchants and consumers to see underlying benefits of transacting digitally,” National President B C Bhartia and Secretary General Praveen Khandelwal, CAIT noted in a joint statement.
The traders’ body, however, expects the Government to come up with suitable incentives for the small traders.
“We request the Government to setup a committee – including representation from CAIT – on strategies of implementation in line with the recent directive. It is critical that they (Government) consider suitable incentives and rebates for small merchants to adopt digital payments as done in the case of countries like South Korea and Uruguay, ” they added.
US retailer Walmart, which operates cash-and-carry business in India, agrees that the sales to kirana stores will take a dig. “As far as our Cash & Carry business is concerned, majority of our members are small traders, who largely receive and pay cash for their transactions. They do not accept credit cards nor do they pay by credit cards,” President & CEO, Walmart India, Krish Iyer said.
“However, we are very confident that Indian banking system & RBI will work very efficiently to support them with alternative currency notes so that they continue to serve the Indian customers for fulfilling their daily needs.” he added.
Just like other retailers, Walmart is also giving options in form of payment solutions to its members, including debit/credit card, cheque, net banking and digital wallet.