Cash’s Again King in Retail World
Some retailers expect cash dealings to return to pre-demonetisation levels of 40-50% once cap on withdrawals is removed
Sagar Malviya & Writankar Mukherjee
Mumbai | Kolkata: Cash may still prove the king in post-demonetisation India. Consumers are increasingly opting for cash payments as liquidity improves in the market, and some big retailers now expect cash transactions to gradually return to pre-November 8 levels in a couple of months.
Retailers including Shoppers Stop, Future Group, Lifestyle International, Spencer’s and Max said 20-30% of their total sales in January were paid for in cash, a significant jump from a meagre 5-8% cash transactions in November-December when delegalisation of old .₹ 500, .₹ 1,000 currency notes led to a severe liquid cash crunch in the system.
Some of these retailers now expect cash transactions to return to predemonetisation levels of 40-50% after the cap on cash withdrawn is completely removed on March13, somewhat negating the government’s efforts to push digital payment. “From the trend that we have seen over the past three months, we expect percentage of cash transactions to continue to rise for the next few months as re-monetisation takes place,” said Shashwat Goenka, sector head (Spencer’s Retail) at RP Sanjiv Goenka Group. “Over time, we expect it to stabilise at about 50%,” he said. Cash payments at hypermarket chain Spencer’s have increased from 11% of overall sales in November to 25% in December, and 37% now.
For online fashion retailers Jabong and Myntra, cash transactions, or ‘cash on delivery’, is already back to normal at 60-70% after falling to about 10% in the aftermath of demonetisation.
“At Jabong, we had our best ever sales in January due to return of cash in the hands of consumers and discounts,” said Rahul Taneja, chief business officer at the firm. “The real pickup of cash transactions started after the third week of January and the average ticket size has gone up by17-18%,” he said.
But not all retailers are seeing similar trend.
Marketers of higher value products such as white goods and smartphones said cash payments now account for less than 10% of their total transactions. While this is expected to increase significantly when consumers have more liquid cash in hand, retailers don’t expect it to rise to old levels.
“We do not expect cash will ever become that big anymore since consumers are now getting accustomed to digital payments,” said Subhasish Mohanty, director at mobile phone retail chain Hotspot. “However, finance component is growing significantly and will continue to do so,” he said.
Cash component in total sales of
the Spice Mobility-owned retailer had dipped to 4% in December and January from 40% in pre-demonetisation days, Mohanty said. Spice runs 200 Hotspot stores, apart from managing 225 stores of UniverCell and Mobiliti World.
Vinay Bhatia, CEO for loyalty and analytics at the country’s top retailer Future Group, also believes cash transactions will not return to old levels because other payment modes are picking up. “As consumers are getting more
comfortable with cards, we see the cash percentage settling down to around 35-40%,” he said. Cash transaction during ‘Big Bazaar Sabse Saste Din’ sale in January had increased up to 40% after falling to 10% in November-December. Pre-demonetisation, as much as 50% of transactions in Big Bazaar outlets were paid in cash.
About 1.2 crore Indians started using digital wallets in the week after withdrawal of .₹ 500 and .₹ 1,000 notes, according to a report by Nielsen. Mobile payments surged to its highest ever reach at 70% during that period, it said.
The rush for wallets helped Future Group’s own Future Pay Wallets to cross 1.2 million downloads within four months of its launch.
However, as availability of cash gradually improved with new .₹ 2,000 and .₹ 500 notes coming into the system, consumers started dealing more and more in cash.
Share of cash transactions in department chains Shoppers Stop and Lifestyle has increased to 2225% now after falling to 5-7% two months ago. “While we expect an increased cash transaction once the cap (on withdrawal) is removed, we are still uncertain in terms on whether cash purchase could attract additional tax for some products,” said Govind Shrikhande, MD at Shoppers Stop.
The RBI on Wednesday said it will increase weekly cash withdrawal limit from savings accounts to .₹ 50,000 from .₹ 24,000 now effective February 20, and remove all restrictions on March13.
Cash transactions at value fashion retailer Max Retail has improved to 20% after falling to 10% in November and December. Vasanth Kumar, executive director at the firm, expects it to grow closer to pre-demonetisation days’ levels of 30% in coming weeks.
At Amazon India, too, cash on delivery mode of transactions has not yet reached the same level. However, Amazon’s vice president (payments) Sriraman Jagannathan said the effects of demonetisation have stabilised. Amazon has increased by four times the number of card-swiping machines used to provide ‘card on delivery’ service to its customers.