ADVERTISEMENT

Demonetisation Good News For Digital Payment Startups, But Not Others

Business-to-Business startups see a 25 percent decline in sales post demonetisation.

A notice reading “We Are Out Of Cash” is displayed on the shuttered entrance of a currency exchange store in Delhi. (Photographer: Anindito Mukherjee/Bloomberg)
A notice reading “We Are Out Of Cash” is displayed on the shuttered entrance of a currency exchange store in Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

While startups in the digital payments space are cashing in on the government’s demonetisation drive, the ‘sudden war’ on black money has put startups in the online business-to-business (B2B) marketplace in a tight spot.

Players like Industrybuying, Tolexo, Wydr say that the they are facing an up to 25-30 percent decline in business as small and medium-sized enterprises (SME) and wholesalers grapple with the cash crunch.

Demonetisation Good News For Digital Payment Startups, But Not Others
Post demonetisation, there is a disruption in the business. A lot of SMEs are just busy dealing with the cash crunch and are getting the cash arranged for daily chores. We are seeing an average dip of 20-25 percent in business as the cash on delivery business has been impacted. 
Swati Gupta, Co-Founder, Industrybuying 

Backed by funds such as Kalaari Capital and Saif Partners amongst others, Industrybuying is an online marketplace for industrial goods and supplies, and caters to both large enterprises and SMEs. Gupta said SMEs constitute 60 percent of the company’s business.

As a result the company has cut its gross merchandising value (GMV) target of Rs 19 crore in November, to Rs 16 crore.

Brijesh Agarwal, founder of another industrial goods marketplace, Tolexo, that deals only with SMEs said that his company has withdrawn the cash on delivery option until the cash crunch passes.

“We are seeing a withdrawal by businesses when it comes to buying online as manufacturing has also been impacted due to poor demand, which has led to a chain reaction, impacting everyone from suppliers to manufacturers to sellers,” he added.

The announcement to withdraw currency notes of Rs 500 and Rs 1,000, which accounted for nearly 86 percent in value of country’s currency in circulation, has taken the nation by surprise. Since the SME sector is primarily cash-driven, business has been severely impacted.

For Delhi-based trader Mohan Goyal, owner of Om Prakash Goyal and Sons, who sells industrial tools on Amazon, Snapdeal, Tolexo and Cloudtail among others, business has literally come to a halt ever since the government announced the surgical strike on black money.

Walk-in customer is zero and 90 percent of the online orders have also been wiped out since the demonetisation announcement as they were primarily cash on delivery orders.
Mohan Goyal, a trader told BloombergQuint in a telephonic conversation

He added that most shopkeepers have shuttered stores for a few days as the cost of staying open will likely be more than the earnings per day. Goyal himself has turned digital and installed card machines and downloaded a Paytm wallet to facilitate online payments and revive business.

Two Months To Recover

Wydr, a wholesale marketplace founded by Devesh Rai, a founding team member of ShopClues, expects business to remain subdued for another two months.

“In the wholesale business, sales are down 40-60 percent, since there is a decline in footfall by retailers. Till the time the money is blocked in banks things will not normalise,” he said.

Wydr is a marketplace for wholesale buying and selling. It connects retailers with brands and wholesalers.

Despite the odds, entrepreneurs and traders are hopeful that demonetisation will yield positive results in the long term by encouraging online payments and curbing unorganised trade.

“The drop in unorganised trade will give a fillip to this industry as a lot of unaccounted transactions take place in B2B business. This will benefit all online players,” said Industrybuying’s Gupta.

“It might be difficult for the time being, but it will curb tax evasion and will bring more transparency to the sector, which will benefit us in the long run,” adds Goyal, who has traditionally done a large chunk of his business in cash.