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The Impact of Demonetization on Indian Retail

The Narendra Modi led Government's tactical move to demonetize the currency notes of the value of 500 and 1000 was made with the intention of eradicating corruption and exposing the black money holders in the country. Although the move might signify a healthy establishment for the country in the future, one can't help but admit the immediate impact or the consequences it has had on various sectors within the country. The Retail Sector certainly being one of them.

demonetisation in retail


The Immediate effect on Retail and its' customers


Offline Retail: Given the high propensity of Indians to deal in cash, the immediate aftermath of PM Modi's demonetization announcement has caused considerable inconvenience among retailers and their customers. Small traders and vendors have been affected the most as they are facing a huge slump in sale. Many of these small retailers are not equipped enough to make provisions of digital payments for their customers , and for this reason are having to go through a lot of hardships. Organized, large retailers and malls too are facing a drop in sales and decreasing amount of store footfalls, but in the long run can expect normalcy to be restored as customers increasingly adopt to making payments digitally.


Online Retail: Online Retail sales has also taken a beating in the month of November, immediately after the demonetization announcement. According to the data from, the monthly gross sales (November) is expected to take a 50% hit in comparison to the month of October. During the 8th-13th November week, the cash on delivery (CoD) volumes were down by 60% than usual. Flipkart claims that they experenced a dip in sales by 25-30% after the announcement. Generally, the leading e-commerce companies register returns of about 13-15%, but has doubled up ever since demonetization took effect, with most cancellations arising out of cash on delivery orders due to the growing reluctance of customers to give out cash.


Offline Retailers focusing on maintaining 'Store Traffic'


Whether it's small traders or large retailers, the biggest inconvenience that retailers are having to face is the diminishing level of conversions due to the fall in store traffic. Small traders are being ignored by the customers as they don't have the provision of accepting debit/credit card or digital payments. For instance, according to, in Mumbai alone, around 40% of retailers in the metropolitan region don't have the card-swipe machines and as a result, are having a tough time in maintaining store traffic. Around 20,000 people have already applied for the machines in order to restore control over their customers.


Giant Retailer, Big Bazaar & FBB stores now allow customers to withdraw upto Rs 2000 from their bank accounts with the use of debit cards. They have collaborated with State Bank of India and as a result are enabling this facility through the bank's cash at POS machines in 258 of their stores located across 115 cities and towns. A similar example can be provided of V-Mart, one of the most renowned chain of family fashion stores in India. V-Mart is enabling Smart ATMs in 136 stores across 116 cities, which will enable people to withdraw upto Rs 2000 with their Debit cards. Apart from trying to provide convenience for people by providing them with an alternative to standing in long queues in banks and ATMs, it can be called a strategic move on the part of these retailers to maximise store traffic and score conversions.


Mobile Wallets & Digital Payment Services – 'Stepping Stones to a Cashless Retail'


There is no doubt about the fact that retailers have looked to adopt alternative provisions of payment methods for their customers ever since the demonetization announcement. Apart from ordering for card-swipe machines, retailers are exhibiting a huge tendency of resorting to mobile wallets and digital payment services for the purpose of receiving payments. Customers too are adopting these services to make payments due to the liquidity crunch.


Let's us have a look at some telling statistics


  • A year before demonetization took effect, the mobile wallet user base in India had already surpassed the total number of credit cards. According to data by RBI, there were already 135 million mobile wallet users in India in comparison to 22 million credit cards by November 2015.


  • Paytm, the country's renowned mobile payment platform experienced an overwhelming increase of 435% increase in overall traffic as millions of people resorted to the Paytm wallets to make payments immediately after the demonetization announcement. They experienced a 200% hike in number of app downloads and 400% growth in transaction value of offline payments.

The numbers above makes it quite evident that customers are willing to make payments digitally. Mobile wallet companies like Paytm. Mobikwik, Freecharge, Oxigen, etc have established quite a huge market share over the course of the last twelve months. The increase of demand of digital payment systems and digital wallets post demonetization, shows how the Indian economy can last without it being completely cash intensive when left with limited options.


Various brands are not only supporting PM Modi's vision of a Digital India, but also devising mechanisms to help contribute in achieving the same. For instance, Vodafone recently introduced a unique cash out facility where over 8.4 million of their M-Pesa customers could withdraw cash from over 1,20,000 M-Pesa outlets by using their digital wallet. What's unique is that the M-Pesa digital wallet can be digitally loaded via credit/debit cards or even net banking. 56% of these outlets have been located in Rural India. As a result, it will only be a matter of time before rural people pick up the way digital wallets function.


Amidst the ongoing frenzy in the quest for cash, we along with our retailers have resorted to a cashless way of life and to our honest admission, the transition might have been unexpectedly seamless for many of us. The Retail Sector has taken an initial beating but is definitely hoping for a swift resurgence with the growing flexibility shown by their customers in making digital payments. The transition for big retailers to adopt the digital path is not going to take much. The problem lies with the small retailers. But, we also have been surprised at the keen adoption of digital payment by a handful of local fast-food vendors in almost every city in the country. Small Retailers can definitely take a leaf out of their book.


A lot has changed in the Retail Sector ever since demonetization was announced. Despite hardships, the transition to digital till now has been nothing short of overwhelming. Only time will tell whether the Indian economy will ever lose its' propensity to deal in cash or whether the digital realm will take over and completely change the face of Indian Retail.

About Abhishek Mitra

Content is King and Abhishek Mitra firmly lives by it. He is highly committed & passionate in what he does and it's evident through the content that he produces. An MBA Graduate in Media & Entertainment from Whistling Woods International (Mumbai), Abhishek has acquired expertise on developing content pertaining to various verticals overtime due to the sheer knack for it. Apart from being an inspirational scriptwriter in his teenage days, he has worked as an academic research writer in the past. Presently, he handles the content for Tickto.

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