Companies

Cash or card? e-tailers yet to decide which is better

Anjana Chandramouly Anjali Prayag Bangalore | Updated on May 18, 2012 Published on May 18, 2012

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Cash or card? India's nascent e-commerce retailers are yet to decide the best transaction mode for their products.

Credit card payments entail a 2-2.5 per cent fee to the card-issuing bank, acquiring bank and the payment gateway company. On the flip side, cash on delivery means the retailer faces the risk of return of the product while the courier companies charge cash-handling charges which amount to 2-4 per cent of the transaction value.

High payment gateway fees and customer acquisition costs are the biggest challenges for e-commerce companies today, says Mr Sanjay Bhasin, President, Goibibo.com, a travel portal. Currently, customer acquisition costs even go up to Rs 1,000 for a transaction, “but we hope it will come down with better Internet penetration”, he adds.

Internet penetration in the country is at 8 per cent currently and, according to him, e-commerce companies can make profits only when it reaches about 25 per cent. “We are also in talks with payment gateways for reduction in fees,” says Mr Bhasin.

‘Still beneficial'

About 95 per cent of transactions on Indiaplaza.com are through card payment. “Although this means we have to pay transaction charges to three parties — acquiring bank, issuing bank and the payment gateway company, it's still beneficial because it's a committed order,” says Mr K. Vaitheeswaran, CEO of Indiaplaza.com, one of the first Indian e-tailing firms to hit the Internet.

In fact, he says Indiaplaza.com treats the 2 per cent transaction fee given to banks as the cost of doing business. “But we can be rest assured that the cash has already been deposited in our bank,” says Mr Vaitheeswaran.

Mr Manoj Kumar, co-founder, edabba.com, points out that cash on delivery is not any cheaper than card transaction as it entails 2-4 per cent cash collection charges to the courier company. “They also take about 45 days to deliver cash to us. Apart from the risk of higher rate of return of products by shoppers,” he says.

Not sustainable

According to Mr Ravi Sundaram, Group Head, Strategy and Corporate Services, ElectraCard Services, the current portfolio of transactions of e-commerce portals is viable for now, but not sustainable.

“It's important to concentrate on enabling merchants to sell higher-value goods on the Net, because that's where the future lies,” he adds.

anju@thehindu.co.in



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Published on May 18, 2012
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