The government’s new currency policy following ban of Rs 1000/500 currency notes on Tuesday evening in a fight against the black money can be termed as ‘game changer’ for the economy in the long run. However, it has temporarily shaken the small and medium businesses across the country and undeniably hit the IT channel business, as much of their transactions happen through cash. While some smaller IT dealers and resellers are not accepting higher denomination currencies, in a number of cases customers are postposing purchase because they do not want to let go of their hard earned cash [the Rs 100 notes] during the time of crisis.
Considering the festive season is around the corner when sales is at its peak every year, let us look into some of the immediate impacts of government’s new currency policy on the IT channel.
Delayed purchase decision
According to the director of consumer and SMB division of a leading laptop brand told Channel Times that mostly laptop and other IT products purchase happen only through physical cash transaction with larger denominations. With the new withdrawal limits, it is very obvious the laptop purchases are getting hit. The hit is expected to be for the next 90 days [at least] after which financial flow may return to normal. Customers are likely to spend the money they have stocked in necessity purpose than purchasing an IT product.
Enterprise sales to be normal
Payment through cheque till now the most preferred mode of transaction in the Indian IT channel industry. With no restriction on the non-cash payments, the IT channel fraternity serving the enterprise segments is likely to remain normal.
Online sale to be sluggish
Most IT products are of high-value and [in most cases] the option of cash-on-delivery is a boon to the customers. A laptop worth INR 20 Thousand is likely to have easy access of twenty numbers of one thousand notes. After the new policies, people might refrain doing online purchase with cash-on-delivery option.
Services sector to suffer
The IT hardware services industry runs on physical cash. The services which are dependent of the after-warranty products are likely to hit. The segment depends on physical cash from small deployment to a complete-repair of the machines.
Distribution segment to impact
Even though the transaction within the channel industry runs mainly on Cheques and online payments, the end retailers got a mindset that the customers are not to invest on an IT product. Barring some small accessories and peripherals which are low-cost, the high-value products (example products worth more than INR 500) are not likely to be purchased from any distributors. This will impact the entire channel ecosystem from sub-distributors, to regional-distributors and national-distributors.