The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization

Chaithanya  Bandi; Antonio  Moreno; Donald  Ngwe; Zhiji  Xu

Working Paper | HBS Working Paper Series | 2019

The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization

by Chaithanya Bandi, Antonio Moreno, Donald Ngwe and Zhiji Xu

Abstract

The Indian banknote demonetization in 2016 was one of the most significant international events of that year. Overnight, 86% of Indian currency in circulation was declared invalid unless exchanged for new bills. The sudden and unexpected demonetization constituted a large shock to the entire Indian economy. One effect of the ensuing cash shortage was a large and sustained increase in the adoption and usage of digital payments. We use detailed sales data consisting of more than two and a half million transactions from a leading Indian online retailer to empirically investigate the effects of payment digitization on the online retail industry. We take advantage of the demonetization as a source of exogenous variation that induced a subset of consumers to switch to digital payments from more commonly used cash-on-delivery payments. We show that consumers who switch to digital payments maintain their purchase frequency but spend more and are less likely to return their purchases. Our findings show that firms in emerging markets may enjoy gains from consumer demand in addition to operational gains resulting from payment digitization.

Keywords: cash on delivery; online retail; product returns; payment methods; digitization; Emerging Markets; Currency; Online Technology; Demand and Consumers; Retail Industry; India;

Language: English

Format: Print

31 pages

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Citation:

Bandi, Chaithanya, Antonio Moreno, Donald Ngwe, and Zhiji Xu. "The Effect of Payment Choices on Online Retail: Evidence from the 2016 Indian Demonetization." Harvard Business School Working Paper, No. 19-123, June 2019.

Case | HBS Case Collection | March 2019

HOPI: Turkey's Shopping Companion

Sunil Gupta, Donald Ngwe and Gamze Yucaoglu

The case opens in 2017 as Onur Erbay, CEO of HOPI, a multi-vendor loyalty platform, is contemplating a critical decision. The case chronicles the origins of Boyner Group, the parent company of HOPI and a major retailer in Turkey, and development of retail and customer relationship management (CRM) in Turkey over the years. Before HOPI, Boyner Group retailers were unable to trace customers across the Group’s brands or form insights about customers’ preferences and habits beyond what brand-specific CRM and loyalty programs provided data for. HOPI was born as the management team at Boyner Group realized the need to serve the customer holistically; the program was designed as a coalition loyalty program including non-Boyner retailer partners. The case provides a detailed overview of the design choices for HOPI—a mobile only app with its own currency, paracik, its revenue model, user experience, and how the company planned to leverage big data to segment the customers for retailers and increase purchasing power for customers. Since its launch in 2015, HOPI had 5.5 million downloads and 300 thousand daily active users browsing campaigns offered by over 116 coalition retailers that ranged from gas stations and cinemas to supermarkets and department stores. In 2017, Erbay, who had ambitions to grow HOPI beyond a loyalty program, was faced with harsh realities: the Turkish market was very price sensitive, several competitors had emerged since HOPI’s launch, and several retailers and consumers preferred discounts at the time of purchase instead of earning loyalty points for future purchases. Erbay was also facing pressure from the parent company to make HOPI profitable. Was it time for HOPI to pivot to the discount model and abandon its original concept? HOPI has provided a supplementary data set to allow for a more in-depth analysis of the program's impact on customer behavior and retailer profits. The data covers four years, two years prior to HOPI’s start and two years after, for two retailers in the coalition loyalty program. The data set includes all customers and transactions at each of the retailers, the final price paid by each customer, and whether the HOPI app was used as part of the transaction. In all, the data contains approximately 2.7 million transactions for 578,078 unique customers.

Keywords: Loyalty programs; multi-vendor platform; retail; big data; Customer Relationship Management; Mobile Technology; Business Model; Data and Data Sets; Competitive Strategy; Decision Making; Technology Industry; Retail Industry; Turkey;

Citation:

Gupta, Sunil, Donald Ngwe, and Gamze Yucaoglu. "HOPI: Turkey's Shopping Companion." Harvard Business School Case 519-057, March 2019. View Details

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