Tier 2 & 3 players grapple with new realities of a demonetised economy

Prime Minister Narendra Modi’s demonetisation drive has changed the transaction scenario in the country. The drive to curb corruption and flow of black money in India, has also led to a situation of cash crunch, delay in payments, a hold on new deals. 

In our earlier report on demonetisation (Ad & digital leaders show how to decipher the demonetisation realities https://www.adgully.com/ad-digital-leaders-show-how-to-decipher-the-demonetisation-realities-69858.html), Adgully has spoken to industry leaders in the metros to gauge the market realities of doing business in a demonetised landscape and the implications over long and short term. 

For this report, Adgully reached out to players operating in the Tier 2 and 3 markets to find out how they have been impacted by the demonetisation drive and what steps they have taken to deal with the fallout of the drive. 

As explained by Sanjay Arora, Managing Partner, Shells Advertising Inc, Nagpur, “'Like for everyone else, the media houses, too, have had a huge negative impact, not because they function in a cash economy, but because their advertisers to a large extent have been impacted. Liquidity being severely constrained, the consumer is in cash-conservation mode and not spending on anything but the essentials. Demand having vanished, the local retailer doesn’t see any reason for advertising. Everyone’s waiting for the liquidity situation to improve, which, according to various estimates, can take anywhere from 3 to 6 months. Once that happens, maybe we shall again see a gradual normalidation of business for the media houses too.” 

Rohit Bindal, Director, Purple Focus Event, Indore, added here, “These markets are majorly ruled by regional/ local players who prefer to deal in cash and refrain of using any online ways/ means. The major reason of slowdown, which is of course a periodic phenomenon, in these markets will be the acceptance of cashless transactions and education towards the same is less, and business needs some time to get used to it and thus direct impact on overall business dynamics.” 

Bindal further said, “'While online transactions help make the transactions smooth, at the same time it will take away a lot of hassles. Maybe initially it will take some time to understand the whole process, but agencies are ready for such a welcome change. Even in the case of compliance with Service Tax and other taxes, agencies always prefer to work cashless to avoid lots of taxation worries. So this changeover will not be a big issue to them. Also, in the last few years the awareness about cashless business transactions has been on the rise and people prefer doing B2B transactions cashless for ease of doing business.” 

Sharing her personal experience, Radhika Akolkar, Vice President, Xebec Communications, Pune, said that the long term and short term impact of demonetisation drive was that “'people will be more careful and vigilant to begin with. They will think twice before initiating a ‘black’ transaction. In the short term, the economy and cash spending is sure to get affected. I, myself, have cut down my cash transactions by 95 per cent. Only buying essentials with cash. In fact, I was pleasantly surprised to have my dhobi say that he would accept a cheque and so did my grocer (kirana wala). The vegetable and fruit vendor and the bakery I visited this morning had a Paytm number. This will slowly result in more online/ digital transactions, which can be tracked/ accounted for, therefore, ‘white’ transaction, even in smaller towns. In fact, more in smaller towns. We, too, will get used to it and life will go on. People resist or are shaken up when they are disturbed or removed from their comfort zone. We were all comfortable doing business the way we were, hoarding money, spending cash, taking bribes, etc…. now all of a sudden, we have been shaken out of our comfort zone, so we are hating it…. Earlier, we could withdraw cash whenever we wanted, but now we must time it with availability of cash at the bank or a particular ATM.” 

Detailed conversations with Sanjay Arora, Radhika Akolkar and Rohit Bindal... 

Sanjay Arora, Managing Partner, Shells Advertising Inc 

What, according to you, are the short term and long term impact of demonetisation on the way business & transactions are conducted in Tier 2 and 3 markets?
The sucking away of over 86 per cent of liquidity from the system is very severely impacting all trades everywhere, be it the metros or hinterland. The short-term scenario is bleak; we surely will see the third & fourth quarter performances going southwards negatively impacting the GDP figures for the current financial year. I am no economist but common sense tells me logically this shall impact both direct & indirect tax mop-up for the government. The cash deposits coming into the banks would ease their positions and if sensible lending happens there just may be a bit of a silver lining to this otherwise dark cloud. 

In the long term, this move isn’t in anyway going to dent corruption, unless more reforms are carried out and the founts of corruption, viz. political funding, etc., are tackled along with a strike at bulk storehouses of black economy such as off-shore tax havens, etc., the situation isn’t likely to improve and we will be where we have always been. 

What steps has your organisation/ agency taken to face the challenges posed by demonetisation?
We are darned lucky that the sector that we operate in has virtually zero black money. Even a classified advertisement worth a few 100 rupees released in a newspaper has to be accounted for so at the macro level it doesn’t make any difference to us. The other issue about the business slowing down in the short-term would need to be tackled by becoming more aggressive, agile and cutting costs that don’t impact us in the long run. 

Getting used to cashless/ online business transactions - how ready are agencies/ organisations in Tier 2 and 3 towns?
Advertising agencies, be it in Tier 2 or 3 cities or the metros, have almost always had cashless economy. I say almost, because here too most often the only time cash component comes into play is when managing political advertising. Hence, agencies have always been geared to function extremely well in a cashless scenario. In fact, I’d go a step further and say that for me on a personal front operating with cash is hugely inconvenient and an impediment to the agency functioning and I avoid it like plague. 

Radhika Akolkar, Vice President Xebec Communications, Pune 

How is the demonetisation drive impacting the working of agencies and media houses in smaller towns and cities?
As far as my knowledge goes, only personal advertisers transact in cash. Also, maybe retail outlets. Media houses maybe well connected to get the currency changed. But by and large all transactions are cheque based. Yes, if it is a political party advertising, then there is a big question mark. My friends in smaller towns don’t seem to be affected that much when it comes to business. 

What steps has your organisation/ agency taken to face the challenges posed by demonetisation?
Well, to begin with, we asked all our support staff if they needed any special assistance. We also allocated a time and designated a person to go to the bank daily for exchanging notes, depositing notes and withdrawing cash. So all those who want to avail of these services don't have to go and spend time. The office helps them and they are more productive. 

Getting used to cashless/ online business transactions - how ready are agencies/ organisations in Tier 2 and 3 towns?
Absolutely ready! I think we all are – Tier 1, 2 or 3 or even rural India. While some may be truly facing difficulties, but most are positive, hopeful and cooperative. I recently visited Karad and the interiors of the Taluka and was surprised to see even the marginal farmer, happily accepting this and going on with life. Not resisting and kicking and screaming. 

Rohit Bindal, Director, Purple Focus P. L. & Fusion Events P. L. 

How is the demonetisation drive impacting the working of agencies and media houses in smaller towns and cities?
Coming straight to the point, Tier 2-3 clients are more local/ regional in nature and thus, the impact will be slightly more when it comes to taking out money for promotion of businesses and thus, the agencies/ media houses needs to work towards more hyper localisation/ location specific solutions to the clients. The demand will be more precise and so are the solutions needed to address it should be. Media houses also need to look at solutions which are more pocket-friendly may be split runs or news-based activations. The local/ regional media houses will be more preferred due to more local connect. The activations business will go high with target to niche markets and desired TA. Demonetisation will give a big boost to online marketing business as people of these new markets will add up digitally and thus reaching to them through digital medium will be a new addition in the kitty thus online agencies will get boost in these markets. 

What, according to you, are the short term and long term impact of demonetisation on the way business & transactions are conducted in Tier 2 and 3 markets?
The Tier 2-3 markets more dependent on immediate market conditions and that’s where the short-term concern is. These markets are majorly ruled by regional/ local players who prefer to deal in cash and refrain of using any online ways and means. The major reason of slowdown, which is of course a periodic phenomenon, in these markets will be the acceptance of cashless transactions and education towards the same is less, and business needs some time to get used to it and thus direct impact on overall business dynamics. Be it businesses or customers, they both needs time to get educated towards cashless transaction processes. While if we look at long term impact, it’s a positive sign as they will be in main lead once they join the drive and they will get to know newer mediums and ways of doing businesses and also this will ease the transaction processes and thus they will be able to concentrate more on growing business and making it bigger. The time required towards banking will go down and thus more time for real business. 

What steps has your organisation/ agency taken to face the challenges posed by demonetisation?
We anyways work more closely with clients’ requirements and provide smallest of solutions too to boost their business and also educating them on how to move in such situations in markets in least possible resources. At the same time, we are ready to give more digital solutions to Tier 2 & 3 clients so that they can get higher impact at small investment. At the same time, these clients need to be educated on use of AV medium, which plays an important role nowadays with the regional/ local electronic media options availability. 

Getting used to cashless/ online business transactions - how ready are agencies/ organisations in Tier 2 and 3 towns?
Any new process or system will always have initial resistance and hiccups, but once it is mandated that everyone needs to follow it and that it is for the betterment/ streamlining of overall business processes, then it is followed. While online transactions help to make transactions smooth at the same time it will take lots of hassles away, so may be initially it will take some time to understand the whole process but agencies are ready for such a welcome change. Even with the compliance of Service Tax and other taxes, agencies always prefer to work cashless to avoid lots of taxation worries. So this changeover will not be a big issue to them. Also, in the last few years the awareness towards cashless business transactions goes high and people prefer doing B2B transactions cashless for ease of business.