Cash on delivery is one of the most common and popular forms of payment for purchases made online. The payment method allows the buyers to pay after they receive the product. Several pieces of research suggest that customers feel comfortable and confident about their purchase when they have to pay after seeing their product. Therefore, the COD model increases the probability of sales for online sellers as well. Let’s look at the key reasons to offer COD payments in all the countries where online selling businesses have flourished.
While most online shopping platforms offer digital payment methods, they have also kept the COD payment option to cater to customers who prefer it over prepaid payments. There are many factors why some people still choose COD over prepaid payments, some of which are listed below.
- No access to digital payment methods
- Lack of trust in online platforms
- Fear of receiving poor product quality
How Does COD Work For eCommerce Sellers?
- A buyer places an order on an eCommerce website and requests for delivery at the provided address. The customer doesn’t make payment online and opts for the ‘pay on delivery’ payment method.
- In many cases, online marketplaces like Amazon and eCommerce platforms contact the buyer to confirm the COD order.
- The seller prepares an invoice and attaches it to the package.
- A delivery guy picks up the shipment from the supplier or seller to deliver it to the customer’s doorstep.
- The customer makes payment in cash upon receiving the product. The customer may also be able to pay via credit card or debit card in case the facility is provided by the courier partner and the delivery person is carrying a card-swiping machine.
- The COD amount is deposited into the logistics partner’s account.
- After the amount is collected, the delivery person deposits it in the office. Thereafter, the logistics company settles the COD amount by transferring it to the seller after deducting the handling charges. This is how the COD amount reaches a seller who sells products online.
Advantages of Cash on Delivery
Flexible payment options for customers: Customers generally don’t wish to risk their money while purchasing products online, especially while buying something from a newly launched website. With the COD payment option, you don’t just give customers a reason to trust your platform but also increase the chances of sales.
No reliance on payment cards: This is another significant benefit of offering the cash-on-delivery payment method. COD is especially useful in rural areas where most people do not use cards. You deliver the package; the customer checks the product and pays the price.
No online frauds: Security can be maintained better via cash on delivery payments. Buyers may not be comfortable paying via cards and net banking due to the frauds that take place during online transactions. Therefore, you can assure your customers of more security with the COD option.
Disadvantages of Cash on Delivery
Vulnerability to losses: One of the biggest challenges with COD payments is that it makes the seller vulnerable to financial loss when the customer refuses to accept the order and returns it without paying. Such cases of RTO greatly affect your revenue as you have to pay for the return shipping charges as well. As there is no authenticity available about the customer, the COD option may give rise to fraudulent orders and ultimately increase your RTO percentage. Besides the fact that this issue will always be there for COD deliveries, there is one way to overcome it. You should partner with NimbusPost, a tech-enabled shipping aggregator that gives you the auto cloud-calling feature for COD orders. Using this feature, you get to confirm all the COD orders via IVR and segregate spam orders from real ones easily. Once you have the list of real orders, you can start processing the shipping of products to only those customers who’ve confirmed it.
Additional costs: Some courier companies may charge you an amount when you choose the COD payment option. While you may want to shift these charges to your customers, it might not be a good decision business-wise.
Post weighing the pros and cons of offering the COD option, you can take the pick that suits your business the best. When it comes to the popularity of the COD payment mode in India, the key reason is the growing number of young customers who don’t keep cards.
Usually, eCommerce sellers hire third-party logistics partners to manage the shipments. NimbusPost is a shipping aggregator that offers the COD payment facility along with digital payment methods. As you get to choose a courier partner from 27+ options, you can successfully deliver across 29000+ pin codes and increase your business reach. Moreover, NimbusPost also offers early COD remittance to help the sellers overcome COD remittance challenges.