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Pros and Cons of COD(Cash on Delivery) for Ecommerce Businesses

By | Apr 11, 2019 |0 Comments

Even with multiple payment options for online shopping, COD i.e. cash on delivery is still one of the most popular modes of payment among Indian online shoppers. Its popularity has made it important for the leading eCommerce courier services to incorporate full support for COD cycle in their offerings.

Why do you think it is so popular? One of the main reasons for this popularity is that the buyer does not have to pay anything before the product is delivered. This provides confidence to buyers, especially new buyers. Since ecommerce in India is still in its nascent stages, there are a lot of shoppers who are still new to online shopping and are apprehensive about making payments online.

That is why, for a successful online business in India, it is almost imperative to offer cash on delivery as a payment option to your customers. Likewise, for a successful COD cycle implementation, it is necessary to rely on a logistics partner that offers COD support for your ecommerce shipping in India. As one of India’s leading logistics aggregator platform, ShipKaro offers you COD cycle support for all your orders. Moreover, with integrated shipping partnerships with several courier services, the platform also offers price comparison among multiple shippers. This way, you can avail the most cost-effective shipping option for all your orders. Moreover, with multiple shippers, you can also get a wider delivery coverage that will help you to expand your customer base.

Like every other mode of payment, cash on delivery also has some pros and cons. If you are an online seller with ecommerce shipping in India, you should be well-informed of these pros and cons and get an idea about the advantages and disadvantages of using cash on delivery for your ecommerce business. To help you out, here is a list of the pros and cons of using cash on delivery as a mode of payment.

Pros of Cash on Delivery (COD) payment mode

  • Attracts wider customer base: As mentioned before, for the customers, one of the biggest advantages of COD is that they can pay for a product only after an ecommerce courier service delivers it to them. This has made COD an immensely popular payment mode among Indian online shoppers. In order to exploit this wider customer base, it is important to offer COD payment mode for all your orders.
  • Builds customer trust: Since with COD payment mode the customers do not have to pay for their products in advance, there is no risk of loss of their money. This increases the trust that the customer has with your brand. Moreover, the customer can personally check the product and ensure that everything is exactly the way it was expected before making the payment. In case the ecommerce courier service delivers a different product or a defective product, the customer can easily return it without making the payment.
  • No dependency on electronic payment: Another major advantage for customers on using cash on delivery payment mode is that it does not make you dependent on debit cards and credit cards. This is an advantage for customers from suburban and rural regions where a lot of people do not use these cards. In these places, most customers prefer simple transaction processes - receive the product, check the product and then make the payment. With a leading company like ShipKaro handling your ecommerce shipping in India, you can easily reach out to customers in rural areas with wider coverage area and COD cycle support.
  • Security of sensitive data: With cash on delivery payment mode, security can be maintained well. You need not disclose any sensitive financial information, such as credit card, debit card or bank account details to the seller. This is again one of the primary reasons why most online shoppers in India prefer cash on delivery as their preferred mode of payment for their online shopping.

Cons of Cash on Delivery (COD) mode of payment

  • Loss when the product is returned: As a seller you spend a lot of money on your ecommerce courier service. That is why when a customer opts for COD payment mode and returns the product without paying for it, the seller becomes vulnerable to heavy losses. This is one of the main reasons why many sellers become reluctant to offer cash on delivery option as a mode of payment.
  • Customer Fraud: There has been a history of fraudulent activities associated with cash on delivery. Since there is no authenticity regarding the information available, the chances of frauds are relatively higher. This factor makes a lot of sellers uncertain about COD payment for their ecommerce shipping in India.
  • Time-consuming: Due to cash handling, COD payment mode adds an extra layer to the supply chain process. This extra process can increase the settlement period between courier companies and online retailers - even up to three weeks. This consequently increases the cash collection cycle for retailers.
  • Costly: Apart from the losses from the returns, for online sellers, COD entails additional logistics surcharges per delivery. Additionally, they also have to make payments to their ecommerce courier service for cash-handling costs and insurances.

While these risks and disadvantages involved in COD payment mode do exist, there are a few preventive measures that can be taken by the sellers in order to reduce them. For instance, as a seller, you can charge extra for cash on delivery payment option and mitigate the losses. Similarly, ensure that you obtain necessary customer information like multiple contact details before making the sale. This way, the chances of frauds and losses can be reduced to a very large extent. Another effective method is to confirm the purchase before assigning the shipment to an ecommerce courier service. This can be done either through a phone call or a confirmation email. However, this may not be a viable option if you have a large number of orders in a short period of time. If you are mainly concerned about the losses you may incur when your products are returned, you may also add a ‘no returns for COD payment option’ in your returns policy. This will again ensure that you do not lose money for your returns.

In conclusion, the advantages of cash on delivery payment mode far outweigh their disadvantages. With ShipKaro as your partner for ecommerce shipping in India, you can offer COD payment mode for all your orders and never lose a potential customer. This will not only attract new customers but help you in gaining their trust. Moreover, ShipKaro logistics aggregator offers the services of multiple shipping partners for you to compare and make an informed, convenient decision with all your orders – saving you time and money. Consequently, ShipKaro makes cash on delivery a beneficial decision for you and your customer alike.

With the increasing popularity of multiple mobile payments and e-wallets, what the future holds for COD is yet to be seen. What are your thoughts on the same? Let us know in the comments below!


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