Does cash on delivery (COD) really increase sales?

Technology

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Despite the existence of the concept of digital India, the nation is still a predominant cash-based country. Standing in 2019, the major population still believes in paying through cash, rather than debit or credit card. Over the years, the technology has advanced itself and eased out people’s lives in a lot of ways. The flourish of e-commerce has brought the whole economy at the tip of fingers. But everything has its drawback. Various issues have negatively impacted the concept and have lowered down its trend among people. One of the main reason being the logistics. Various mismanagement in logistics operations has led to different issues and has resulted in the wrong or defective product delivery. Gradually the population who were slowly making them used to digital payment modes, switched back to the option of cash on delivery just to stay assured that the money won’t go to waste.

As per the reserve bank of India, only 1% of the total population uses a credit card for online payments. In such an economy, cash on delivery acts as a brownie point for both the customers and the retailers.

What is Cash on Delivery?

The cash on delivery is a mode of payment that lets you pay for your online bought product after you receive it in hand. The option has existed for a long period of time but became popular once people started realizing that this is a safe option when it comes to online shopping. There are a lot of reasons why people prefer this mode of payment. Some primary reasons are given below.

No card details required

People are often skeptical and develop trust issues for giving out money before getting the product in hand. Or probably, they are making an online purchase for the first time and they are worried about security. So when the option of cash on delivery came to the market, people were truly delighted as this became a trustworthy form of payment. The use of credit and debit cards are often pervasive, and hence this mode of payment is preferred for placing orders in different retailer’s website.

It increases reliability

Being able to pay, after you have physically seen the product is one of the most intriguing factors of this payment mode. You don’t have to stay worried about getting wrong or defective product after you have made the payment.

Reduced chances of online fraud

With the internet being a vast area, there are a lot of things that can go wrong. A lot of fraud companies often makes scam deals. You place an order, pay for it and your product never arrives. There is no way of tracking it either. In such a scenario, cash on delivery option acts as a savior. With this, you will pay ONLY after you have received the product.

Benefits for the retailers

The cash on delivery not only holds benefits for the customers, but it also helps the retailers in a lot of ways. Some of the major benefits of Cash on delivery for the retailers are given below.

Helps them to reach a wider base

Making the option of cash on delivery available for people helps the customers reach a wider base, and makes more people want to go for online shopping. Customers like students, housewives, etc, who are most likely to not own a credit or debit card, prefer the option for cash on delivery to buy anything from online.

Helps the retailers to establish their presence in the competition

All the e-commerce giants have the option of cash on delivery. Going for this option allows a lot of small business to establish their presence and helps them be seen among the cluster of similar businesses.

It simplifies the business process

For a customer, satisfaction is the first priority. Keeping the cash on delivery option available for the customers reduces the refund requests as there is no payment in the first place. This reduces confusion and simplifies the business process for all the retailers.

Certain disadvantages of Cash on Delivery

Even though this option generates trust among the customers, but extra charges on COD transaction for logistics are a serious issue that the sellers are complaining about. There are a lot of complexities involves and the COD causes additional cost for the retailers. Various logistics charges almost above forty bucks for cash on delivery which is not added to the product cost. So here is why e-commerce economy to fail to grow if cash on delivery keeps on increasing every day.

Delay in payments due to failed delivery

It might often happen that the customers’ aren’t home, and the logistics guy need to make multiple trips to the customer’s house to complete the product delivery. This delays the payment and the client’s business gradually starts facing loss.

Requires extra manpower

Various studies have shown that prepaid items are delivered faster as compared to the postpaid products. On an average, the industry average days for successful product delivery is 1.24. This means, almost 24% extra manpower is required for delivering a product with cash on delivery option. This not only increases the logistics cost, but also the retailer’s cost since they are ones, who are paying to these logistics.

Facing loss at times

It has been observed that Indian’s purchases items that are devoid of shipping charges. This is a major drawback since the whole payments will have to be taken care of by the retailers otherwise. So this option is not sustainable in the long term, especially for the e-commerce business owners.

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