Cash on Delivery (CoD) Pros and Cons in eCommerce
Most of us into an eCommerce business and online shopping may be quite familiar with the term cash on delivery or COD. In simple terms, it is a mode of payment where the customer pays by cash/card directly to the courier person or vendor only after the product is delivered. This is considered to be one of the most popular ways of the transaction in online buying and selling.
Almost all nations where online businesses have flourished, COD has become a standard payment mode for shopping. Among them, some of the countries are India, Bangladesh, Thailand, and so on. So, what makes this mode of payment so accessible, and is it free from cons? Let us discuss this.
According to Nielsen’s Global Connected Commerce Survey (Business Insider), about 83% of consumers in India preferred using cash on delivery as a payment mode for online purchases. Cash on Delivery has been a preferred mode of payment across India due to many reasons. Firstly, tier-2 and tier-3 cities in India do not have the required awareness and infrastructure for making online payments. Secondly, most individuals do not have access to smartphones and bank accounts to resort to online banking.
Like all other modes of payments, it is evident that cash on delivery will also have some pros and cons. Having an idea of these will help you as a customer or seller in an online business. Let us first have a view of the advantages of cash on a delivery system that makes it a touch above the other modes of payments.
Advantages of Cash on Delivery (CoD)
Flexible payment options for the customer:
As a customer, one of the most significant benefits of COD is that you can pay only after you get the product in hand. In that way, there is no risk of loss of money. For example, if you pay online beforehand and the seller does not deliver, your hard-earned money gets stuck with the seller. There is no such risk involved when it comes to cash on delivery payments.
The customer can also check the product and see whether everything is perfect before paying for it. In case you find that the product is defective or a different outcome has been delivered, you can always return it without paying.
No dependency on payment cards
Another significant advantage of cash on delivery is that it does not depend on credit or debit cards. This factor is useful in suburban or rural areas where a lot of people do not use cards. The delivery comes, you check the product and pay, and the transaction is complete. It is convenient and straightforward.
No online payment frauds
Security can be maintained in case of cash on delivery. You do not have to divulge any financial information, such as debit card, credit card, or bank account details to the seller. This is one reason why lots of customers prefer CoD as the preferred mode of payment.
Disadvantages of Cash on Delivery (CoD)
More than the customers, cash on delivery is essential for the sellers to some extent in an online business. As a result, you need to offer this service to the customers judiciously.
Vulnerable to Losses
One of the challenges with cash on delivery is that it makes the seller vulnerable to losses when the customer returns the product without paying for it. You spend all the money to deliver the product, but ultimately it got replaced. This adds to your revenue loss.
There has been a precedence of fraudulent activities in case of cash on delivery. As there is no authenticity of the available customer information, the chances of frauds become more.
Courier companies charge you an amount when you opt for the cash on delivery payment option. Since shifting these costs to your customers can be tricky, most sellers soon feel the burden of these costs.
To reduce the disadvantages and risks involved in COD, sellers should try to adopt some measures. For example, lots of sellers nowadays charge some extra delivery costs in case of the COD option. Moreover, sellers should obtain necessary customer information, such as contact details, even if they are selling through cash on delivery. This way, the chances of losses and frauds can be minimized to a great extent.