Category Name - Ecommerce Trends  

The Advantages and Disadvantages of Cash on Delivery (COD) in E-Commerce

Every individual linked to e-Commerce business and online shopping in one way or the other would be familiar with the term Cash on Delivery or COD.

Every individual linked to e-Commerce business and online shopping in one way or the other would be familiar with the term Cash on Delivery or COD. It is basically the mode of payment, in which the customer opts to pay by cash or card directly to the delivery person/ vendor when the products are delivered. In recent times, Cash on Delivery (COD) has become the most widely used and popular method of transaction in online buying and selling.

All parts of the world with booming online/ e-Commerce businesses are now using Cash on Delivery (COD) as a standard mode of payment; and the same is adopted by the e-Commerce Shipping Providers in India, Bangladesh, and Thailand as well.

The increasing fame and use of Cash on Delivery (COD) raises the question- why is this mode of payment sought after? What are its pros and cons? The following paragraphs would provide detailed answers to these questions:

Advantages and Disadvantages of Cash on Delivery (COD)

Around 83% of the Indian customers prefer using Cash on Delivery (COD) as a mode of payment in online purchases- according to Neilsen’s Global Connected Commerce Survey (Business Insider). There are several reasons behind the increasing popularity of Cash on Delivery (COD) in India:

  1. A large number of tier-2 and tier-3 cities in India lack the awareness and infrastructure required to make online payments.
  2. A huge part of the population does not have access to smartphones and bank accounts and is thus unable to use online banking options.

However, like all the other modes of payment, Cash on Delivery (COD) comes with some advantages as well as disadvantages. Getting enlightened with these aspects would assist you in online/ e-Commerce business in both ways- as a buyer and as a seller. Let’s start with the pros of Cash on Delivery (COD), highlighting the characteristics that make it more popular as compared to the other modes of payment:

Advantages of Cash on Delivery (COD)

Safe and Flexible Payment Option for the Customer

Cash on Delivery (COD) allows the customer to make the payment after receiving the product in hand- which is the most substantial advantage of this mode of payment. In other words, with Cash on Delivery (COD), there is no risk of losing money. In addition, it avoids a number of unfavorable instances that might occur if you make online payment beforehand- for example, what if the seller does not deliver? You have already made an online payment, and your hard-earned money is now stuck with the e-Commerce Business owner. Cash on Delivery (COD) payments eliminate all such risks- making it the most secure method especially for customers.

Moreover, it also allows the customer to check if the product is perfect or not, before making the payment. It leaves the option of returning the product open for the customer, in case the product has defected, or some other article has been mistakenly delivered.

Cash only, Stop sign. No debit or credit card. Money sign. Vector stock illustration

Eliminates the need for Payment Cards

Cash on Delivery (COD) does not require credit or debit cards at all- eliminating the requirement entirely. For the customers residing in rural or suburban areas, this aspect is specifically useful; as a number of them do not have payment cards, and rely only on cash. The process of Cash on Delivery (COD) is simple and straightforward- the products are delivered; you check them and make the payment to complete the transaction- that’s it.

Prevention from Payment Frauds 

Cash on Delivery (COD) is a safe and secure mode of payment, that avoids frauds of any kind. The buyers are not required to disclose any kind of financial information- like debit card, credit card, or bank account details to the e-Commerce Business owners. This is yet another reason why Cash on Delivery (COD) is the most preferred mode of payment, especially among buyers.

Disadvantages of Cash on Delivery (CoD)

Cash on Delivery (CoD) is not only essential for the customers, in fact, but it also holds even more significance for the sellers, especially in an online business. Thus, both the customers as well as the e-Commerce Business owners are inclined to use this mode of payment in recent times.

Open to Loss

The first and foremost disadvantage of Cash on Delivery (CoD) is: it makes the seller vulnerable to losses- whenever a product is returned by the customer, without paying for it. The e-Commerce Business owner would invest quite a lot of time and money in delivering the product, and in case it is returned, there is an additional revenue loss.

It should be noted that there are several existing examples of frauds with Cash on Delivery (CoD)- since there is no authenticity of the information provided by the customer, there are increased chances of fraudulent activities.

Additional Money Handling Costs 

Most of the eCommerce shipping solution providers would charge some extra amount, the money handling charges while providing Cash on Delivery (CoD) services. While the customer might be paying the shipping charges, calculating and transferring this cost to the customer is generally tricky- hence most of the business operators bear this cost themselves. This causes an increase in the miscellaneous e-Commerce business expenses.

Steps to Minimize Disadvantages of Cash on Delivery (CoD)

In order to minimize the risks and scams of Cash on Delivery (CoD), e-Commerce Business owners are required to take some precautionary measures. For instance, the majority of the e-Commerce Business owners have started adding extra charges in the shipment cost, in case the customer opts for Cash on Delivery (CoD). In addition, the business operators now aim at obtaining authentic customer information beforehand, in order to avoid any frauds; especially while providing Cash on Delivery (CoD) service.

Moreover, it is advised to use e-Commerce Shipping Providers, like InstaShipin, for handling the shipment and delivery of e-Commerce businesses. InstaShipin does not only provide reliable and efficient delivery services all across India but also has the most cost-effective Cash on Delivery (CoD) options available, to provide a boom to your business. For more information, Click Here to get in touch with us today, and provide better, improved, and efficient shipment, with additional payment options to your customers.

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