Cash On Delivery – Pros, Cons and Why It Works in India
Cash On Delivery (COD) is currently one of the most popular mode of payments among Indian online stores. The major reason for its popularity is that the buyers do not have to pay anything before the goods are delivered to them. This helps in giving some confidence to new buyers as ecommerce is still a growing concept in India which is fairly nascent at this stage.
5 Reasons Why COD is Popular in India
1. Lack of Payment Alternatives
Most of India’s population either does not have a Debit or Credit card and the ones that do, do not such it much for online transactions. Cards are basically used to withdraw cash from ATMs but not for making payments online. Therefore COD is one means where a seller can reach out to buyers even if they don’t have means to make an online payment.
2. Product Condition and Satisfaction
There have been so many cases where you order something but you get something else. IN such cases, it just makes the process of online shopping very painful. If you have paid online, you’ll have to initiate refunds which again takes some time. Moreover, we Indians prefer to physically look, feel and touch something that we buy. In such cases, COD comes as a good option for buyers to actually check the product before paying for it.
In fact, this is what players like Myntra, Jabong, etc. are trying to sell through their new TVCs.
With so many ecommerce companies coming up, COD is a great way to have an upper hand over competition. Essentially it’s the difference between life and death for many of the small businesses.
4. Scam Scare!
The trust for online shopping and ecommerce has been increasing in India but many still fear using new ecommerce companies and fear that they’ll be scammed.
5. Indian Nature
Like mentioned, Indians love to have the ability to see, feel and touch things that they are going to buy. People have similar expectations when they buy online as well. If it wasn’t for COD, people would still walk in to a store so as to meet this criteria.
So, we know COD is very beneficial for customers and fairly enough for sellers as well. But it does come at a price to the sellers too.
Pros for Sellers
1. Great Marketing Stunt– By now sellers also know that Indians have extreme preference for Cash On Delivery and are now using that as way of making themselves popular within the Indian market. Statistics reveal that online stores that provide COD have more customers than those that don’t. So, it definitely is a great way to market yourself especially if you are new to this space.
2. Gain Trust – Indians have more trust for those ecommerce companies that offer the option of Cash On Delivery. Sellers also get the option to impress their customers and gain trust in return. This, in fact, helps them build a good relationship with their customers.
Cons for Sellers
1. Fear of Return – COD also comes as a loss for sellers when customers suddenly change their mind and do not want to purchase the product anymore. In many cases, the seller would have already shipped the item and the customer would cancel when the order is at their door. In such cases, sellers face losses because of costs incurred during the logistic operations.
2. Fear of Theft – The agents handling delivery usually have a lot of cash to handle. A lot of security and legal formalities have to be done to insure yourself from theft, if you are a seller.
3. Time Taking – If you use third party services for COD, the realization of money takes a lot of time. There will be several processes that will have to be done which delays the money actually reflecting in your company accounts.
There are many who are working to find an alternative to COD so that it can be beneficial to both buyers and sellers. But at the moment, there is no other payment option that is readily accepted or preferred by the Indian people like Cash On Delivery.
In fact, some incentives to make online payments can be encouraged so that people use online payment methods. Eventually, their fear will reduce and more people will be encouraged to use online payment options.