Cash On Delivery Payment Gateway – Boon or Bane?retailemall.com /blog/cash-on-delivery-payment-gateway-boon-or-bane/

Gaurav Dhiman

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We recently covered the major payment gateways in India and their charges for your ecommerce paymentprocess. But the Indian ecommerce sector depends largely on a different mode of payment – the “Cash onDelivery” (COD) system. The Cash on Delivery was introduced in India in the beginning of thelast decadeand instantly changed the Indian ecommerce industry. According to recent figures from IAMAI, it is saidthat around 60% of online purchases are paid by Cash on Delivery which largely reflect the parallel cashbased economy in our country. Hence it was definitely a huge surprise when FlipKart decided to stophonoring the CoD mode of payment in Uttar Pradesh a few weeks ago. Or was it?

Why Cash on Delivery?

The advantages of cash on delivery are obvious. The main benefits include

Lack of alternate payment mechanisms

There is currently no payment system that is better than Cash on Delivery for buyers in India. Even thoughIndia has a huge population who has debit cards, a vast majority of these customers prefer to use them forwithdrawals in ATMs for most part. This is evident from the recent study by Google India which revealedthat 55% of online shoppers prefer Cash on Delivery.

Purchase Satisfaction

The most popular indian ecommerce verticals are electronics and apparels and since both electronics andapparels are goods that have traditionally been a “touch and feel” purchase, there have been manyinstances of customer ordering for one item and receiving another. Cash on Delivery protects the customerfrom the painful process of having to return the item and wait for the refund. With cash on delivery,customers can check on the delivery and pay only on satisfaction of the product.

Online Shopping Apprehensions

Online shopping comes with itsown risks of scam, frauds andother apprehensions. Also, mostcustomers in India prefer to buywith a touch and feel of the goods.This is particularly true in the caseof textiles. Jabong, Myntra andothers highlight CoD in theirmarketing to take advantage ofthis sentiment.

Why not CoD?

The high percentage of returnscause worry for online merchants.In many cases, it was reported tobe upwards of 45%. Factoring theextra complexity in supply chain,the multiple trips in case ofcustomer unavailability andultimately a longer dealcompletion time, the margins take an inevitable hit.

Conclusion

What can be a possible middle ground for Cash On Delivery which helps both customers and the onlineretailer? There are several suggestions by industry leaders which include

Incentives for online payment – Several online retailers provide discounts to customers who use DebitCards or Credit Cards for online payment. This is supported by banks such as HDFC, Axis and others toencourage customers to shop online.

Central database of COD customers – This helps retailers track the reliability of a customer order andcan decline delivery if the percentage of customer return is high.

Advance payment – This encourages the customer to pay a token advance for confirming the order andrest on delivery of the goods. This prevents “just for fun” orders by pranksters.

Do you prefer CoD for your purchases? Why and what would make you switch to another payment mode?Let us know in the comments below.