In the present world, you can get everything online from basic necessities to electronic machines. People are choosing online shopping rather than visiting brick-and-mortar stores.

Despite the increasing number of online shoppers, people are worried about online shopping. The major reason is making payments online is many questions arise in users’ minds like

  • Is the store using a secured payment method?
  • What will be the evidence that I have paid online?
  • Is it all right to give my card details?
  • What if I do not receive the product?

All these concerns hinder the buying process for online shopping.

To overcome this situation, E-commerce stores consider the Cash on Delivery payment method as the most preferred one. Having to pay after the customer gets the product in hand has reduced customer’s anxiety for online purchases. The customers make the payment at the time of delivery of the product. If the customer does not make the payment, the product is returned back to the seller.

In this article, we have explained Everything You Need to Know About Cash On Delivery for E-commerce.

What is Cash On Delivery?

Cash on Delivery allows customers to make payments in cash when the product is delivered. It is also called pay on delivery or collect on delivery. With cash on delivery payment method, the customer does not pay in advance but pays to the delivery boy when the product is delivered.

Why Offering Cash On Delivery is Important?

72.7% of Indian customers prefer cash on delivery as the payment method for online shopping. Compared to other payment modes, cash on delivery is the most favorable one amongst Indian online shoppers.

COD-pie-chart

Image source: Printrove

When online shopping is considered, cash on delivery is among the significant payment methods. It has greatly improved the experience of shoppers. Many online businesses have started adopting cash-on-delivery payment options for their E-commerce store. Manage Cash on Delivery orders of your Magento 2 store with Cash On Delivery Suite Extension.

Digital payments like debit or credit cards, net banking, e-wallets have only 30% of all the online purchases made. The following are the reasons for cash on delivery as the preferred payment method in India.

  • Do not acquire a credit card
  • Don’t have a bank account
  • Do not trust the website to share my bank details
  • Want to see the product prior to payment
  • Convenience with Cash Payment
  • Lack of awareness and infrastructure for digital payments
  • Fear of online fraud

Advantages of Cash on Delivery for E-commerce:

Cash on delivery has increased the online sales rate for E-commerce stores. It offers many benefits because the customers prefer cash on delivery as a payment method over other payment methods.

 

  • Increase trust and loyalty

 

Trust and loyalty are the key elements for a strong customer base. They are essential for building long-term customers and helpful for brand success.

When you don’t ask customers to pay in advance, without providing the product in their hand, it builds trust. They feel that as a trustworthy brand you are focused on fulfilling the order first before the receival of payment. This increases customer loyalty towards your brand and they choose you for future purchases and may pay online.

 

  • More sales and revenue

 

Revenue is necessary for the life span of your business. Sales for businesses are like oxygen for humans to keep them alive. Hence, sales and revenue play a key role in sustaining your business against competition.

Shoppers are always busy. They are always in a hurry to shop quickly and complete the purchase instantly. The checkout steps increase for online payments. With cash on delivery, the transaction is completed faster and quicker. This gives them an urge to purchase thus leading to more sales and revenue.

 

  • Easy returns

 

Before shopping, the customer checkout returns policy of the business. With easy returns, the businesses notice a 300% increase in overall sales according to ReadyCloud Suite.

With cash on delivery payment option, there is ease in returning the product. If the product is not received as decided or is defective, the customer can quickly return the product. As the payment is not made beforehand, the customer is not worried about their money being blocked by the supplier.

 

  • Secure shopping

 

The customers are always frightened whether or not they will receive the product. Online payments increase their fear as they have paid prior to receiving the product.

There is no need for the customer’s bank details with cash on delivery payment method. The customers are safe from any frauds and security breaches as cash on delivery payment method does not require the customer’s bank account details. The customers are also not afraid about not receiving the product.

Disadvantages of Cash on Delivery for E-commerce:

Along with the advantages of cash on delivery payment method, it possesses minor disadvantages. However it can be rectified.

 

  • Exposed to losses

 

One of the biggest concerns with cash on delivery payment methods is that store owners will be exposed to losses. They spend a lot of money on shipping and delivery and the customers return the product due to any reason without paying for it. This sums up the revenue loss.

 

  • Extra expenses

 

Shipping and delivery companies charge an additional amount for cash on delivery payment options. Including these charges in the product price creates a bad user experience and increases abandoned cart rates. Thus, the store owners have to bear these additional expenses.

 

  • Chances of  frauds

 

With cash on delivery payment method, there are possibilities of fraudulent activities by the customers. You do not have the authenticity of customer’s information which results in frauds and cheating.

 

  • No discount coupons

 

The E-commerce stores link with banks and offer a certain percentage of discounts on online payment orders. Due to more shipping and delivery costs, the store owners cannot offer discounts on cash on delivery payment orders. This declines the customer experience of the store. 

Covering all aspects before offering Cash On Delivery:

Cash on delivery is the most favorable payment method amongst Indian customers. It has eventually helped to increase the customer experience of the store.

But in spite of its advantages for customers, the E-commerce store owners face some problems with cash on delivery payment methods. The online stores encounter fraud orders and this leads to high order cancellation rates for websites.

72% of orders are Cash on Delivery, out of which 40% of orders are Returned to Origin (RTO).

Hence, when you implement a cash-on-delivery payment option for your store, make sure to make your store flawless. Consider the following points to minimize the chances of loss and fraud to a great extent.

  • Verify customer’s address.
  • Speak to customers before shipping the product.
  • Detect fraud contact details.
  • Detect orders that have a high level of RTO.
  • Additional delivery costs for cash on delivery.

Conclusion:

Offering a Cash On Delivery payment method to customers is a fantastic way to boost sales for E-commerce businesses. Cash on Delivery drives traffic to your website. Also, increase the reliability and authenticity of your store with COD.

Many online stores provide cash on delivery payment methods because of its advantage in converting visitors into customers. Despite its disadvantages, cash on delivery proves to be an advantageous feature for an E-commerce store.