COD or Cash on Delivery was an instant hit with the Indian masses, especially the skeptical ones who shied away from online shopping due to the trust factor. COD seemed to be the perfect answer to win them over. So all the marketplaces and sellers hurried to offer the option to one and all as the convenience and safety associated with it attracted customers.
The result? The exponential growth of Indian e-commerce in the last year!
While it helped to convert skepticism of customers into trust, thus widening customer base, it started burning a hole in the pockets of sellers. In the hurry to acquire as many customers as possible, no one thought of the long term effects of it – increased cost for the seller.
Although FoodPanda facilitates placement of orders, orders are delivered to customers by the restaurants themselves, which means payments are collected by them. A separate team of people have to be appointed and assigned to collect payments on a monthly basis. Restaurants, being a volatile business, they shut shop out of the blue leading to bad debts, as also change in management or other reasons. Such losses amount to 2-3% on an average.
Identifying the problem, FoodPanda has been trying to promote online payments from customers:
Result– COD has dropped from 100% to 50%, FoodPanda is aiming for a reduction to 25%. This would help to reduce cost collection and bad debts by as much as 50%.
Result– After offering the above in the past few months, its COD and online payment ratio is 60:40 compared to the previous 70:30, with a decrease in the rate of returns from 15% to 13%.
Banks too are supporting the cause of online sellers, to increase their own volumes and to encourage inactive customers to get active with using their cards.
Ultimately, the option is up to you. The general consensus has been a loss in balance sheets due to COD, although it does help to get the trust of customer. But we also cannot ignore the downside of it, higher rate in returns from customers. If you are willing to take the risk, you can continue to offer the option coupled with some beneficial online card payment options like FoodPanda to motivate customers to try using it. Once they realise your credibility and same level of service and product quality, they will eventually pay more using their credit/debit cards.
After dwindling with her family business, into travel and hospitality, for more than 3 years, Pooja Vishant found her true love in writing. Happy-go-lucky and cheerful, she loves pink; so pink is the way to go if you want to get into her good books. The Associate Editor keeps track of even a leaf that has moved in the ecommerce world!
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