Cash on Delivery (COD) – Online shoppers love it but sellers, etailers not so much.

Impulsive purchases and order placed accidentally by buyers has led to high returns rate of COD orders. On top of it, the additional cost of COD service charges levied by logistic companies over and above the regular delivery/returns cost put heavy financial burden on sellers.

Cash on Delivery is here to stay

This very candid interview of Kothandaraman Vaitheeswaran, founder and Chief Executive Officer at India Plaza published on Live Mint touches on his resistance to COD. At one point, the interviewer asks Vaitheeswaran, “You were pretty stuck up about not doing COD which changed the face of e-commerce in India.”

He answers, “My view on COD has not changed. I think it is fundamentally inconvenient to customers. The premise of shopping online is convenience. People use COD because they don’t have credit cards. We were the first to experience COD in 2002. In 2004, I withdrew it. Because the administrative hassles were a pain. Then I had data that customers who were buying on credit cards were now buying COD, why should I do that? When the COD explosion happened in 2008…”

Yes, the explosion happened when Flipkart entered the ecommerce market with guns blazing and COD as ammo, which turned out to be the game changer.

Flipkart is now the ecommerce leader. India Plaza went offline in 2014.

So the fact is whether sellers like it or not, COD is the preferred mode of payment in India and it accounts for 60% of online transactions. Etailers can’t afford to remove this payment option as many Indian shoppers don’t have cards and if they do, they aren’t very comfortable using it.

Cash on Delivery Charges

Now that we have established that COD is the necessary evil, let’s concentrate on the solution. That is finding a service provider for your ecommerce business.

Below are the COD service rates offered by 5 logistic companies to its users:

There are of course DTDC, eCom Express, GoJavas, Gati and Professional couriers, that also offer COD services.

Please note that these rates are highly negotiable and volatile. Your product category, weight, volume, demand and association with the logistics company are some of the factors that will influence the final charges a seller will have to shell out.

Things to Remember

Delivering order on time or for that matter willingness to serve all customers is very crucial in the ecommerce business. That’s why your delivery timeline and conditions can make or break your online business.

Below are some pointers, which you can call it tips, suggestions or basic things that you must remember for your business’s health.

• As a new/small seller, deactivating COD option will affect your business negatively because buyers are apprehensive about placing a pre-paid order when they come across a new/fairly unknown seller

• If your sales volume is high and area of operations wide, then it is best to pay more and opt for a reputed logistics partner with largest number of serviceable pin codes and a wide range of services to offer

• If your sales volume is low and restricted to a specific region/city, then you should seriously consider availing services of a local courier company or high-tech start-ups

• Once your sales pick-up, rates can always be renegotiated as no logistics company would want to lose your business. So if you are just starting out with less volume but have complete faith in the potential of your product, make peace with high COD cost at the initial stage

• Consider Logistic Aggregators, if you would like to use service of multiple logistic companies

• Charge customers for COD orders

As an online seller, what do you think about cash-on-delivery payment system? Do you want to share your positive or negative experience about a logistics company’s COD services? Please do share.