Cash on Delivery (COD) is an extremely popular payment method in India. According to research, 90% of new customers in India choose COD as their payment mode for online orders.
While COD is a boon for shoppers, it is often frustrating for ecommerce sellers—they have to pay additional handling charges, face restricted cash flows and delays in COD remittance by the courier partner.
Despite the stated drawbacks, ecommerce sellers are forced to provide COD as a method of payment, as not offering COD can lead to shopping cart abandonment.
Fortunately, COD remittance can be effectively managed to ensure cost-effectiveness and savings. Let’s uncover it together.
In this blog, you will learn about COD remittance, the advantages and disadvantages of COD remittance and how to optimise it.
COD (Cash on Delivery) is a payment method in which customers pay for a product not at the time of placing an order but at the time of delivery. Customers pay in cash or using digital payment methods known as Pay on Delivery (POD) upon receiving the order.
COD is the payment method for 65% of online purchases in India.
When COD orders reach customers, they pay using cash or digital methods, i.e. POD. The invoice amount is received in the courier partner’s account (if paid digitally) or the delivery partner deposits the cash at their office. The delivery service provider transfers that amount into the ecommerce seller’s account; this is known as COD remittance.
On the one hand, D2C brands receive the payment (cash received) directly from the courier partners. On the other hand, when selling on a marketplace like Amazon and Flipkart, the marketplace transfers the invoice amount (cash received) into an ecommerce seller’s account.
The issue with COD remittance is that the courier partner and the marketplace have a specified remittance cycle. Based on that, they transfer the invoice amount into your account within a predetermined time period—thus restricting the amount of cash you have to run business operations.
COD is the preferred payment method of numerous shoppers and thus is provided by most ecommerce sellers. Let us look at the advantages of offering COD for ecommerce sellers:
1. Drives ecommerce sales
Often customers are not comfortable paying in advance for an order, especially when purchasing from a new D2C brand. Allowing customers to pay for an order when they receive it can reduce shopping cart abandonment and boost ecommerce sales.
2. Raises trust in a brand
Online shoppers these days are scared of online fraud and do not easily trust new or small ecommerce brands. The COD option guarantees customers the authenticity of your ecommerce brand by assuring them that the order will be delivered to them and drives more purchases.
3. Widens customer base
While most of the country has gone digital, some parts of India do not have a stable and secure internet connection. Thus, customers may be fearful of losing connection while making payments. Thus, COD is an excellent way to tap into the customer base from areas without secure internet connections.
90% of rural ecommerce orders in India are paid in cash.
4. Increases convenience
The checkout process for a COD order is shorter. Moreover, COD does not require the customer to share confidential details making it an easy and convenient option. Higher convenience can drive purchases by lowering the shopping cart abandonment rate.
Offering COD as a payment method has certain disadvantages for ecommerce sellers; let’s have a look at them:
1. Restricted cash flow
Once customers pay for the order at the time of delivery, the delivery service provider or the marketplace takes some days to transfer that amount into an ecommerce seller’s account, restricting the business's cash flow.
Delays in COD remittance disrupt the daily operations of an ecommerce business, especially a start-up or small-scale brand, as they have limited resources to begin with.
2. Additional charges
In COD orders, delivery providers charge a handling fee which has to be borne by the ecommerce seller, making it costly. While ecommerce sellers can make customers pay for handling charges by adding delivery fees, it may dissuade customers from placing an order.
3. Higher chances of RTO
COD orders are susceptible to being returned to origin (RTO) as customers have not invested any money in the orders and have no fear of loss. If not managed effectively, RTOs can be unprofitable for ecommerce sellers due to the various additional charges it carries.
Tip: Partner with a robust third-party logistics provider like Eshopbox to manage RTOs effectively.
Optimising COD remittance is beneficial for ecommerce brands as it will help them overcome the associated challenges. Here are a few ways to optimise COD and COD remittance:
Eshopbox is a tech-enabled 3PL (Third-party logistics) that empowers customers with flexible payment options like Cash on Delivery, Card on delivery and more. You can unlock rapid business growth with streamlined cash flows and Eshopbox’s automated remittance cycles.
With Eshopbox, you can make order fulfilment easy and efficient while delivering a world-class customer experience to your shoppers.
COD is the most popular payment option for customers but carries numerous challenges for ecommerce sellers. Fortunately, with effective management, ecommerce brands can deal with the problems associated with COD remittance. Tech-enabled fulfilment partners like Eshopbox provide COD services and streamline order fulfilment while ensuring a superior customer experience to scale up your ecommerce business.