All online sellers are generally familiar with the term cash on delivery. It is a payment mode where a customer pays the delivery executive upon the delivery of their parcel. It is one of the most popular modes of payment for online purchases. Though various online modes of payment have become quite famous lately, tier-2 and tier-3 cities still don’t have enough awareness and infrastructure to make payments online. Besides, most customers prefer to pay only when the order is in their hands.Guest Posting Site
In this article, we shall discuss COD in length and its pros and cons.
What is the Cash on Delivery (COD) Mode of Payment?
Cash on delivery is a popular payment mode for online purchases. Buyers make the payment through cash or card at the time of delivery. It makes them more confident about their purchases.
The process of cash on delivery is simple. The courier agent collects the payment from the buyer at the time of delivery. He then deposits the amount at the local office of the eCommerce company. Thus, both the buyer and seller are satisfied.
Pros of COD
COD has several advantages on offer, especially for the customers:
- Flexible Payment Option: For a customer, paying when the order is in their hands is one of the most critical benefits of COD. For instance, if you pay for an order online and a seller doesn’t deliver the order, your money is stuck with them. There is a risk associated with the loss of money. Also, with COD, you can check whether the product is perfect or defective before paying for it, just like in a brick-and-mortar store. If the product is faulty, you can return it without paying.
- No Online Payment Fraud: Paying online always comes with the threat of online fraud. However, with the COD mode of payment, security can be maintained. You don’t have to share critical information online, like your bank account details, card number, CVV, and expiration date. This is another crucial reason why most users prefer cash on delivery.
- No Dependency on Bank Cards: With COD, you don’t have to depend on debit or credit cards. This factor is significant in rural areas where many people still don’t use bank cards and mainly deal in cash. You receive the product, pay in cash, and your online transaction is complete. It’s that simple and straightforward!
- Impulse Buying: Using the COD option, one can buy products quickly. They don’t need to fill in any payment details (which are generally additional steps) but just make a purchase, leading to faster checkout. This encourages impulse shopping.
- Better Reach: Since most customers prefer the COD payment method, online sellers can reach out to more customers. Also, they can gain customer trust as customers know they don’t have to pay anything until they receive the product.
Cons of COD
Given the number of buyers who prefer the COD mode of payment, offering it is essential for online sellers. But it also has some disadvantages:
- Prone to Losses: One of the biggest challenges for a seller is that a buyer might return the product without paying for it. Thus, they’re vulnerable to losses. They spend all their time and money preparing and shipping the orders, which might ultimately be returned to their origin. This leads to revenue losses.
- Additional Cost for the Seller: When the seller opts for cash on delivery while shipping the order, the courier companies charge an amount to collect money. The seller generally pays this additional cost.
- Refund Issues: Processing a refund is a bit complicated when a COD order is returned. The customer has to provide his bank details even though he has paid by cash. The money is returned to the buyer’s account in 5-7 business days.
- Cash Flow Restrictions: Unlike online payment, which is received instantaneously, the COD payment takes time to reach the seller. This restricts the cash flow, sometimes hindering daily operations as well.
Summing Up
The cash-on-delivery mode of payment has played a crucial role in the unprecedented growth of the Indian eCommerce industry. It is the concept that the masses relate to – purchase a product and pay for it when it is in your hand.
Also, COD is a risk-free option for buying products online, especially for first-time buyers. However, it comes with some risks for the sellers.
To reduce the risks and disadvantages of COD for sellers, many sellers are adopting new measures. Some also charge extra delivery costs in case of COD, while some offer discounts and cashback if the buyer chooses the prepaid option.
