Cash on delivery, or simply COD, is an e-commerce payment method that requires the customer to pay for their order when they receive it instead of beforehand. In general, a cash on delivery process is not advisable for all e-commerce businesses. Depending on your company and target market, this may or may not be a good idea for you. It also depends on how comfortable you are with risk management and what your business needs are. Cash on delivery can be especially useful if you want to increase your conversion rate as research has shown that shoppers are more likely to complete an order if they know they have to pay it before receiving the product. Read on to find out if cash on delivery is a good fit for your business.
What is Cash on Delivery?
Cash on delivery, or COD, is an e-commerce payment method that requires the customer to pay for their order when they receive it instead of beforehand. The customer should be expected to pay the full value of the product, shipping fees, and taxes upfront, and then the seller delivers the product at their convenience. In other words, the customer pays for the product once it’s in their possession. This payment method is most commonly used in Asian countries, including China, Japan, South Korea, and India. To clarify, cash on delivery is different from collecting a deposit, where the customer only has to pay a small percentage of the order upfront. Cash on delivery works best for products that are not time-sensitive and don’t require special care during transit.
Why Run a Cash-on-Delivery E-commerce Business?
There are many reasons why you would want to include cash on delivery as a payment option. If you’re aiming to target Nigerian and Asian customers, this method of payment is considered normal and preferred in some parts of the world. This payment method can also be helpful in increasing conversions because shoppers have to pay for their items immediately. This means that they have less time to change their minds and walk away. If you are a wholesaler, cash on delivery can be a good option, too. However, if you choose this payment method, you might want to make sure that your suppliers offer credit terms so that you can secure your payments in the long run.
How Does Cash on Delivery Work?
The cash on delivery payment method is pretty straightforward. Customers place an order for a product, select cash on delivery as a payment method, and then you deliver the product to them. They then have to pay for the item in full before you hand it over. The good news is that you don’t have to accept cash on delivery payments in physical form like you would in a brick-and-mortar store. You can allow your customers to make their payments via online banking, mobile wallets, debit/credit cards, or even with cash at a nearby convenience store. If you’re accepting cash on delivery payments, it’s important to have a clear, written policy on when you will deliver the product to your customers. This can help minimize disappointment and complaints.
When is COD not a Good Idea?
Cash on delivery can be a good option if you want to increase your conversion rates and you want to cater to your Nigerian and Asian customers. However, you should think twice before incorporating this payment method if you are dealing with certain products. If the product is time-sensitive: If you’re selling something that needs to be delivered as fast as possible, such as fresh produce, you may want to consider other payment methods. If the product is expensive: If you’re selling something that is very expensive and people may be reluctant to pay upfront, cash on delivery may not be the way to go. If you’re not comfortable with risk: If you’re not comfortable with taking on the risk of having to hand over the item before you are fully paid, cash on delivery may not be the right option for you.
Should You Go for COD?
As with any payment method, cash on delivery has its pros and cons. If you think that this payment method is a good fit for your business, there are a few things you should keep in mind. First, make sure that your terms and conditions are clear and easy to understand. You also need to make sure that you have a fraud detection system in place. If you’re selling expensive items, it can be a good idea to require a deposit or to ask for the full payment upfront. It’s also important to track your sales and monitor your inventory. With the cash on delivery payment method, you can’t really rely on pre-orders. You need to make sure that you have enough inventory on hand to deliver the items to your customers as quickly as possible.
Cash on delivery may sound like an easy way to run a business, but it’s important to be prepared. Make sure that you have a fraud detection system in place and that you are comfortable handling disputes. You also need to make sure that you have enough inventory on hand to meet your customers’ demands. If you’re comfortable with taking on the risk and if you feel that cash on delivery is a good fit for your business, then it can be a great way to boost your sales.