Cash on Delivery: Advantages and Disadvantages

Pay on delivery or Cash on Delivery (COD)? 

Confused?

Yes, you read that, right! These are two different things. As an e-commerce owner, what type of payment option should you keep?

Want to know? Then keep reading.

In this blog, we will talk about the “pay on delivery” payment option, their advantages, disadvantages, and how you can implement this for your business. 

So without further delay, let’s get started.

Overview

Whether it’s the advantage of not having to make an immediate payment while buying something or the lack of enough trust for the buyer, the pay on the delivery concept in e-commerce has gained tremendous popularity among Indians in the past few years. The concept increased the percentage of people buying things online and contributed to the rise in popularity of eCommerce platforms.

According to the survey conducted by the Confederation of Indian Industry, it has been seen that despite the low usage of the internet in certain parts of the country from 2010 to 2014, the e-commerce sector has tripled its turnover from 20,020 crores to 83,096 crores during this time.

It can be predicted that by 2021, the turnover might reach about 660,000 crores. There are many factors that make POD in e-commerce one of the most convenient and trustworthy modes of payment. 

In many cases, a parcel is returned, rescheduled for delivery or marked as RTO as the customer doesn’t have the cash ready with him or her. 

In such cases, the pay on a delivery comes helpful, as the customer is able to pay via his card, UPI, net banking etc.

This payment option really helps in reducing RTO and thus lowering overall logistics costs.

What is Pay on Delivery? 

Pay on Delivery (POD) is a broader term that includes any payment made at the time of delivery, not limited to cash. It can involve paying via cash, debit/credit card, UPI, or other digital methods when the product is delivered.

What is Cash on Delivery?

In cash on delivery e-commerce, customers order products online but do not need to make an immediate payment. Instead, they pay when the item is delivered. This payment on delivery meaning has gained popularity in e-commerce as it builds customer trust, particularly among first-time buyers. For companies, cash on delivery e-commerce opens up the market to a broader audience, including those who may not have access to credit cards or online banking.

Advantages of Cash on Delivery

One of the primary advantages of cash on delivery is the trust it builds with customers, who may be skeptical of online transactions. COD minimizes the risk of fraud for buyers, as they only pay upon receiving the product. Additionally, the advantages of cash on delivery include reaching customers in areas where digital payment infrastructure is limited, making it an accessible payment method for a larger audience.

Disadvantages of Cash on Delivery

Despite its benefits, there are some disadvantages of cash on delivery for both businesses and customers. For businesses, COD can increase logistical challenges and costs, as failed deliveries or returns can result in lost revenue and wasted resources. Another significant disadvantage of cash on delivery is cash handling, which can increase the risk of fraud or errors during transactions. Customers, on the other hand, may face additional wait times or even delivery delays due to the extra steps involved in processing cash payments.

Understanding what is pay on delivery and the payment on delivery meaning is important for businesses navigating the e-commerce landscape. While the advantages of cash on delivery can expand customer reach and build trust, businesses must also consider the disadvantages of cash on delivery and how it impacts logistics. As online shopping continues to grow, evaluating the role of cash on delivery in e-commerce will help businesses provide diverse, convenient payment options to their customers.

Who accepts pay on delivery?

As an e-commerce seller, it completely depends upon you whether you want to provide this facility or not. So in short, every e-commerce company can accept payment on delivery. 

If you allow POD, the courier service company will automatically keep that provision for you and will take the payment from the customer via digital mode on your behalf.

Should you offer pay on delivery?

Whether you are a new business or an old one, there will be certain products that customers will always be skeptical of buying. So in that case you don’t want to lose the customer, you can offer them the POD option. This will help in building their trust and assurance.

Here’s how Cash On Delivery works.

No cash dependency

As mentioned earlier, the customer doesn’t need to have the cash to receive the parcel. Other digital payment options are available for him/her. So you can stay assured that your product won’t be returned due to a lack of cash. And that is the advantage of cash payment. 

Great Marketing strategy

Giving out the option of pay on delivery provides a great competitive advantage for eCommerce sellers. This is a great marketing strategy and increases the chances of people buying.

Building trust

Sellers giving out their products without taking up immediate payments are building their trust among potential customers.

Pay only when you receive 

Pay on delivery builds trust among the customers. This is applicable especially for the new e-commerce business, which is still not a brand. The POD option in such cases helps in increasing credibility among customers. 

The Security

One of the major advantages of Cash payment on delivery is the maintenance of security. No financial information is given out and hence the customer can stay assured of being free of any kind of fraud. Cash on Delivery issues staves off the tension of refund in case of non-delivery of the product. The customer can pay only after they get the product in hand. In that way, there is no risk of any kind of money loss. But many customers face cash on delivery issues due to miscommunication with the delivery person.

Don’t need to change

Paying in cash on delivery in ecommerce often ends up with the delivery person saying that he doesn’t have change. In such a case, you can always grab the card and pay. No hassle of change. No problem with payment. 

Disadvantages of Pay on Delivery

Though the Pay on the Delivery system is a helpful and much more secure payment option, it has its share of vices. Read through to know about the problems you might face through the Pay on the payment on delivery system.

Loss of Revenue to the Sellers

It may bring loss to the sellers in case a buyer returns a delivered item without paying. The customer might refuse the product or might be unavailable Which results in high revenue loss for the seller and increases harassment of the buyer. 

Extra Courier Charge

The online shopping portals generally deliver a good through the hands of a courier service. The couriers take their share of the charge with the selling price of the item that is being sold, so in Pay on Delivery, you end up paying more when compared to other payment modes.

Minimum Transaction Value

Some online shopping portals also have a minimum transaction amount before a buyer can choose ‘Pay on Delivery’ mode. This means the buyer has to spend more money which can sometimes lead to customer loss.

Conclusion

If you are setting up a new online shopping portal without a large number of reviews or branding, you might want to add the COD/POD method. It will offer a sense of credibility to your buyers. As said earlier, pay on delivery offers a sense of security and flexibility to the buyers. If you want to give a seamless shopping experience for your customers, you can offer this method.

However, with its share of virtues and vices, pay on delivery is a flexible system and can attract more customers than you can think. It is a comfortable payment method for online buyers. It guarantees increased revenue to the sellers and full privacy of payment to the buyers.