The 'Cash on Delivery' Payment Option!
Cash on Delivery (COD) as a payment option has existed for a long time, but is fast becoming a popular payment option in some countries such as India. A customer places an order online and chooses the COD option. The order is fulfilled and the customer makes the payment in cash at the time of delivery.
In developed markets such as the US, COD as a form of payment option is still used during pizza delivery; the order is placed through the telephone (or a website) and fulfilled by the nearest restaurant. The customer makes a cash payment to the pizza delivery boy (if pizza is being delivered home) or at the restaurant (if the customer has chosen to pick up the pizza at the restaurant.). Since the use of credits cards is pervasive, it is the preferred mode of payment even for orders placed on retailers' websites.
Compare this with India where as per the Reserve Bank of India, the number of credit card users is less than 1% of the total population. In a scenario such as this, offering COD as a method of payment gives both customers and retailers alike tremendous benefits.
The customer benefits by:
• Being able to place orders online even without possessing a credit/debit card
• Being able to pay when the item has arrived (which I suppose is the 'killer' feature as typically Indians are suspicious about paying for something that they cannot physically see/touch/feel!!)
• Reduced chances of online fraud.
The retailer benefits by:
• Reaching a wider base of customers such as students, housewives etc. who typically do not have a credit/debit card
• Offering the service as a differentiator with respect to competition
• Simplified business processes; if the customer chooses not to accept delivery, there is no refund as there has been no payment. However, if the customer accepts delivery and then changes her mind, it is typically covered under the returns process depending on the product ordered.
There are a few complexities involved too, though. The option can only be offered if retailers have their own delivery fleet or have tied up with carriers to collect payment on their behalf. This adds to the retailer's cost which needs to be accounted for in the overall product pricing.
The COD option has already helped increase sales for Indian online retailers; it will not be a surprise if this becomes a must-have for the future. Let me know if you have any thoughts on this article.