Recent studies and research have found that around 60 percent of online transactions are based on the cash-on-delivery (COD) option in India. The COD option is supposed to be a necessary provision for the success of online e-commerce business, at least in India. There had been a lot of news recently regarding COD option that is provided by e-commerce websites and also how India Post had helped the e-commerce companies to further collect money plus there had been news that after the success of some shopping festivals launched by e-commerce websites some of the real estate groups are planning to go the e-commerce way.
After so much recent news about COD and the growing popularity of e-commerce it actually strikes one’s mind, why is the COD option so popular amongst online shoppers? Is it providing them with some kind of profit or benefit? Is the COD option actually beneficial for the e-commerce websites too? It is not the same in developed countries as COD is not an option used frequently by online purchasers. This option is quoted as the reason for success of e-commerce industry in developing countries due to the very less number of population holding plastic cards (debit or credit cards).
Benefits of COD for online customers
There are obviously some certain benefits that COD option provides or seems to provide to the online purchasers. Some of these benefits are listed below:
- The customers do not have to produce their card details and password. There are some kind of trust issues that Indian online customers possess and hence COD seems to be a safer bet for them.
- There have been issues many times with the product delivery as the product delivered is different from the product ordered. During such circumstances if the product is already paid for using debit or credit cards then refund takes longer duration. Hence, COD is helpful in such situations as the customer does not have to pay at all until he receives the desired product.
- The third point is somewhat linked to the previous point as customers always have this penchant to review or try the product before paying for it and online medium cannot provide this facility. Here, COD option is beneficial for the customers as they can receive and check the product before paying for it.
Benefit of COD for e-commerce companies
The benefit of COD for e-commerce companies is:
- By providing the option of COD the e-commerce websites are able to reach to a larger population as the people who do not own credit or debit cards can also shop online using COD option. Hence, it helps the e-commerce industry to increase its consumer base.
Disadvantages of COD for e-commerce companies
It has been noticed that more than benefits, the COD option is proving as a loss to the e-commerce companies.
- There are additional costs in handling of cash.
- It has been noted that due to COD there have been problems of long payment cycles because of intermediaries.
- The e-commerce company has to pay for the courier charges in case of return of the product which further adds on to the cost. And, there is a greater chance of return of the product in the case of COD.
The cash-on-delivery option has proven to be beneficial to the online shoppers lately. However, it has not been so profitable to the e-commerce companies but still COD is a necessary provision for e-commerce companies due to the cut-throat competition. It is noted that recently the e-commerce companies have come up with some innovative ways to avoid loss due to COD option. Some of these are charging extra shipping costs and giving extra benefits for using debit or credit cards, etc.
So, to conclude, COD is proving to be expensive to the e-commerce companies and therefore to the customers too but it would exist till the credit and debit cards gain popularity in the market.
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