WHY WE NOT PROVIDE CASH ON DELIVERY(COD) SERVICE
Of the 6500+ eCommerce companies in India, less than 5% offer COD as a payment option. So if it’s hailed as the savior of eCommerce , why are more companies not adopting it?
First it costs more. The two major companies, Blue Dart and Aramex charge a transaction fee (about INR 50) plus a percentage of the amount (about 1 to 2%) collected. Customers are not necessarily willing to pay more because they are paying by cash so this eats into the merchant’s margins. Although the fees are similar to credit card transaction fees, payments from them are much faster to the merchant.
Second the return rates (across all eCommerce companies) for merchandise is about 40%, according to Blue Dart. This may vary for certain companies (Some companies have claims of 15% returns, whereas others claim to have 60% non acceptance). So if a small merchant (doing 100 transactions a day), about 30% through COD (30 TX/day), and their returns are at 40%, then INR 1200 is lost daily. The courier company charges an extra INR 50 to 100 as return fees to ship merchandise back.
Finally, when customers use the COD option they don’t place a firm order. They indicate intent to purchase the item. So there’s no fallback for the merchant if the product is not accepted. Reasons for not accepting have been many including, “changed my mind”, “wife did not approve purchase” or “did not have cash when the courier arrived” or “found a cheaper price elsewhere”, usually offline.
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