What payment methods do Indian D2C customers prefer?
With over 12.5 crore shoppers now choosing to buy online, it's clear that consumers across the country are embracing the convenience of digital shopping. As a Direct-to-Consumer (D2C) brand, understanding the payment preferences of buyers is key to gaining their trust and increasing your sales.
Offering a variety of ecommerce payment methods is essential to increase conversions! How? Flexibility in payment methods can reduce cart abandonment. This is especially vital for D2C brands in a diverse market like India, where consumer payment preferences can differ greatly due to factors like urban and rural demographic behavior.
Imagine a shopper who prefers Cash on Delivery (COD) because they don’t trust online payments. If your site only accepts digital payments, they might abandon their cart and never return. On the other hand, a person who loves the simplicity of UPI, with no need for exact change or delays in payment processing, may get frustrated if COD is the only option available, leading them to shop elsewhere.
What payment methods should your business offer? How can the right payment options impact your growth? Let’s decode how payment choices like UPI and COD influence your success as a D2C brand.
Offering a variety of ecommerce payment methods is essential to increase conversions! How? Flexibility in payment methods can reduce cart abandonment. This is especially vital for D2C brands in a diverse market like India, where consumer payment preferences can differ greatly due to factors like urban and rural demographic behavior.
Imagine a shopper who prefers Cash on Delivery (COD) because they don’t trust online payments. If your site only accepts digital payments, they might abandon their cart and never return. On the other hand, a person who loves the simplicity of UPI, with no need for exact change or delays in payment processing, may get frustrated if COD is the only option available, leading them to shop elsewhere.
What payment methods should your business offer? How can the right payment options impact your growth? Let’s decode how payment choices like UPI and COD influence your success as a D2C brand.
Top Payment Options for Ecommerce Businesses
Among the popular payment gateways for ecommerce in India, UPI and COD stand out as two dominant choices. While UPI appeals to the tech-savvy population in urban centers with its speed and efficiency, COD remains a preferred option in smaller cities, where customers appreciate the security of paying in cash upon delivery.
What is UPI?
Unified Payments Interface (UPI) is a simple and secure system in India that allows instant money transfers using smartphones. It has become a popular choice for everyday payments, bill payments, and online shopping.
Benefits of UPI
UPI payment option offers several key benefits for both D2C brand owners and customers:
- Instant Transactions: UPI enables real-time payments, allowing customers to complete purchases instantly. For D2C brands, this speeds up the payment process and ensures quicker order confirmations, enhancing the overall shopping experience.
- Keep Track of Transactions: UPI provides detailed transaction records, making it easier for sellers to track sales, manage accounts, and prepare financial reports.
- Multiple Bank Accounts: UPI allows users to link multiple bank accounts to a single app, giving customers flexibility in choosing their payment source. This versatility ensures D2C brands can cater to a wide range of customers' preferences.
- Customer Insights: The data from UPI transactions can offer valuable insights into customer behavior and preferences, helping D2C brand sellers tailor their offerings and marketing strategies.
- Security Features: With robust encryption and authentication protocols, UPI ensures secure transactions. This builds trust among customers, making them more likely to complete their purchases without concerns over data safety, benefiting D2C brands by reducing cart abandonment.
Example- Beardo, a men's grooming brand, effectively uses UPI payment online alongside other options like credit/debit cards and net banking. This integration offers customers a quick and convenient checkout experience, enhancing satisfaction and driving higher conversion rates.
What is COD?
Cash on Delivery (COD) lets customers pay in cash when their order is delivered, offering a secure option for those who prefer not to pay online. Customers can ensure that they receive the order before making the payment.
Benefits of COD
- Trust and Assurance: COD fosters a sense of trust between sellers and customers, as it reassures buyers that they won't be charged until they receive the product. For sellers, this means fewer abandoned carts and increased conversion rates, as customers are more likely to finalize their purchases when they have the option to pay upon delivery knowing they are not risking their money.
- No Need for Digital Payment Skills: By offering COD, sellers can reach a wider audience, including those who may be unfamiliar with online payment systems. This inclusivity can lead to increased sales from customers who might otherwise hesitate to shop due to payment complexities.
- Reduced Payment Failures: With online payments, there’s always the possibility of payment failures due to technical issues or declined transactions. COD eliminates these barriers, ensuring smooth order processing without relying on online payment gateways.
Example- Amazon's Cash on Delivery option helps shape the ecommerce world by enhancing customer satisfaction. By allowing customers to pay in cash upon delivery, Amazon has catered to those hesitant about online payment gateways, increasing trust and conversion rates. This strategy has led to a rise in sales and customer satisfaction among consumers less familiar with electronic payment methods.
According to the Times of India, "In 2020, COD constituted more than 65% of all e-commerce payments in the 2 to 4 tier cities, indicating the significance of cash for payments in these areas."
According to the Times of India, "In 2020, COD constituted more than 65% of all e-commerce payments in the 2 to 4 tier cities, indicating the significance of cash for payments in these areas."
UPI vs. COD – A Comparative Analysis
How D2C Brands Can Cater to Payment Preferences
Brands like Mamaearth, known for their natural and organic products, have adopted both UPI and COD to reach a wider customer base. Mamaearth has successfully attracted customers from various demographics, ensuring a seamless shopping experience that meets the needs of urban and rural consumers alike.
D2C brands may choose to establish a strong online presence to effectively engage with diverse customer bases. Platforms like SmartBiz by Amazon, a no-code website builder, allow businesses to create their own storefronts quickly and easily which comes with payment integration features, enabling brands to accept a variety of payment methods, including UPI, credit/debit cards, and Cash on Delivery (COD). This flexibility ensures that brands can cater to the varying preferences of their target audience. By leveraging tools like SmartBiz, new D2C businesses can launch their online shops without needing extensive technical knowledge, ensuring they are well-positioned to meet the demands of Indian consumers.
D2C brands may choose to establish a strong online presence to effectively engage with diverse customer bases. Platforms like SmartBiz by Amazon, a no-code website builder, allow businesses to create their own storefronts quickly and easily which comes with payment integration features, enabling brands to accept a variety of payment methods, including UPI, credit/debit cards, and Cash on Delivery (COD). This flexibility ensures that brands can cater to the varying preferences of their target audience. By leveraging tools like SmartBiz, new D2C businesses can launch their online shops without needing extensive technical knowledge, ensuring they are well-positioned to meet the demands of Indian consumers.
Bonus section: The Future of Payment Methods in Indian E-commerce
The Indian e-commerce market is changing fast, especially in how people pay for their purchases. Technologies like digital wallets and Buy Now Pay Later (BNPL) are becoming popular and will greatly affect D2C brands.
Here’s how these trends will shape ecommerce payment methods and what brands need to do to prepare:
Here’s how these trends will shape ecommerce payment methods and what brands need to do to prepare:
- Rise of Digital Wallets: More customers are using digital wallets like Paytm and PhonePe for cashless payments. A digital wallet stores payment info for secure, cashless transactions via mobile or online. Brands should offer these options to meet customer preferences.
- Growth of BNPL Services: BNPL attracts customers by allowing them to purchase items without immediate full payment, making shopping more affordable and accessible, which can boost sales for D2C brands.
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