Offering COD often prompts customers to make impulse purchases. When customers know that they can see and check the product at the time of making payment for it, they feel safer and more comfortable making the order.
MANAGING A BUSINESS
COD vs Pre-payment: Why is It So Important? Do You Need to Offer It?
5 min. read
4th March, 2024
Small businesses striving to establish their niche in the digital marketplace often find themselves in a dilemma when deciding between offering pre-payment or cash-on-delivery (COD) options for their customers.
A study reveals that 62% of Indian customers prefer cash on delivery over pre-payments when making online purchases. As a business owner, it’s natural for you to wonder why some customers feel comfortable with COD over pre-payment.
In this article, we'll discuss pre-payment and cash on delivery options on eCommerce websites and what customers feel about them.
A study reveals that 62% of Indian customers prefer cash on delivery over pre-payments when making online purchases. As a business owner, it’s natural for you to wonder why some customers feel comfortable with COD over pre-payment.
In this article, we'll discuss pre-payment and cash on delivery options on eCommerce websites and what customers feel about them.
What is Cash on Delivery? Why Do Indian Consumers Love It?
Cash on delivery is a payment method where customers pay the money for their orders soon after receiving the product at their addresses. E-commerce businesses lacks the personal touch of a traditional marketplace wherin a customer only pays after receiving the item purchased, cash on delivery offers the similar sense of security and trust to the customers.
Because of this reason Indian e-commerce companies introduced cash on delivery in 2010 and it's believed to key contributor to their success.
Indian customers prefer COD over pre-payment due to the following reasons:
Because of this reason Indian e-commerce companies introduced cash on delivery in 2010 and it's believed to key contributor to their success.
Indian customers prefer COD over pre-payment due to the following reasons:
- India has a diverse population where the level of digital literacy significantly varies. Cash on delivery addresses the trust issue associated with online transactions for those who are new to eCommerce.
- Indians tend to prioritise checking the product while making a purchase. With COD, customers get the chance to see the product before making the payment. They can also unwrap and check the product in front of the delivery person. If there is any problem, they can quickly initiate the follow-up action such as returning the product or requesting a replacement.
- Considering concerns over online security, many Indians would still prefer cash transactions. Cash on delivery for small businesses is a strategic move to bridge the gap between customer preferences and the online shopping experience. Cash on delivery also opens doors to a wider customer base for small and medium size e-commerce businesses.
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How Does Cash On Delivery For Small Businesses Work?
Here’s how cash on delivery for small businesses works.
Integrating with eCommerce websites
Small businesses need to integrate the cash on delivery (COD) payment option into their eCommerce platform. So, they should choose a payment gateway that offers this option, so that customers can choose COD while placing their order.
For new businesses yet to develop their eCommerce websites, the SmartBiz app is a great tool that can help them create their own e-commerce websites within minutes and offer multiple online as well as COD payment options to their customers via its integrated payment and shipping solutions.
For new businesses yet to develop their eCommerce websites, the SmartBiz app is a great tool that can help them create their own e-commerce websites within minutes and offer multiple online as well as COD payment options to their customers via its integrated payment and shipping solutions.
Display COD as a Payment Option
Once COD is integrated as a payment option, online retailers need to display it as a payment option on their websites. As many customers prefer COD, businesses stand a higher chance of making a sale to new customers when they offer this option.
Confirming and Dispatching the Order
When a customer places an order using COD, the small business needs to confirm the order and prepare the package for shipment. At this stage, they rely on trusted logistics partners to ensure a smooth and timely delivery.- SmartBiz by Amazon has integrated with Shiprocket which allows sellers to dispatch COD orders reliably. To activate COD, typically businesses will need to initiate and complete a KYC with the shipping partner of their choice.
Delivery and Payment Collection
This is the most vital phase for cash on delivery for small businesses. The delivery personnel will reach the customer’s doorstep with the shipment. The customer gets the opportunity to verify the product physically before making the payment.
Managing returns and exchanges
At times, customers might want to return or exchange a product delivered through COD. In these situations, businesses should have clear return and exchange policies in place. It is essential to manage these transactions to ensure a seamless customer experience. Businesses either have to return the amount to the customer in cash, or transfer it to their bank account.
How To Offer COD On Your Online Store?
Here is the step-by-step guide for integrating cash on delivery in online stores.
Create your COD integrated e-commerce website Create your eCommerce website with the best options available on the internet, but make sure that it aligns with your requirements and instills a sense of trust. For a cost-effective solution and smooth operations, small businesses can work with the SmartBiz app. SmartBiz allows you to create your own fully functional e-commerce website, complete with integrated payments & shipping, without any complex coding or design skills. What’s more, it is currently available to test out completely for free until Sept’24, as a part of our early access offer. Know more here.
Create your COD integrated e-commerce website Create your eCommerce website with the best options available on the internet, but make sure that it aligns with your requirements and instills a sense of trust. For a cost-effective solution and smooth operations, small businesses can work with the SmartBiz app. SmartBiz allows you to create your own fully functional e-commerce website, complete with integrated payments & shipping, without any complex coding or design skills. What’s more, it is currently available to test out completely for free until Sept’24, as a part of our early access offer. Know more here.
Set demographic availability
Small businesses must define the regions where their delivery personnel can collect cash. Accordingly, they need to set up their logistics and shipment management processes.
Establish COD policies
Online businesses need to define the cash-on-delivery policies on their website. This includes specifications related to additional charges, explaining the process of returns and exchanges, and setting order value limits for COD transactions.
Contact logistics partners
While developing the business infrastructure, businesses need to collaborate with trusted logistics partners. It ensures a smooth delivery and order fulfilment process, managing COD effectively.
Use tracking technology
Most small businesses count on tracking systems to monitor the status of COD orders. This includes order processing, dispatch, and delivery. The system also keeps customers informed about the progress of their orders.
Train delivery personnel
Your delivery partners must be trained on the handling of COD transactions professionally. They need to be proficient in communicating with customers, inspecting products, and collecting payments securely
Payment confirmation process
Develop a system to confirm cash on delivery payments when the delivery personnel receives the money. This may involve sending confirmation emails or messages to customers upon successful payments.
Types Of Payments Available For COD Orders
While cash on delivery typically involves the payment of cash by the customer at the time the delivery person hands over the product, the COD infrastructure has changed in recent years. Apart from cash payments, delivery persons can also receive the payment in the following methods:
- Partial cash payment, and the remaining payment online on the spot.
- Mobile payments and digital wallet transfers.
- Online bank transfer during the delivery process.
- Credit card swiping during delivery, where the order fulfilment personnel carries the device.
For online businesses, it’s essential to mention the other types of payment rather than transferring direct cash at the time of delivery to their customers. With the SmartBiz by Amazon app, you have the ability to add COD payments to your website, so you can have your customers pay via their prefered method. You can also add additional charges to COD orders to cover any charges that handling cash entails.
Best Practices To Keep In Mind
While configuring cash on delivery for small businesses, these tips will streamline the process:
- Make sure to mention the COD policies and charges on the website to avoid misunderstandings.
- Partner with trusted logistics or courier companies to ensure timely and secure COD deliveries.
- Be prompt while sending order confirmations, mentioning the expected dates of delivery.
- Train delivery personnel to handle COD transactions securely
- For returns and exchanges, small businesses must clearly outline the process for cash on delivery orders.
- Evaluate and optimise the COD performance regularly based on the feedback from customers.
- Use order tracking technologies and advanced mechanisms for payment processing and invoicing.
- Provide reliable customer support so that buyers can address concerns related to COD transactions.
- Being agile, small businesses must adapt their COD strategies based on current market trends.
Conclusion
At a time when the scope for physical verification is limited in the digitised business ecosystem, customers consider cash on delivery as one of the key ways to remain safe while paying for online orders.
The success of online businesses depends on the quality of merchandise and trust. While businesses try and s prioritise quality, it’s easy to miss out on the trust factor that defines the overall experience for the customers. In this context, businesses should understand the importance of offering cash on delivery.
Amid raging competition, offering diverse payment choices including cash on delivery can be a winning formula for small businesses.
The success of online businesses depends on the quality of merchandise and trust. While businesses try and s prioritise quality, it’s easy to miss out on the trust factor that defines the overall experience for the customers. In this context, businesses should understand the importance of offering cash on delivery.
Amid raging competition, offering diverse payment choices including cash on delivery can be a winning formula for small businesses.
FAQs:
What are the benefits of offering COD in marketing?
Can I offer COD for high-value merchandise?
Talk to your logistics partner regarding the maximum value of goods that they consider safe for COD transactions. Established eCommerce companies work closely with trusted shipment providers to streamline this process.
Is there any disadvantage of COD for small businesses?
In case the customer refuses to accept the shipment, small businesses are likely to make a loss. This is due to the transit expenses they incur. The reverse shipment cost adds to the overall loss on that particular order.
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