Retailstartups

Why Cash On Delivery Is a Bad Idea

Online shopping has probably reached the peak of its popularity during the time of COVID-19. This sector is still developing fast and new options are available – the aim of them all is to facilitate the ordering and payment processes, and in the long run – to gain more loyal customers.

However, some of these practices may be beneficial to the customers, but they have a negative impact on the online shop or business involved. One of the options that are inconvenient for the seller is the so-called cash on delivery (COD) service.

Why exactly is cod payment a bad idea and what are some of its alternatives that can be more useful from the entrepreneur’s perspective? We explain in detail.

How Does Cash On Delivery Work?

Cash on delivery is a payment method available in some online shops or platforms. It allows the customer to pay for the service or product at the very moment of receiving it – it’s not necessary to pay in advance.

CoD is possible with direct delivery methods, e.g. via a courier, or a postman. From the buyer’s point of view, it’s often a perfect option, as they don’t have to fear losing money if the parcel does not arrive. They can also check if the shipped item is exactly what they ordered.

The payment is then processed to the seller. However, it needs to go through the post office or delivery company, so it takes some time before the order is actually paid. That’s why it has both advantages and disadvantages. To read more on how CoD payment works, click here.

Why Should Online Businesses Avoid Cash On Delivery?

We already know that the CoD service is a controversial one – it can be convenient for the clients, but it slows down the transaction process from the shop’s perspective. That’s why it’s better to avoid the CoD payment option. What is more, customers may simply overuse this option and make spontaneous orders that will later be cancelled or not accepted. Customers can give fake addresses or names with no fear of being charged. What does it mean for the company, though?

It means wasting the workforce, time and money, and if the number of cancelled or fake orders is significant, an online shop can waste a huge amount of their potential profit. Moreover, the budget cannot be accurately planned, as the exact income from the CoD orders is never fully known and reliable.

What Are the Alternatives to Cash On Delivery?

We’ve already pointed out some reasons why the CoD payment option is not the best choice for businesses that operate online. What are some of the alternative payment methods that online sellers can make use of?

Now, when the online payment options are numerous, enabling cash payment seems pointless. A few years ago, when credit cards were not so widespread, it could have been questionable. But currently, online payment options are much more developed.

To accelerate and facilitate the payment process in your online shop, you can enable several options, for example, PayPal, credit card or debit card payment, delayed payment or paying with a smartphone operating system.

PayPal is a payment option based on a fully-online transaction. It works with Visa, MasterCard, Discover, and American Express credit cards and it doesn’t require any additional fees or subscriptions. It is a convenient option for both the seller and the buyer.

Credit card or debit card payments are other comfortable options. They are safe and quick. What’s more, they’re especially useful for shoppers who make regular online purchases – the card data can be saved and linked to a certain account, so making a pre-paid order requires just a few clicks. Some of the shops offer the so-called delayed payment option when the customer is charged with the money after some time – up to seven days from the date of purchase.

Paying with a smartphone operating system like Apple Pay or Google Pay is getting more and more popular as well. Customers can save their credit card information on their accounts, so making purchases from the phone is also possible.

Conclusion

With regard to the wide variety of online payment options, cash on delivery payment seems to be old-fashioned and inconvenient. Businesses can gain loyal customers by giving them longer return periods or other attractive discounts.

Provided that you take care of the online marketing and advertising sectors of your online businesses, resigning from CoD payment options should not be a problem. If you have any doubts, you can always consult a marketing or online payment specialist to get some more knowledge on this topic.

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