Online businesses are growing in India with fair pace and we have witnessed some promising innovations to track the consumer’s wallet. Amongst various new innovative trends, Cash on Delivery (COD) seems to be the major driver behind swelling ecommerce business prospects. Less penetration of credit cards with consumer’s unease with enabling online transactions, COD looks as a viable en route to access tier two and three cities, which believe to fuel the growth of online shopping in the country.
Suman Mittal (26), a marketing executive with a leading insurance firm was keen to flaunt Gucci hand bag but could not access as she lives in Guwahati, where finding such brand is almost impossible. However, now she flaunts a Gucci handbag and she owes this pride possession to an ecommerce portal. Speaking more about the same she said “I got to know from my friend that I can order it with various online companies and for this I do not need to have credit card or use net banking, I can pay after the product gets delivered at my door step via COD. It feels great to have products at your doorstep with an effortless click; I think COD is a great phenomenon and I would like to use it frequently”.
Meanwhile, COD can be a viable option for consumers; however it could be a hassle-full affair for ecommerce players In India as there are lots of challenges involve in facilitating it. According to some industry experts, 30 to 35 percent of total orders generated through COD fail to get collected and eventually get return to the companies. Iamwire tried to unearth the existing challenges with COD payment options and ecommerce in India. Following challenges seem to be writ large with ecommerce players while ensuring COD:
- Handling cash in the supply chain which requires building additional processes
- It blocks the working capital of the company because the remittance of payment is not immediate
- It Constraints your offering both in terms of location serviceability & catalogue
- In addition to this there is always a possibility of order rejections/returns
- Lack of professionalism and organized skill with logistic companies
- Shipping charges increased by 1 to 2 percent of total order value in contrast of plastic cards transaction
However, some of the ecommerce companies have put up entirely contradicting data to what experts have opined. Rahul Sethi, President www.tradus.in said “The order rejection rate of COD orders is extremely low for us; we get less than 2% of the orders back”. According to Sethi, approx 20-25 percent of their total orders come as COD. We receive the highest number of COD orders from women in metros and tier 2 cities that buy beauty care and fashion accessories. Femella, a web exclusive store for women has started COD as a payment option a month back and already they have witnessed whopping increase in their order by 50 percent. Kavya Arora, Director (Femella) pointed out that only one rejection has been registered since the launch of their COD. Apparel, fashion accessories along with computer peripherals consist most of the COD order for tradus.in and apparel for Femella.
It has been apparent now that Indian ecommerce businesses have lots of local effects and it seems true also by looking at various aspects of ecommerce business. So far India along with some other handful markets across the globe are few which use Cash on Delivery as a payment option and it is evident because of low and slow penetration of credit cards along with major chunk of population in India that still prefer cash over plastic payment options. Letsbuy.com, an exclusive electronic web store has begun COD in March this year and at present letsbuy’s 30 to 35 percent of orders come through COD.
Shedding light on it, Amanpreet Bajaj, COO, letsbuy said “COD is undoubtedly an innovative way to reach the Indian consumers, however ecommerce companies need to have proactive approach to leverage this. Though, logistic services are not very professional in dealing with COD but it could be managed well if one’s internal team works solely for it. At letsbuy.com, we get around 8 percent of COD rejection orders and largely it is attributed to logistic lacunae”. Later he added that western along with south India generate most of the letsbuy’s COD orders.