COD has been a game changer in Indian E-Commerce industry. When Online Shopping was in its nascent stage, there were plenty of apprehension related to making online payments. Stories of online Credit Card fraud circulated like wildfire, multiplied by fear of passwords, bank account details etc. getting hacked. The very basic nature of Online Shopping itself was at stake, for people were just getting accustomed to purchasing something which they haven’t touched or felt, from someone whom they have never seen.
Then came the game changer – Cash On Delivery aka COD. The concept of COD had been prevalent, but it took a bold decision to implement it in a whole new avatar by some online giants. Suddenly the entire population seem to greet Online Shopping portals with arms wide open. Orders came pouring like the regular showers in Cherrapunji during monsoon season. Everywhere you could hear the term “COD”, “COD”, “COD”.
Image Source Google – thetechpanda.com
“Sharma ji, naya Mobile kaise liye?
— Bhai Gupta ji, maine to online kharida aur COD pe payment kiya. Aap bhi kharid hi lo.”
Very soon it became a norm for websites to offer COD. Those who abstained from COD suffered losses. Logistics companies transformed themselves to facilitate cash handling and act like a payment gateway in the physical world. And sales skyrocketed, thanks to deep discounts by e-commerce websites.
All seemed rosy until someone shifts focus on “99 Pricing Policy”.
Image Source Google – savemoneyindia.com
Well, what on earth is “99 Pricing Policy” and why should anyone bother about it at all? First of all, “99 Pricing Policy” is not something new and we have been seeing this since time immaterial. It refers to the practice of pricing products tentatively close to psychologically bigger number such as 99.00, 249.00, 499.00, 999.00 etc. etc. Like many of you, I too don’t understand the rationale behind this practice (may be it has some financial impact and I don’t understand finance well other than counting the notes in my purse 🙁 ). I only feel that it has nothing more than some psychological impact, at least with me.
Why should anyone bother at all? With the onset of COD, we have been ordering more products online. And believe me, most of the products follow this “99 Pricing Policy”. When we pay the delivery boy, the onus is on us to give him exact change. And 99% time, people do not haggle over something so trivial as 1 Rupee.
But wait, how many products you purchase online via COD mode in a month? Maybe 4 or 5? Multiply that by 1 Rupee. So it becomes 5 (what do we get in 5 rupees these days?). Over a year, it becomes Rs.60/- (not bad, a cuppa coffee perhaps).
Now multiply it with the average household in your society. Suddenly you see the numbers rising exponentially. Just try to imagine what could be the value when you consider whole of India??? And this amount, my friend, is totally unaccounted for (knowingly or unknowingly, we all are contributing to Black Money!!!!!). Grapevine is that Govt. is considering making online digital payments exempt from service tax in order to reduce Black Money. No wonder it makes sense to me now.
Image Source NewIndianexpress.com
“COD” has its own demerits, from both Buyer as well as Seller perspective.
Buyers can gain by avoiding COD in the following way:
1. When they make payment online, they disburse the exact amount. So they avoid making excess payment each transaction, and avoid shelling out extra towards unaccounted money.
2. You have to keep the physical money ready with you before the delivery boy arrives. Theoretically it should not be a problem, but personal experience says that it has additional hassles associated such as “who will be present at home at that time”, “My security guard will receive the parcel, but can I trust him with cash”, “I got thousand rupee notes from ATM” etc.
3. The main idea behind COD was to target people from remote areas, who are not that much tech-savvy for online payment as compared to metro areas, so that they can purchase online and avail products which are not locally available for them. But most of the logistics service providers till date refuse to serve COD facility to remote areas. So the true benefit of COD never reaches those people for whom it was meant to.
4. If digital payments do become exempt from service taxes, people will find COD option to be costlier.
5. If COD (which has higher cost impact for Sellers than normal pre-paid orders) is avoided, sellers can pass on the cost advantage to Buyers. And Buyers gain with discounted product price in such scenario.
Benefits for Sellers:
1. Logistics service providers generally have a much longer waiting period before the cash from customers reaches its sellers. Online payment gateways generally do it within 3 days.
2. There are chances of losses incurred while offering COD. In case of wrong address or customer denying to pay, the return shipment cost is again charged back to seller. They can avoid these by avoiding COD.
3. In many areas, logistics companies have stopped providing COD services due to snatching and other incidents. Sellers can avoid these material losses by going for digital payments.
4. In many cases, COD charges are much more than Payment Gateway charges.
In conclusion, I can say that now that E-Commerce has been a household name and people are more receptive than ever, it is best time to sunset COD and proceed towards a true digital future. Of course you need to have a third party in between the seller and buyer to protect their interests and insure the payment against any fraud. This is where marketplace platforms play a great role. No wonder now a days all big players in E-commerce are operating in Marketplace model. The future belongs to them.
Being a Co-Founder at www.stylecraftz.com, we are going ahead with this big task of not providing any COD. We operate in Marketplace model and rich out to Craftisans and Designers to bring their unique crafts online. These products are liked by those who have a distinct taste and preference above others. Such true admirers of Crafts do not really worry about COD. From our end, we do ensure that any payment made is 3 layer protected.
When all big boys are pushing hard at COD to drive their sales, we are bucking the trend, even when we are at early startup stage. What do our fellow Rodinhooders have to say about that?
Do share your candid feedback about COD and how you cope with it in your case.
Connect with us on Twitter @Stylecraftz
Vinod Kumar Agarwal
Hi Sheuli,
My family (my wife and 2 grown up daughters) are compulsive ecommerce shopaholics in humor so to say. I tried my hand within early launch of every ecommerce popular now portals (flipkart snapdeal and Amazon).
I had experienced the ebay way of shopping to begin with (NO COD). Good and bad experiences.
The most important thing then was very few of us had Internet enabled Bank Accounts and of course Credit Cards.
I went through the phase of misuse of credit cards and blocked payment and late refunds etc
Having said my long story when COD was offered by Pin Codes and only a few chosen suppliers we had a sigh of relief.
Impulsive shopping decisions reduced drastically.
Yes counting cash and keeping change was always an issue like you said 99 pricing.
Well Mumbai Best buses and Auto rickshaws have enabled/reformed us to digest the inconveniences of carrying change and not having sometimes.
Commercially as a seller COD is a big temptation to attract genuine buyers. Some end up paying online too.
Some of the people who still want to pay COD are the digital handicapped one’s who cannot remember Pins and enter OTP in the time and platform available.
COD is the place to be Always in INDIA.
Pardon me for my poor logic if that is. I for one have benefited more than once.
Best Wishes and Good Luck for Stylecraftz.
Sheuli Purkayastha
Hi Vinod,
Thanks for sharing your views. First of all, let me tell you no logic is poor, or right/wrong. Its all about perspective. And you are absolutely right from your perspective.
Many people share the same perspective. Infact, we consulted a vendor for SMM recently. They sold us on the wonderful work they are doing for other websites. When we told them that we don’t have COD, they flatly told us to include that in our payment options, else they won’t be able to do effective SMM for us!!
I wonder if nowadays its not product that sells, its the payment option. So, does this mean people are buying COD, rather than products??
When we look beyond this, we have India’s largest E-commerce website in terms of number of transactions and they never offered COD. Yes, I am referring to IRCTC website. And believe me, nobody complained so far about being digitally handicapped or forgetting passwords when they book a train ticket from IRCTC. Same goes for other popular movies/event ticket booking websites.
Some people might argue that these websites don’t provide any physical product delivery. But I argue that in these websites too, people are paying even before they receive any service. And there are instances when payment was debited but no ticket was booked. But people continued with using these websites and the volume they generate today is awesome.
My point is that COD was a game-changer in the initial days of E-commerce. It played a role of ice-breaker in the engagement between Online Stores and Buyers. But now since the conversation has started, no one needs an ice-breaker to continue the engagement (isn’t it what they do in high profile business gatherings?).
Regarding impulsive shopping decisions, I believe COD just helped to increase that, rather than subside. Do we need any better proof of that other than the sales figure of popular websites which keep travelling northward and the percent contribution of COD?
Majority of online buyers are employees in corporate sectors. Everyone enjoys free internet, isn’t it? But how many of them really open the packages and check before making payments for orders delivered in COD mode? Not untill they have reached home late at night. In COD mode also, more than 90% people receive the package and make instant cash payment and in case of any disputes, they raise it later with the Online store. So what is the benefit of COD in terms of “pehle saaman dekhunga, phir paisa dunga” perspective?
Even major players are also trying to come out of this payment option. The other day one of my relative was trying to buy a smartphone from a top ranked website in COD mode. While checking out, she was asked to provide a phone number where an OTP would be sent. She tried with numbers of everyone in the house. But everytime the system told her that OTP could not be sent to the phn number specified. In the end, she made online payment and the order was booked. Perhaps the website is too scared to admit that they want to move out of COD option.
Regarding excess payment to delivery boy, let me give you an example. We bengalis are very sensitve to chawannis and athannis and take pride in bargaining even for 50 paisa. This is one of the reason that there is no shortage of change in Kolkata, be it 50 paisa, 1 rupee or any other denomination you mention. In Saltlake Sector V in Kolkata, a few years back delivery boys used to come in bikes for delivering online orders. Since last 1.5 years, websites started sending truckloads of products for delivery to buyers. And believe me, most of them are COD orders. Since most products follow the Rs.99 pricing model, people pay out using 100, 500 or 1000 rupee notes and no one stands back to collect the change. Those who do are told “Sorry sir, we don’t have Rs. 1 change to give back to everyone. You have to give us the exact amount in that case.” The result is same for every buyer. They simply walk away without taking Rs. 1 change or without shelling out exact amount. It’s as if their time is worth more than haggling over such a small amount. Every day, these truckloads return back with thousands of unaccounted money. Whose pocket this money goes to, no prizes for guessing.
It’s my observation that people can save more and get more discounts when they pay upfront, rather than COD. Being digital saves a lot of additional cash handling charges and enables the seller to offer better price advantage. Nowadays, many platform provide additional cashback or free recharge when buyers pay online. It’s just that we have to collectively encourage people to pay online rather than COD, the same way we all came together to offer COD for generating customer faith and remove that initial hesitation.
My logic might also seem flawed to some. But it’s a opinion we have formed at this stage. We all know ultimately “Customer is the King”.
Do let me know what are your thoughts on this. And also, what do you suggest about the vendor providing SMM service that told us they rely only on COD for ensuring sales?
P.S.: On a different note, it’s Bengali New Year now, along with Punjabi (Baisakhi), Tamil (Puthandu) and Assamese (Bihu). We are celebrating this with everyone, so why not fellow Rodinhooders? You can get additional 10% discount on your purchase at http://www.stylecraftz.com by using coupon code “SNB10”.
Regards,
Sheuli
Vinod Kumar Agarwal
Hi Sheuli,
I have gone through your reply and suggestions patiently.
I can only say your Point of View has already been acknowledged by the RBI and supported by Paytm with recently launched Unified Payment Interface.
Other than the logistics part each consumer may have their own share of experience both in offline an Online transactions.
As a seller my position will always be to reach maximum sales potential and coupled with customer satisfaction.
Let COD be a Hit Wicket or LBW, all is well if your score keeps adding.
My sincere Wishes and Good Luck to you.
Vinod
Kiran N Bhat
Hi Sheuli,
Good thoughts … and yes, definitely agree that the cost of transactions using currency compared to ePayments is very high. Probably the cost could be reduced by atleast 5 – 10% of the total value of the transaction & also ePayments will ensure that there is a larger contribution to the national exchequer.
However, when you are starting off newly, it would be best to follow the pre-set market rules (De Facto) … wherein here it is COD, and everytime you have a client who opts for COD, while delivering the goods, please find a methodology to give some information / gyaan about “how COD is not cost-effective & ePayments are better”. This can be achieved by various means like
– Attach a small phamphlet or some kind of info paper, containing various info about your products / services and also small portion dedicated to encourage customers to use ePayments.
– If you have a control over the last mile delivery, then have the delivery person explain this to the customer
This way you are contributing to a change, while you will be successful in your business too.
From COD phase to complete ePayments phase … the transformation will take a lot more time, maybe 50 – 75yrs roughly wherein we will see a 100% ePayment. But you will help it speed up and maybe ePayments could achieve 100% maybe within 30 – 40years.
If the market forces have set a de facto standards of COD, would suggest that you go along that way and raise an awareness. And due to this process if your repeat customers start using ePayments, Voila …. you have achieved something significant and also you could offer them some special discount.
I have this standard statement which I keep telling people – Just Ensure the Country Prospers … and to ensure this works .. the Countrymen also need to prosper. So as we prosper, lets contribute to the nations prosperity. If you want the nation alone to prosper, then you are leaving a “legacy of fight against COD” not a “legacy of a business that worked to make ePayments successful”.
ALL THE BEST …. 🙂
Regards,
Kiran N Bhat
in.linkedin.com/in/kiranbhat/
https://twitter.com/kibhat1301
mail to: kiran@hredgeindia.com
Sheuli Purkayastha
Hi All,
Not to brag but we saw it coming 6 months ago. Finally, it’s time to promote Digital Payment options. I believe Wallet service providers are celebrating Diwali in their offices today.
Regards,
Sheuli
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Twitter: @stylecraftz