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.
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