The increase in online shopping is evident. From day-to-day groceries to basic necessities, electronics, pet supplies and more, each one of us is choosing to buy online instead of stepping into brick and mortar stores. But with online shopping came a feeling of uncertainty amongst shoppers. Not being able to instantly grab hold of their purchases, increased order anxiety. Add to that frivolous frauds online, and you’d find them placing endless WISMO calls.
That’s where the Indian eCommerce ecosystem is seeing a shift back to choosing cash on delivery more than online payment methods. Getting to place an order online without having to pay for it until it actually gets delivered, has helped us as consumers reduce our anxiety around purchases.
In this blog, we’re sharing everything you need to know about offering your customers cash on delivery as a payment method.
What is cash on delivery (COD)?
Cash on delivery is a payment method wherein an online shopper chooses to pay for a purchase at the time of order fulfilment; instead of paying for it in advance. It is also commonly known as collect on delivery or cash on demand. So if a product is undelivered or not paid for, it gets returned to the brand/merchant.
Why is offering cash on delivery important?
According to Nielsen’s Global Connected Commerce Survey, published on Business Insider, almost 83% of consumers in India prefer cash on delivery as a payment mode for online purchases. 72% of consumers from major cities and 90% of those from smaller towns choose cash on delivery over any form of advance payments.
Payment options such as net banking, debit and credit card and online wallets, contribute to only 30% of all the online purchases made.
- Fear of online scams
- Familiarity with cash payments
- Ease of transaction
- Lack of secure payment gateways
- Insufficient network for online transactions
- Post-purchase order anxiety
- No dependency on payment cards
Simply put, cash on delivery (COD) offers online shoppers the comfort and reassurance they’re looking for.
A consumer gets to hold the product before paying for it.
But that’s not all. Even from a business perspective, offering cash on delivery as a payment method on your Shopify store has its advantages.
Business advantages of offering cash on delivery
1. Increase in impulse purchases leading to more sales and revenue
Online shoppers are always on the go, even when they’re shopping from home. They want to be able to browse products quickly and complete their purchases in a jiffy. With online payments, it takes them at least two more steps to complete checkout. But with cash on delivery, the process is faster and hence, there is an increase in impulse purchases.
2. Builds trust and increases customer loyalty
When you don’t ask for an upfront payment without giving the customer something to hold in hand, you build trust. They know that as a brand, you’re focused on first fulfilling their order and then on getting paid for it. The simple emotion leads to increased customer loyalty, which can eventually lead to them choosing to also pay online for future purchases.
How does cash on delivery work for Shopify stores?
Starting an online store is easy. But when it comes to looking into the little nuances of consumer purchase behaviour, it takes a few more steps. Case in point - offering cash on delivery on your store. Now there are two ways to do this:
1. Install the Advanced Cash on Delivery app
The Advanced Cash on Delivery app is a free solution developed by Shopify. It enables merchants to offer cash on delivery with a simple plug and play interface, wherein they get complete control over how and when shoppers can use the payment mode to place orders.
Here are some of the powerful features of the app:
- set a price range for cash on delivery orders
- specify the postal codes where you want to offer cash on delivery
- create custom shipping rates to all cash on delivery orders
- add an availability checker to your store's theme
- let your customers check Cash on Delivery eligibility for their postal code
- COD payment option when they choose COD shipping
- Prepaid payment options when they choose prepaid shipping
2. Use a manual payment method
Alternatively, you can also choose from a list of suggested manual payment methods on the Payment providers settings page. To set this up, you need to log into your Shopify store admin, head over to settings and payments and then follow through the payment instructions to set up cash on delivery.
While you can set up cash on delivery in this way, there are few things you will have to take into account additionally:
- checking COD availability at different postal codes
- setting up a maximum and minimum order value for COD
Covering all grounds when offering cash on delivery
Cash on delivery is the most preferred payment method amongst Indian shoppers. True.
But because of how easy it makes it for shoppers to complete a purchase, there has also been a reported increase in fraudulent orders. This has resulted in online businesses experiencing high cancellation rates and RTOs, leading to a loss in revenue.
On average, online stores witness an RTO rate of about 30% on the orders placed.
So when you implement cash on delivery, remember to fool-proof your store. With apps like Thirdwatch, you can:
- Identify orders which have a high probability of RTO to enable timely cancellation
- Detect incomplete/ fake addresses
- Flag incorrect contact information (email ID/mobile number)
- Speak to customers and update the addresses before order shipping
- Detect fraudulent orders to cancel them before shipping purchases
- Predict impulse purchase patterns with high RTO rates
Do you need to offer cash on delivery?
If you’re primarily selling in India, offering cash on delivery as a payment method will only help you turn more store visitors into customers.
The familiarity of making purchases with cash in India is what makes this payment method the most used.
So the answer is YES.