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Pros and Cons of Cash-on-Delivery (COD) For E-Commerce Entrepreneurs

Pros and Cons of Cash-on-Delivery (COD) For E-Commerce Entrepreneurs

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Cash-on-Delivery (COD) is one of the most popular payment method in e-commerce, and for good reasons. Because of this, many e-commerce stores choose to add COD to their payment option.

However, COD is not all breeze, and just like other payment options, it has its own pros and cons. Before you consider implementing COD to your store, consider its advantages and disadvantages.

Advantages of COD Payment Option

The obvious benefit of COD payment option is that, more customers are likely to buy your store. Here are two reasons for that.

First, your customers will be willing to buy from you knowing that in case things went bad, his or her money will not be lost. With online transactions, there’s that anxiety on the part of your customers that their money could be potentially lost to shipping problems or fraudulent e-commerce stores – but that certainly and apparently won’t happen with COD system because their money is theirs until they received the product.

Second, COD is simply simple compared to online transactions. There’s no need for credit or debit card payment, and there’s no need for online banking payment. As long as the customer has the cash ready, he/she can buy at your store with ease.

If COD encourages your customers to buy more, this meant that you can earn more sales than if you don’t have COD as one of your store’s payment options.

Disadvantages of COD Payment Option

But just as COD is a great payment option that can lead you to more sales, it has its own risks that needs to be considered.

One of the risks entrepreneurs may face is the risk of fraudulent customers. Just as there are fraudulent e-commerce stores, there are also fraudulent customers who tries to outsmart the seller or just probably trolling them – yes, they are just annoying people!

Tip: You can avoid or reduce your risk against fraudulent customers by placing restrictions before they can avail your COD option. For instance, you may opt to withhold COD option to new customers until they become regular or “establish their reputation” in your database. Or, you can simply take some risks and block any fraudulent customers the moment you see them – after all, most of your would-be customers are really legitimate who just want to buy stuffs online.

Another risk you will face with COD is the revenue loss incurred for every product return. Since returned products are not paid, you will have to carry the cost of its shipping.

Tip: The best way to minimize product returns is to simply ensure quality. While it will not totally remove your risk of product returns, ensuring product quality through quality checks will minimize your risk of product returns.

Speaking of shipping cost, many couriers charge extra payments for COD options. Since it is hard to shift that extra cost to the customer, most of the time, the burden of the charge is carried by the seller.

Tip: You can charge a little bit on the delivery fee if your customers opt for COD option. But don’t just too much as some customers are savvy and will take notice if you charged way more than the average shipping cost. And it’s simply bad!

Final Thoughts: Should You Add COD?

COD is a great payment option which works great for both the customer and the seller. That being said, you should take note of the risks and disadvantages of COD. Luckily, there are things you can do to minimize your risk and maximize the benefits of COD. Besides, as mentioned above, most of our customers are real who simply want or need to shop things online; they’re not there to destroy your business and life!

Oh, if you’re interested in offering COD, Fulfillmen can help you with that! As long as you sell to key countries, Fulfillmen works with various local couriers which allows their customers to be able to offer COD to these countries. To learn more about Fulfillmen’s COD services, click here.

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