When you are running a business, you want to give your customers the best satisfaction, so they become regular customers. You ensure they get a range of services to make it easier for them to purchase what you have to offer.
One of your customers’ most wanted features is providing the cash on-delivery method of payment when buying online. The comfort and satisfaction of paying after physically receiving a product are unparalleled.
In this article, we discuss COD in detail, along with some of its pros, cons, and examples.
Part 1. What is Cash on Delivery (COD)?
Cash on delivery is a payment service provided by businesses where customers can pay for a product after it is delivered to their desired location. Most of the time, the payment is made in cash, and hence, the name is preferred more than paying while ordering. Nowadays, it is also called ‘collect on delivery,’ as cash isn’t the only form of payment, and customers can pay with electronic payment methods.
Part 2. How Does Cash on Delivery (COD) Work?
Please see the image below to understand how the cash-on-delivery service works. Then, let’s discuss each aspect of COD.
The Seller Advertises and Posts on Social Media
Any business that wants to sell its products will advertise it through different means. One of the most used and common methods is posting it on social media. This can either be an ad campaign or regular posts about the product on its official page or thread. The purpose of this practice is to gain maximum views and clicks, which can result in higher chances of a purchase.
The Buyer Makes an Order
If the product is attractive, the buyer is enticed and places an order on the same social media post or page. If the business mentions ‘cash on delivery’ available, they select it and provide their information, such as address and contact number.
Product Delivery and Payment Collection
The seller then uses a courier service or a third party to facilitate the delivery. Once the delivery is made, there are two prominent ways of processing the collection. In some services, the delivery personnel take a picture of the product being delivered and then scan a QR code to confirm the product is delivered. This is less common but still available.
Most of the time, the buyer receives the product and pays on the spot after physically acquiring the delivery. In a COD case, the invoicing is printed and pasted on the package of the product for clear information for all the parties involved. In some cases, they can check the product to see its validity.
The Payment is Released
In the first scenario, after the code is scanned, the payment release process starts, and the seller receives the payment soon after. In the second scenario, the cash collected is brought back to the courier office, which, after approval, is digitally released to the seller.
Some delivery charges will be deducted from the total payment, which may change based on the business agreement between the two parties.
Part 3. Pros and Cons of Cash on Delivery
After discussing how the process works, let’s discuss some of the pros and cons of COD service.
Pros of Cash on Delivery
Following are some of the key pros.
Immediate Payment
In most cases, the payment is immediately transferred to the seller as soon as the courier registers that the delivery is made. This is much faster than digital payments, as in some cases, the bank takes processing and hold time before releasing the payment. It ranges from a couple of days to a couple of weeks, depending on the practices of third-party courier services.
Shorter Delivery Times
These days, delivery within a state or country can be done overnight, whether by road or air. In other payment methods, the invoicing, delivery, clearing, and release process takes more than a week to process.
Consumer Confidence
This service increases the confidence a customer builds in a seller, especially a new one who still has to make a name for themselves. Thus, by offering the service, sellers can start building a brand name.
Furthermore, a customer who lacks access to credit can easily pay with cash and doesn’t have to rely on credit companies. This also greatly increases the seller’s trust.
Cons of Cash on Delivery
Let’s see what some of the cons of this method are.
Greater Risk
The delivery company and seller take a risk when sending their product. If the buyer doesn’t have cash or finances, the product returns, causing loss. The seller incurs more costs this way as the buyer isn’t obliged to pay any damages for the return.
Lot of Manual Work
In most of these cases, cash is the form of payment that increases the manual labor involved. The money is collected, counted, delivered, and finally deposited in the bank. The same is the case with accepting checks as payments, where only some steps are changed, and the labor involved increases.
Part 4. Types of COD Payment Methods
Cash is one of many methods of payment when concerning COD. Following are some other methods of payment.
⦁ Checks—Certain companies allow payment with checks if the order is large and they are dealing with a regular customer. The checks are then delivered to the nearest bank supported by the seller.
⦁ Mobile POS—POS or point of sale machines are usually carried by the delivery individual, so the customer has the option of paying on the spot with their card.
⦁ Electronic Payment—The customer can transfer the funds online to the account that the courier shares. In recent cases, the courier shares the QR code of any validated digital wallet, and the payment is made instantly.
⦁ Digital Currencies – Some sellers also accept crypto, so the processing time is minimal.
Part 5. Cash on Delivery Examples
Following are some of the most common examples of cash on delivery.
Food Delivery
Many cafes and restaurants are offering food delivery to further enhance their customer service and outreach. While digital payments are quite common in any business’s app, there is always an option for COD. Uber Eats is one of the prime examples.
Online Shopping
Whether it’s Amazon or another popular online service or any business, they offer their online customers the option to select COD. By placing the order, the seller delivers the purchased product to the customer’s door, where the cash is collected.
Pharmacies
Many pharmacies have also jumped on the online delivery train, offering health products and medicines to their customers. Cash on delivery is one payment option for these types of businesses.
B2B – Business to Business
The seller orders different products in bulk from the manufacturer or wholesale supplier. Though they may make some of the payment, complete cash on delivery is accepted in many circles.
Conclusion
Cash on delivery is a great option for many customers who want to hold the product physically in their hands before they make a payment. They do not have to go to a brick-and-mortar store to buy something; instead, they can choose online while their product is delivered to them.
If you are a business that understands the needs of its customers, COD is a great service to provide. This service can be further enhanced if you choose NextSmartShip to streamline your logistics for a nominal fee. While you focus on your business, NextSmartShip will take care of all the logistical activities and money release.
