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COD Payments in Micro-Localities: A Seller’s Guide

The rise of eCommerce has revolutionized the way people shop in India. With the widespread availability of the internet and smart devices, online shopping has become a common practice in households across the country. Despite this digital shift, one key factor that drives buyers to shop online is the option to pay in cash. COD payments also carries a larger risk of theft because agents run the danger of losing money or being stolen. As a result, there is a greater insurance risk, which raises the cost of doing business. A further source of cashflow issues for the retailer is late payments for goods. Cash-on-delivery essentially shifts the entire risk to the seller.

shoppers data for ecommerce Source: https://razorpay.com/blog/cash-on-delivery-and-the-challenges/

This growth will likely lead to an increase in cash on delivery orders. This raises the question of what challenges are associated with COD payments and how these challenges can be addressed.

When it comes to identifying good and bad areas for COD, there are several factors to consider, including the safety and security of the site, the prevalence of fraudulent activities, and the accessibility of the location.

One way to validate addresses and determine whether an area is suitable for COD is to use a mapping tool or a geographic information system (GIS). These tools can help you visualize and analyze data such as demographics, crime rates, the presence of banks, transportation options, etc. in a specific area.

Challenges With COD

  • For the seller, COD transactions are expensive, particularly when there are product returns. Product returns occur more frequently in CoD purchases than in Prepaid orders. While COD is practical for Indian customers placing impulsive orders or for those who continue to have misgiving about prepayments, it exposes online sellers to the risk of losing money and sales as a result of RTOs, orders that are returned to the seller.
  • The applicability of COD may also depend on the local demography. For instance, an area where COD may be less appropriate is in regions with high crime rates. In such areas, carrying cash can be risky, and delivery personnel may be vulnerable to theft or robbery. This may make it difficult for them to carry out COD transactions safely and securely. Moreover, with difficult-to-navigate addresses, last-mile agents frequently have trouble finding the customer’s delivery location.

COD Service Backed With Standardized Addresses:

  • RTO Prevention Areas: Identify the high-risk areas with high return to origin (RTO) rates or low acceptance rates, which can be an indication that customers may not be willing to pay for their orders through COD.
  • Assess Payment Infrastructure: Looking at the transaction history of an area can also help you identify good and bad areas for COD. If an area has a history of high COD transactions and low fraud rates, it may be a good area to target. Assessing the payment infrastructure available in the micro-localities, including the availability of banks, ATMs, and other payment options.
  • Cost Impact: By targeting good areas for COD, online retailers can reduce the risk of fraud and theft, which can result in significant cost savings. Online retailers can also save on delivery and logistics costs associated with failed deliveries. Businesses might lack capital because clients pay for the product after delivery.
  • Reachability Issue: Validating addresses can help online retailers identify areas that are easier to reach for delivery drivers. This can improve the delivery experience for customers and reduce the risk of failed deliveries due to inaccessible or hard-to-find addresses. Such areas should also land in the no-COD option list.
  • Affluence Prediction:  Analyze the demographic data to identify any patterns or trends that indicate affluence in the area. For example, high levels of education and high-income levels are often indicators of affluence who purchase high-value items.

Conclusion

Cash-on-delivery payments have been a popular payment option in India’s e-commerce industry. However, it also presents several challenges for online sellers, such as high product return rates and the risk of lost sales due to RTOs. By validating addresses and targeting good areas for COD, online retailers can improve the delivery experience for customers and reduce the risk of failed deliveries. Furthermore, demographic data analysis can help predict affluence in an area, which can help online sellers forecast their sales and make informed decisions about their payment options. By addressing these challenges and implementing effective COD strategies, online sellers can continue to offer customers the payment options they prefer while also reducing costs, improving efficiency, reducing fraud risk by ensuring that deliveries are only made to valid and verified addresses, and increasing customer satisfaction.

An address quality API can verify the accuracy of the address provided, including the street name, postal code, city, and state. This can ensure that the COD payment option is available in the specific locality, which can save time and resources for both the seller and the buyer.

For more information on our products and services, you can visit www.geoiq.io or get in touch with us at hello@geoiq.io

Photo by EVG Kowalievska

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