Looking for a new way to boost sales and keep your customers happy? Are you hoping to build brand loyalty and gain the trust of your shoppers?
It’s time you consider offering Cash on Delivery (CoD) as a payment method.
It’s the top payment method in India. It’s also quickly growing in popularity in other places, such as the Philippines and even the US.
But, how does CoD work and what are the common CoD charges to consider? There’s no need to fret, we’ve got it all laid out for you below. Read our guide here and discover how CoD could be the next best tool in your business’ repertoire.
What is Cash on Delivery?
Cash on Delivery is a method of payment for online purchases. In this method, the buyer doesn’t have to pay the seller until the logistics company delivers the product. Most CoD orders accept cash or card payments.
Most customers prefer this method of payment. It ensures they don’t have to spend until they know for sure that they received the product. If they got the item and discovered there’s a defect, they can refuse to accept it and simply not pay.
This is a stark contrast to traditional transactions. The traditional method requires customers to pay, via card or other modes of payment, before the seller ships the item out.
How Does CoD Work?
In many ways, CoD works exactly like a traditional payment method. The buyer has to go online and complete an order on the seller’s site. They have to provide all the common details, such as their delivery address and the name of the recipient.
However, at the tail-end of the order process, they no longer have to pay at that exact moment. They simply have to choose the “Cash on Delivery” option. The buyer then has to prepare and ship the item.
Sellers have to add the shipping fee on top of the cost of the ordered product.
The buyer only has to pay once they get the item. They will pay the courier and the courier then delivers the money to the seller. Once the seller receives the payment, they can close the order and record it as a completed transaction.
Couriers get to keep the shipping fee payment.
Keep in mind that CoD affects how you conduct accounting.
Public companies have to recognize revenue at the time of the transaction. They then have to record the payment in accounts receivable. Private companies can follow the same method or turn to cash accounting, wherein they must wait to record the transaction as revenue until they get the payment.
Benefits of Cash on Delivery
Why offer Cash on Delivery? Wouldn’t sellers want to get the payment before they risk sending an item to a buyer?
Let’s go through each of the benefits in-depth:
Increase Order Completion Rates
Take a moment to go through your sales and site analytics. How many people visit your site, place items in the carts, but then abandon their order before they can complete it?
People might get dissuaded to complete an order because they don’t want to spend cash at that very moment. You can work around cart abandonment with Cash on Delivery. CoD offers a sense of security to your customer and who doesn’t like having an additional payment method in case your shop can’t accept all forms of cards or PayPal?
CoD also works with customers’ mindsets. They’re more likely to push through with an order because there’s the comfort that they don’t have to pay right away. It’s all about building trust with your consumers and this leads to an increase in customer loyalty.
Some people also prefer CoD because they fear the risk of credit card fraud or identity theft. Offering CoD soothes their fears since they can then pay upon confirming that you did indeed deliver a legit item to their doorstep.
Boost Customer Loyalty
CoD is also a good option if you want to build your brand.
Offering CoD, as mentioned, increases the likelihood of people completing orders. The more times people experience a smooth transaction thanks to your CoD option, the more they’ll rate your business highly.
As long as you keep cash on delivery available, your customers will keep coming back. You’ve established a relationship with those customers and they can always rely on your CoD for payments.
Positive Word of Mouth
These customers are also more likely going to tell their friends and family to shop at your site because of the CoD advantage. People who might not have gone to your online shop before might now give it a try. If their friends trusted your shop, they will too, especially with the benefit of CoD.
You can take advantage of this too. Whenever you got customers who spent a lot on one order, make sure to mention them on social media! Let everyone know you trust your customers to pay upon receiving their orders and that they can trust you to ship out the right items.
How to Implement CoD?
Cash on Delivery isn’t difficult to implement. You do need to have a reliable logistics partner because they’re the ones collecting the payment for you.
The first step is to negotiate with the logistics company. They’ll let you know how much they charge for different shipping conditions.
Don’t forget to add these shipping fees to customer orders. Make sure you let your customers know who’s delivering their items. This lets them know who they should call in case an item gets lost in transit.
Once you’ve set an agreement with the courier, you can offer CoD in your shop. When someone makes an order, you have to make sure the courier gets notified.
The receipt for the order should include the final charges. This lets the delivery worker know how much the logistics company keeps and how much they have to send to you.
Let Customers Pay Cash on Delivery Now!
Why wait? Offer Cash on Delivery now and watch as more customers flock to your shop. It’s a good payment method to get the ball rolling for your brand and it’s effective in building loyalty.
Of course, you can’t start without a good logistics partner. Let us handle that side of the equation. Contact us now and let us help you out!