Shattering the Myth : Reality behind COD (Cash on Delivery)

Shattering the Myth : Reality behind COD (Cash on Delivery)

Today, we wanted to talk about COD which is the most popular shipping option.

Why do Customers prefer COD ?

1. I am new to this site and I don't know if they will even ship.
2. I may not get the right product
3. I don't want to pay and worry about losing money. 

What is the Reality behind COD?

1. Not every shipping partner gives COD option in every city. For ex : Fedex may have COD option in Delhi but may not have COD facility available in a smaller place like Beawer ( Rajasthan)
2. Not every shipping partner gives COD option to every supplier or vendor. Most of the big shipping partners already have existing clients who are big companies who give them business and they are not on the look out for small companies like us. This is like an Oxymoron. Given that the small businesses need the COD the most as an option since they are not established and their customers don't know them much.
3. Even the Startups don't want Startups : This is something which we were also surprised with. In India, it looks like even Logistics startups don't want to deal with small businesses. Apparently, it is important to land a big client to be stable and so, they don't care about small businesses either. While we agree that big clients increase your foot print in the market, but you should never forget that you were once a start up.
4. The best of the shipping companies don't perform well in terms of COD shipments (at least for small cities). This has been our experience so far. The typical shipments which are non COD reach anyone within 3-5 business days. However, it takes 10 days even for companies to process COD shipments. In our own experience, we gave the contract to one of the most renowned companies in the industry which we think is the best even today ( excluding COD shipments).

Some of the issues which we faced were,

1.The address was not serviceable after the shipment has left the facility and was at receiver's destination. We would be on phone for hours to convince the shipper to keep it there so that the customer would collect. However, their system won't allow it and the item would return. We wonder why someone would even pick up the shipment if it is not COD serviceable.

2. The receiver refused the delivery and there is an RTO issued. While we don't have many of these cases but if the delivery person has a disconnect with the receiver or just wrote the shipment as Refused delivery( the customer actually wanted this item but the delivery person wrote this by mistake), the businesses will be charged twice as much for re-delivery as there will be back and forth fuel costs associated with these kind of shipments.
3. The shipper wrote a wrong amount. It is quite possible that in spite of the fact there is a clear invoice written, the amount which was written in the final invoice may be different. This will also be informed to the Vendor after 45- 50 days as the reconciliation of accounts happen very late.
4. The customer gave a wrong address and the updated address is not COD serviceable. This is rare and we don't want to give any ideas but sometimes, this happens where the customer gives a wrong address and the updated address once the shipment reaches destination may not be COD serviceable. 

Let's discuss a little about the finances involved in COD :

1. Any COD shipment may cost anywhere between 200 to 350 ( depending on insurance, location and serviceability.
2. What happens when the shipment returns for any reason ? Equal amount is charged even for the returned shipment. For ex: The shipping partner charged Rs 200 for a shipment which was accepted by the customer, the shipper would charge Rs 400 for a return shipment as they think it is equal amount of effort both ways.
3. What happens when the shipment is lost? Yes, we have had many issues with this as well. Of course, we will replace the items but by the time we are informed ( almost 15 days after the item is shipped), some of the items are already out of stock.
4. The Shipping partners take anywhere between 20 - 30 business days ( sometimes even 45 days) to deposit COD. If say, there was a wrong amount written by the shipper or by the person who collected the amount, the businesses will suffer a loss as we wouldn't get remittances until the transaction is done and the customer has received the item.


What do other vendors/businesses do?

1. Apparently, once the item is shipped, most of the businesses don't care if it has reached in 10 or 15 days as the responsibility is left with the customer to follow up. At least, this is what our shipping partners mentioned. We don't know how far this is true. We follow up with our shipping partner every day for every shipment even when we have 20 or more shipments in transit. We think that it is somehow irresponsible from the seller side to not be accountable once the item is shipped.
2. Move their office to a Metro. We didn't start big and we don't want to ask for VC funding. We are very traditional in this mind set, we don't spend until we earn. It is probably easier for big companies with foreign funding to throw money to earn more. We will create a big office only when its required and spend when we actually are able earn some profit. Current e-commerce businesses (even the big ones) are not really earning as much as their current valuations but the businesses are hoping that if they would kill all the competition in this process, they would be able to earn more once they have the monopoly. We are not in the category and probably never will be as we think that best products earn more customers and no amount of money can take away customers earned that way.
3. Quit giving COD as an option. We may be thinking about this soon if we don't find a reliable shipping partner as most of our old customers already have opted for Bank deposit. We are also introducing other payment options soon.

Conclusion : Given the amount of headache which comes with COD , we don't think that this is of a great advantage to the customer or to the vendor. We are here to do honest business and we are here to stay.We hope that customers trust us and help us grow to the levels that we dream of.

We would love to hear from you! Share us your opinion as we would like to know more from our customers.


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