Enhanced logistics and delivery methods are expected to increaso to 28% over the next years, according to the report published by Catalyst and Kantar: The State of Ecommerce 2021. It's becoming clearer and clearer that offering alternative shipping and delivery methods to customers —such as a cash-on-delivery service— is key to improving the customer experience.
Offering to pay with cash on delivery is still beneficial for your eCommerce business, with limited downsides. But, what exactly is cash-on-delivery? Let us tell you!
How does cash-on-delivery (COD) work?
Sometimes it can be hard for customers to choose a shipping method that meets their preferences and needs. This is the reason couriers try to offer a wide variety of alternatives to promote sales and ease the purchasing decision.
One of the most frequent options as an alternative shipping method nowadays is the cash-on-delivery service. This method is offered by most couriers, but you may be asking yourself how does COD work?
In a cash-on-delivery service, customers pay once the parcel is received. Contrary to the prototypical online selling process, when the payment is made when the order is placed.
How can you offer a cash-on-delivery service?
A perfect solution for customers who are reluctant to enter their bank details online is to use the COD system. This alleviates concerns at checkout and the online business wins customers that would have otherwise bought offline.
For this to happen, the customer must select the COD option at the checkout page and payment screen.
This way, when the courier arrives with the parcel, the customer will need to pay and only then can he receive the parcel and open it.
The courier will transfer the money to the seller following the terms and conditions previously agreed by both parties.
What are the conditions of the COD delivery?
To ensure quality service for the customer, courier and seller, all terms and conditions must be met. The following is a list of the activities that every agent must complete.
A customer or buyer makes the payment to secure delivery and meet contract requirements. As explained in the contract, the buyer must provide correct delivery information, be available at the time and place agreed by the customer and courier, ensure they have cash to make the payment in the method stated by the courier, online store or both of these parties and pay the total amount, including VAT and any additional costs, if applicable.
Courier. This agent is fundamental in the delivery process and payment to the seller. In essence, couriers are responsible for carrying out a considerable part of the cash-on-delivery service, meeting the needs of both customers and sellers. Couriers must deliver the parcels at the agreed time and place as well as provide a high quality service. Moreover, they must ensure that payment is completed before the parcel is handed over. The courier must also meet the terms and conditions outlined by the seller.
The seller should ensure an easy and efficient process for the customer via high quality products or services and timely deliveries. Sellers must also comply with the terms and conditions agreed with the customer and courier.
Is cash-on-delivery safe?
This payment and shipping method is safe, but with any transaction there are still risks involved.
The buyer or customer has the advantage of not having to pay for a product until the package arrives. However, this doesn’t guarantee that the items aren’t faulty or that there hasn’t been an error with the order. If any of this happens, an exchange or return or reimbursement will solve the issue.
The seller risks sending the product(s) and not receiving payment. This is a considerable risk, because if the buyer fails to deliver his part of the contract, the seller would be responsible for all the delivery and the return logistics and costs.
Nevertheless, cash-on-delivery shipmetns are safe, as long as there's a commitment by all parties to comply with the terms and conditions of the transaction.
So… the buyer can’t open the package before paying?
Legal requirements for cash-on-delivery services vary from courier to courier and are determined in the contract. Normally, the package can't be opened without paying for the item and additional shipping costs.
Sellers take a risk when they ship the order without receiving payment first. However, with repeated customers this risk is lower. Thanks to the fact that the buyer cannot receive the parcel before the payment, the safety of the transaction is guaranteed.
There is a way to allow customers to check the content of the package before the payment. For this, the seller must authorise the buyer to do so and clarify this on the delivery terms and conditions.
How is COD delivery regulated?
There are no specific rules for cash-on-delivery shipping. As a general rule, both the online shop and the courier establish the rules for the service. This applies to accepted payment methods, the number of delivery attempts and the maximum cost of the order.
Additionally, you can find legislation that protects both customers and sellers like with any other kind of transactions. This can include national, European or even international legislation.
Benefits of paying with cash on delivery
- Smaller cart-abandonment rate, thus increasing sales and profitability
- More security for online shoppers who are concerned about the safety of their banking information
- Boosts the reputation and customer loyalty and retention
Disadvantages of COD deliveries
- Sellers can reject the package once it reaches its destination. This means that the online store will lose a sale and that, if the store wants to recover the package, it will pay, in addition to the shipping costs to the destination, the costs of its return to the warehouse
- Couriers usually establish a maximum amount for cash on delivery shipping. This amount varies depending on the courier company you choose
Couriers offering COD in the Baltics: Estonia, Lithuania, Latvia
Omniva
This well-known courier operating in the Baltics offers a service for COD upon receipt. The process of receiving the parcel varies depending on the delivery method.
For parcel collection, the customer will need to go to the nearest parcel machine, pay the required fee via bank card and take the parcel from the locker. The customer should confirm the collection of the order and print a receipt if desired.
To pick up a parcel from a post office, the customer will need to present ID, pay for the product and shipping costs before they receive the parcel.
To receive a package from a courier, the customer must be available to receive the parcel and pay the total cost of the purchase (product and shipping costs).
Smartpost
The cash-on-delivery service by Smartpost is available with the added cost of €0.96 + 1.5% of the total order amount. When the courier delivers the parcel, payment must be made by bank card. You can also collect from a parcel (blue) locker and pay with a card or use the online payment method by following a link sent via SMS or email and then collecting it from the white coloured lockers.
Smartpost will send the payments to the eCommerce bank account once a week or the same day of the collection, depending on the type of locker used for delivery.
If an item is returned and was sent via cash-on-delivery, Smartpost will not refund the fee. For this service, IBAN and BIC information is required.
DPD
The cash-on-delivery service from DPD allows the buyer to pay for the order partially or fully upon receipt of the parcel. In Estonia, this service ironically cannot be paid in cash, only by card.
DPD provides this service domestically, as well as for international shipments in the Baltics.
UPS
UPS offers cash-on-delivery services with payments under 20 days. If UPS doesn’t receive the payment after three delivery attempts, the package is returned to origin. The maximum amount is USD 5,000 for cash payments and USD 50,000 for payments through a check.
Couriers offering COD in Finland
Posti
When you ship through a cash-on-delivery service with Posti, the recipient will pay the total amount set by the online store.
If they need to pay for more than the shipment, for example, the products, this amount must be added directly to the COD amount.
UPS
UPS also offers cash-on-delivery services in Finland with similar conditions. Check availability here.
Couriers offering COD in Germany
DHL
DHL in Germany offers the cash-on-delivery service for orders with a value under €3,500. The courier will transfer the amount to your account within one or two working days of delivery. The price of this service is €5.60 plus VAT (usual transfer fees are not applied).
For international shipments with cash-on-delivery, the price is +€7.50 (VAT included) and the maximum sum is €1,000.
This service is not available to all countries. If you want to check which countries you can send products from Germany using the cash-on-delivery method, you can go to DHL’s official page for up-to-date information.
Hermes
In Germany, Hermes offers cash-on-delivery services nationally. However, we could not find any information on service costs and conditions or if the company provides these services when orders are sent from Germany to other countries. Contact Hermes directly and they can provide more details so your business can obtain the best deal.
UPS
UPS provides customers with three attempts to pay for their delivery via cash. This is essential in terms of receiving the parcel and, after three failed attempts, UPS will return the parcel to the online store.
In Germany, the maximum amount that UPS will collect in cash is €500 per receiver and day. In terms of cheques, the maximum amount is the local currency equivalent of $50,000 per receiver and day. UPS accepts various payment methods like business or personal cheques as well as cash.
The cost of this service varies depending on each shipment, with 2.8% the average net rate added to shipments delivered under cash-on-delivery conditions.
Couriers offering COD in Poland
Inpost
Inpost offers a cash-on-delivery service for orders up to PLN 5,000. The price of this service is PLN 6.00. If you want to receive a shipment report, you will need to pay an additional fee of PLN 1.50 for each report or pay a monthly subscription of COD PLN 10.00.
Poczta Polska and Pocztex
Poczta Polska and Pocztex offer cash-on-delivery services. However, the company doesn’t share the cost of this shipping method on its webpage. If you want to ship your orders with Poczta Polska or Pocztex, you’ll need to contact the courier directly and ask for more information.
DPD
DPD offers a cash-on-delivery service for domestic shipments that can be paid by card or cash. This service has a price of PLN 7.90 that will be added to the cost of the products.
Conclusions
Cash-on-delivery shipping are becoming more and more popular in many markets, hence the importance of working with couriers that can provide this service nationally and internationally.
Even though this payment and shipping method can create some delays in terms of receiving revenue, it gives customers a sense of assurance when making orders online. Further, for any new online stores, COD offers a way to attract new customers.
If you have questions on how to implement this delivery and payment method in your eCommerce business, contact us!
You can offer cash-on-delivery shipping with Outvio. Sign up and connect your CMS and couriers —or use our pre-set shipping rates— and start shipping within minutes!
