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Brands Fight High Returns on Cash on Delivery Orders
27 Jul
Summary
- Cash on delivery remains significant for traditional e-commerce.
- Brands face working capital challenges due to CoD payment terms.
- Technology helps mitigate high return rates associated with CoD.
Despite the digital payment revolution, cash on delivery (CoD) remains a dominant payment method for traditional e-commerce and direct-to-consumer brands, reflecting deep-seated consumer trust issues and preferences.
This reliance on CoD presents significant challenges for businesses, primarily impacting working capital. Companies must cover manufacturing, packaging, and shipping costs before receiving payment, with failed deliveries further exacerbating cash flow issues and inventory backlogs.
Furthermore, CoD orders typically experience significantly higher return-to-origin (RTO) rates, ranging from 20% to 30%. This results in losses from lost sales, customer acquisition costs, and logistical expenses.
To combat these issues, brands are increasingly leveraging technology. AI-based risk scoring, address validation, and proactive customer communication are being used to reduce RTO rates and recover potentially lost orders.
Innovative payment solutions like partial CoD and Buy Now Pay Later options are also being explored. Some brands are implementing UPI mandates or using pin code-level intelligence to secure payments while preserving customer convenience.
