Explore Cash on Delivery (COD): how it works, its benefits and risks, examples, and tips for secure handling. Learn if COD is right for your business.
The delivery industry uses a variety of payment methods, like cash, credit cards, and checks. Each company has its own payment policies.
When looking at payment methods, it’s all about timing. Payments can be made upfront or at delivery. This is known as Cash in Advance or Cash on Delivery (COD).
COD is hugely popular in Southeast Asia.
This is because many people there don't have credit cards, so COD is a game-changer for businesses. It also helps customers trust online businesses. According to Statista, the COD market could hit $578.4 billion by 2025.
In this post, we'll dive into COD. What does it mean, how does it work, and what are its pros and cons for delivery?
Let's get started.
In this post:
Think of COD like a pizza delivery where you pay the driver when they show up. This idea works for lots of other deliveries too.
With COD, you pay with cash, check, or credit card when the delivery arrives instead of paying ahead of time.
While paying upfront is more common in eCommerce logistics, some small businesses use COD because it has many benefits (we'll get into those later).
Big companies might find COD tricky because it makes their accounting more complicated.
Simply put, COD is a popular payment option that customers like when buying from new retailers.
With COD, customers can pay for their stuff right at their door with cash.
Now that we know what Cash on Delivery (COD) is, let’s see how it works.
COD is a payment option used by both courier companies and in-house delivery teams. Even eCommerce platforms like Shopify and WooCommerce have COD setups.
For example, in WooCommerce, sellers can offer COD for any shipping method, and even for virtual orders that don’t need shipping but still need payment.
Because COD orders carry more risks, Shopify lets stores set a price limit for COD.
If an order costs more than this limit, it won’t qualify for COD. This helps reduce the risk of shipping without getting paid.
COD is used by many industries now. Here are some examples:
Since we mentioned the risks of COD, let's also look at the benefits.
When it comes to eCommerce shipping, more options mean better business.
We've talked a lot about different delivery options on this blog, like same-day delivery, contactless delivery, and free delivery. These are what customers expect and prefer.
The same idea applies to payment methods. The more choices you offer, the better it is for your customers. COD, in particular, adds an extra layer of security for buyers.
Offering more options for customers means taking on more risks for the business.
Online stores that use COD risk not getting paid in full or at all. If that happens, shipping costs aren’t covered and need to be managed ahead of time.
For example, logistics companies use route optimization software to consider all delivery factors and create the fastest, cheapest routes. This includes planning loads to cut down on mileage, fuel costs, and driver time.
It's not all risk and no reward for businesses that offer COD. For starters, smaller businesses without a big brand name can use COD to build trust with customers.
Bigger logistics operations might find COD challenging. Yet, smaller sellers can use it to encourage customers to buy, knowing they have more time to pay.
Combine COD with advanced delivery notifications, dynamic ETAs, and live package tracking, and even a small delivery operation can provide great self-service and exceed customer expectations.
Learn how Porcelanosa achieved a 80% reduction in customer calls on deliveries.
Plus, COD can be better than credit because you get the payment in full right away. In terms of accounting, COD shortens the days receivable, meaning short-term debt can be settled faster.
As you can see, there are pros and cons to offering COD as a payment option. If you have a local delivery operation with in-house staff, it might be worth trying COD to see how it affects your sales and revenue.
The good news is that trying COD doesn’t need big investments. With the right delivery management system, you can add COD without extra costs.
Plus, there’s plenty of technology available to support COD. You can choose from various cash-on-delivery apps that are best suited to optimize your business operations.
With eLogii proof of delivery, you can plan and optimize routes while equipping your staff to handle paperless and contactless deliveries and pickups.
The eLogii delivery driver app includes a Cash on Delivery feature. When creating or importing an order, the dispatcher specifies the COD amount.
E-signatures and photos can be captured to automatically for an electronic Proof of Delivery (ePOD) document.
COD is a widely used payment method for online purchases in numerous countries. These include India, Pakistan, Bangladesh, and other places with less tech access.
The main reason is that people in these countries often don’t have credit cards, so they pay in cash when their order arrives.
In contrast, countries like the UK, US, Sweden, Norway, and Singapore are more digital and use electronic payment methods widely. In these places, cash on delivery is less common because people prefer digital payments.
You should set some policies and guidelines to keep COD transactions safe between your customers and your business. Here are a few to consider:
Cash on Delivery (COD) is the opposite of Cash in Advance. Instead of paying upfront, customers pay at the delivery location after their order arrives.
COD has both benefits and drawbacks for customers and businesses. While it might be tough for large operations, small businesses can gain from COD because it lowers buyer risk and helps build trust.
If you're thinking about adding COD to your shipping process, check out eLogii’s route optimization software, which includes a COD feature for drivers.
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