For online consumers scared of using plastic, cash on delivery option is a boon, but for online retailers it could fast become a nightmare.
About 30-50 per cent orders where the customer has opted to pay cash on delivery (COD) are returned, say industry sources. Result: It doubles courier charges for the e-tailer, adds to storage costs, thereby eating into his margins.
Mr K Vaitheeswaran, CEO of e-tailing firm Indiaplaza.in, says that about 95 per cent of its transactions are through card payment where the return rate is about 1.5 per cent. “But in CoD, we have a 40-50 per cent return rate,” he says.
Mr Mrityunjay Kapur, Country Head of consulting firm Protiviti India, attributes this to early stages of online retailing in the country. The rejection rate will decrease as customers get more comfortable with e-retailing, agrees Mr Purnendu Kumar, Vice-President, Retail and Consumer Goods, Technopak Advisors.
But Flipkart, an evangelist for the CoD model, says it does not have an issue. Almost 65 per cent of Flipkart's daily shipment of 30,000 items is based on CoD. Mr Vaibhav Gupta, VP, Products, Flipkart, says, “Before we started CoD, we had heard from sources that the return rate for CoD transactions in the industry could sometimes go up to 30-40 per cent. But this is not true at Flipkart.”
Mr Vaitheeswaran says that customers shopping online change their mind if the purchase is an impulsive one and this will get enhanced if the wait for the product extends beyond longer than two-three days.
Mr Rajesh Nahar, owner of CBazaar, an online seller of ethnic clothing, says he faces a 10 per cent return rate because the courier company is unable to reach the customer. “The courier has no choice then but to take back the parcel as he has not collected the money.”
There are cases when the courier company took too long to deliver and frustrated customers did not want the product anymore.
In contrast, offline retailers put their rate of return at around two per cent. “The effort of actually driving to the store, producing the bill and returning the product is not easy. This takes a lot of time and effort,” reasons out Protivit's Mr Kapur.