Cash is no longer the king for e-commerce firms

E-commerce firms made their mark in India by accepting cash on delivery (COD) of goods. But with more and more refusals and cancellations by customers, they have been compelled to move to online payments.

To promote online payments, which are also upfront remittances, e-commerce companies are now offering massive discounts, loyalty programmes and freebies. And for many, the results are encouraging.

“There are a lot of cancellations coming in when orders are placed on a COD basis. Most of the refusals happen as the person may not be present at the address, or may have changed his mind or simply wouldn’t be interested as it was an impulsive buy,” said Aasheesh Mediratta, Chief Executive Officer at Fashionandyou.

A customer is more likely to take delivery if he has made online payment, reducing the number of reversals, Mediratta, said, adding that the online fashion retailer offers sops such as free shipping (₹100 charged otherwise) and 5 per cent off on purchases made on select credit cards. For Fashionandyou, the COD to online ratio was 70:30, and has improved to 63:37, he said.

“I don’t deny COD is a successful model,” said Deepak Abbot, Assistant Vice-President at online recharge company Paytm, even though cancellations are “frequent”.

The sellers have to pay collection agencies ₹60-90 (negotiable) a consignment, irrespective of the shopping cart size. However, for online transactions, the consigner has to foot 1.5 per cent gateway charges, making it expensive in case of a higher cart price.

However, agencies make remittances in either a 15- or a 30-day cycle. This locks up money compared with instantaneous online payments.

Foodpanda, a food delivery service, also prefers online payment, but for reasons such as high billing amounts. The tedious process of collecting the commission from restaurants also makes it look at online payments, said Vijayendra Singh, Managing Director and Co-founder of Foodpanda.

Foodpanda has a 50:50 cash on delivery to online payment ratio and it is looking at changing it to 20:80.

Amazon India is seeing an increasing trend of card payments, a company spokesperson said.

According to Technopak Advisory’s Associate Vice-President (retail) Pragya Singh, COD is not available in smaller towns due to logistics constraints and cash handling issues. Going forward, online payments would be the preferred mode, she said.

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