Cash-on-delivery, most preferred payment method for online shoppers: IIM-A survey

Despite an accelerated digitalisation of payments in India post-Covid, an online consumer behaviour survey conducted by the Indian Institute of Management-Ahmedabad (IIM-A) deduced cash-on-delivery, or CoD, as the most preferred mode of payment for online purchases. The survey results indicate trust issues as a possible factor behind the consumer choice.

“Nearly 65 per cent of consumers used cash to make payments in their last online transactions. In particular, consumers use cash more to buy fashion and clothing products exclusively. Cash is also the preferred payment mode for consumers from low-income groups having annual household income less than ₹3.6 lakh,” states the findings from a survey of 35,000 consumers conducted by IIM-A across 25 States. The contents of the survey, titled ‘Digital Retail Channels and Consumers: The Indian Perspective’, uses the consumers’ last online shopping transactions to assess their behaviours and views about online shopping.

“While our survey did not ascertain the reasons why consumers prefer CoD, trust may be an issue. However, one needs to think about trust more broadly, say factors that create doubt across product categories. For example, consumers looking to buy fashion and clothing may be concerned about the size and fit of the clothing, and consumers buying electronic products may be wary about the product being a used product. However, more research is required to ascertain these facts, and our data may not speak much regarding whether these are leading to greater use of CoD,” said Pankaj Setia, IIMA Chair Professor, Professor of Information Systems, in a written response to businessline. Professor Setia co-authored the survey report with Professor Swanand Deodhar and Ujjwal Dadhich from the Centre for Digital Transformation of the institute.

When asked which cities in India reported greater use of CoD, Setia stated: “Compared to others we do see greater use of CoD in cities such as Kolkata, Patna, Agra, Amritsar, Bhiwandi, Arrah, Ranaghat, Phulia, Bokaro Steel City and Puruliya.” The IIM-A survey found that fashion, clothing and electronic items were the major product categories where consumers engaged in online purchases. However, 87 per cent consumers used CoD for exclusively buying fashion and clothing products, while 75 per cent buy exclusively electronic products used CoD as the payment mode.

“For Indian consumers, CoD is the most preferred payment method for online shopping. It provides consumers the convenience to pay when the correct order is received. Initially, CoD was started to encourage online shopping and gain the trust of consumers in E-commerce. With time, several payment methods, including digital payment systems, have evolved, but consumers still prefer CoD for online shopping,” states the survey where Flipkart was the principal partner of the retail tech consortium that funded it. Croma, Fabindia, Flipkart, Kotak Mahindra Bank, Nykaa, OYO, Patanjali, P&G, Snapdeal, StarQuik and Unilever were the other partners of the consortium.

“However, for retail channels, CoD is not as efficient as the logistic partners handle the transactions. In this process, the retail firms receive the payment a little later compared to other payment methods. For the CoD-based return, the process is even more complicated. At the time of initiating a return, consumers have to fill out the return form and share their bank details. Once the refund team validates the credentials and approves the refund status, the refund is transferred to the bank account. This entire process takes around 5 to 7 days to complete. As the turnaround time for CoD is longer, E-commerce firms usually promote other payment methods by giving discounts and cashback offers to consumers,” it added.

Males spend more online than women

The survey also shows that male consumers spent more in online shopping transactions than women. “While this spending pattern needs further examination, it aligns with the gender gap in economic participation and opportunity in the country, wherein females lag behind males.” The survey also showed that a higher proportion of female consumers bought fashion and clothing products, while a higher proportion of male consumers bought electronic products. Online consumers from smaller cities spent more than those in Tier 1 cities.

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