Forget the credit card, cash-on-delivery is doing the trick

When Flipkart goes to town on national television announcing its Cash-on-Delivery services for shopping online, you know that it's consumers who are setting yet another trend. In response, e-commerce Web sites are bending backwards to snatch the opportunity.

Though customers in the country are becoming highly net savvy even in the smaller towns, they are still wary about using their credit cards on unfamiliar sites. So, when a Cash-on-Delivery (CoD) choice pops up on the monitor for a highly desirable product, more often than not the consumer succumbs. Can there be a better way to test the site as well as buy with zero risk?

Young marts

It is this CoD option that is providing young online marts the fillip and helping them notch substantial sales.

Take, for instance, Letsbuy.com, online retailers of consumer electronics, communications and computer goods who started operations in December 2010. It introduced the CoD option on its site in April this year, and it has become the preference for 40 per cent of its buyers. So be it a mobile, a camera, a laptop, a refrigerator or an air-conditioner, you pay for it at your doorstep only after receiving delivery.

“One of the issues with any Internet initiative is that the ‘barrier to entry' is very low. So trust plays a huge role,” says Mr Arindam Bose, Managing Director and Chief Customer Officer of e-commerce venture timtara. A 16-month-old site, timtara started offering the CoD choice two months into its launch. And what did it find?

“In some months we were doing 80 per cent of our sales through CoD… When we launched not many customers took us seriously. CoD was the best way to get over this trust deficit,” he says pointing out that the option offers a value addition. “It shows the customer that you are a mature player, confident about your products and business model”.

Inconvenient method

Mr K. Vaitheeswaran, Founder and CEO of Indiaplaza.in (formerly fabmall.com), however, has a different take on the issue. Though his site offers the CoD option for books and is planning to extend it to other merchandise, he asks an interesting question: Why is it that those who use e-commerce sites for the convenience of shopping would like to use such an inconvenient method of payment?

He feels it is equally cumbersome for consumers to pay large amounts by cash and even worse, to stay at home and wait for the courier to arrive. Indiaplaza, one of the oldest in the business, does only 5 per cent via CoD route.

Women top COD

Co-founders of Letsbuy.com, Mr Hitesh Dhingra and Mr Amanpreet Bajaj, say that interestingly consumer research from their site shows that of their 40 per cent CoD sales, around 20 per cent is orchestrated by women buyers. Men generally carry the credit card in the family, but it's the women who have the time to surf the Net and make home purchases. This is especially true of the smaller towns and cities.

Mr Bose too feels that the trend is here to stay. “Going forward, as the next wave of e-retail comes in from Tier 2 and 3 cities, CoD will play a very critical role…a new genre of customers will need to be assured…”.

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