Table of contentsClick link to navigate to the desired location
This content has been automatically translated from Ukrainian.
Cash on delivery is a payment method where the buyer pays for the goods upon receipt, rather than in advance. This method is often used when purchasing goods online, when the buyer does not want or cannot pay for the goods in advance, or wants to inspect the goods before payment.
When using cash on delivery, the seller sends the goods to the buyer, but the payment for the goods is collected by the postal service or delivery service upon delivery. After the buyer pays for the goods, the money is transferred to the seller. The postal company charges a service fee (money transfer).
Cash on delivery is the same as payment upon receipt. The term payment upon receipt has the clearest meaning. For clarity, you can refer to a simplified scheme of how payment upon receipt works.
Simplified scheme of cash on delivery (payment upon receipt)
- Placing an order in the store
- The store sends the goods
- The courier delivers the goods and allows inspection
- The buyer takes the goods, pays for them + delivery + service fees
- The courier hands over the money for the goods (to the store)
When the goods do not satisfy the buyer, they can be returned. But there is a nuance; the courier or postal service cannot provide free services. So someone has to pay for the services. Usually, in the case of small and medium online stores, the cost of return falls on the buyer, and they must understand that if the goods do not fit, they lose the money they have to pay to the courier. Let's consider the pros and cons of cash on delivery.
Advantages of cash on delivery (payment upon receipt)
Cash on delivery has its own advantages that may be attractive to buyers and some businesses.
- The buyer has no risk of losing money for the goods they want to purchase. Payment is made only after the goods have been received.
- Cash on delivery can increase buyers' trust in the store or supplier, as they can verify the quality of the goods or service before payment.
- For many buyers, it is convenient to have the option to pay for the order upon receipt, especially if there are no other payment methods (on the online store's website), such as credit cards.
- The buyer will receive the goods after some time, so they can technically use this time to find money to pay for the goods. For example, you order goods today (the last promotional item on the site at a very attractive price), tomorrow you receive your salary (money to pay for the goods), and the goods will be delivered in a few days.
- For expensive items, it may be convenient to use cash on delivery, as it allows the buyer to verify the quality before paying a large sum. The courier service fee will be higher accordingly, but you pay for minimizing (completely eliminating) the risks associated with purchasing the goods.
Disadvantages of cash on delivery (payment upon receipt)
- The seller takes on the risk that the buyer may refuse to pay after receiving the goods or service. For small and medium businesses, this is very significant. The store loses not only time (money for labor costs) but also 'freezes' its goods for some time. For example, this is the last item, and to sell it or deliver it to a new customer, it must first be received and checked for damage (which may occur during transportation).
- Delivery services provide cash on delivery for an additional fee, which can increase the delivery cost for the buyer.
- For businesses, it is important to receive money as quickly as possible. Cash on delivery can lead to delays in cash flow and affect liquidity.
- Not all buyers may be satisfied with the limited choice of payment methods. For example, if the buyer does not have cash or cannot use another payment method, this may affect their purchasing decision.
- In some cases, such as returning goods or changing the terms of the agreement after receiving the goods, complications may arise with processing refunds or correcting payments.
- If the goods are damaged or lost during delivery, there may be issues determining who is responsible for this until payment is made. Cargo insurance partially resolves this issue, but there are nuances.
How much does the cash on delivery service cost?
It depends on the company. Currently, prices change quite often, so current information should always be checked on official websites. Some online stores provide up-to-date information about delivery prices and cash on delivery services during the purchase process. Such actions by the store aim to minimize the number of refusals of goods due to high fees.
What are the alternatives to cash on delivery?
Large online stores implement various services, offerings, and processes to increase sales volumes. Various options for secure sales (for both parties), insurance, etc. Online stores also open offline pickup points, which serve as places where buyers can inspect the goods and pay or refuse them with minimal costs.
This post doesn't have any additions from the author yet.
