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E-stores offer offline pay option to lure buyers
E-stores offer offline pay option to lure buyers
If shopping online wasn't your thing because you were wary of online scams, you can do it the good old way-using cash. Cash on Delivery (CoD), where the customer pays for what he/ she purchased once the items are delivered, used to be popular in the US when credit cards hadn't gained popularity. Now, Indian e-commerce is also switching to CoD to increase their customer base.
"We started CoD mainly due to the under-developed nature of the Indian payment system. In the West, the preferred method of payment online is the credit card whereas in India we have only 8-9 million unique credit card users," said Ajit Balakrishnan, founder-CEO of Rediff.com. Sales from CoD account for 40-45% of Rediff's revenue.
Flipkart, which introduced CoD last April, saw a dramatic jump in sales. "Around 50% of our customers use the CoD option," said Sachin Bansal, CEO and co-founder of Flipkart. "We introduced CoD to expand the market beyond the audience who owned credit/ debit cards. There was also the issue of customers finding online payment cumbersome or not trusting them enough. There was no reason why e-commerce should not reach out to everyone who has access to internet."
Even travel portals like MakeMyTrip and Yatra have jumped on to the CoD bandwagon. "Students, homemakers and even other demographics like businessmen and people in tier II and III cities prefer CoD," says Sonia Mehta, chief customer experience officer, Yatra. The portal introduced CoD a month ago and has already seen a spurt in sales. "What our customers also liked was that we give them the liberty to do a part payment on CoD, so they could even split their payment options," she says.
To the Indian consumer, who still uses cash, offering CoD works as a trust-building measure. "Indian consumers are partially computer literate and have their own set of apprehensions about online transactions. CoD is a reassuring mode of transaction as it brings them closer to the brick-and-mortar model of purchase," said A S Venkatkrishna, founder-director of StoresonDoors, a grocery and fresh produce portal. "When we launched our online venture StoresonDoors, we could sense our customers' mind block and their reluctance to pay online. So, we opted for CoD not only for customer acquisition but also retention." Venkatkrishna saw a 200% increase in sales since the CoD model was launched.
In some cases, CoD is also preferred when the size of the transaction is small. "Besides, customers are used to having a feel of the product before paying in brick and mortar stores. CoD allows them to do just that. Besides, a CoD transaction saves the customer's time as he does not have to wait for paying through other payment gateway," says an Indiatimes Shopping spokesperson.
But payment through CoD comes with its pain points. Flipkart's Bansal cites instances where customers change their mind about the purchase and send the items back. "Logistics companies in India are not experienced in handling cash. Therefore a lot of training has to be provided at regular intervals from our end to keep the process free of any bottlenecks," he says. There are also times when customers can't accept the delivery because they find themselves out of cash.
For the portal, CoD remittance depends on courier which takes 10-15 days where as in prepaid mode they their payment upfront. Meanwhile, debit cards-cum-ATM cards are also becoming popular. "We currently have 120 million debit card holders in India and their ability to do online transactions is limited by the fact that there is no proper real-time communication system between all the banks and e-commerce portals at the moment. But the share of debit cards in our transactions has gone from virtually zero 10 years ago to 25% currently," says Balakrishnan.
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