How processing of cash on delivery works at a 3PL company.

Cash on delivery at a 3PL company: processing payments after delivery

Online payment is an increasingly popular method when shopping in e-shops, but cash on delivery has not yet gone out of sight. Every country, especially in Europe, is different, and customer preferences are no exception.

In some countries, especially in Central and Eastern Europe, the majority of shoppers still prefer cash on delivery when shopping online. According to data from the Ecommercenews portal, for example, most customers prefer cash on delivery in countries like Hungary, Poland, Romania, or Slovenia.

Allowing multiple forms of payment is therefore an ideal way to satisfy e-commerce customers. This can be especially true when expanding abroad, where, in order to be successful, the e-shop must adapt to local shopping habits.

Moreover, cash on delivery is not only important in some countries.

According to the Statista portal, it is one of the top 11 reasons among internet users for shopping at e-commerce sites around the world. This is also why the e-shop has to deal with the introduction of “cash on delivery” when expanding to new markets.

However, this can be a difficult task in some cases. Therefore, in the article, we describe in more detail how COD works, what advantages and disadvantages it brings, or how to deal with its management.

Cash on delivery in detail

Although shopping on the Internet is convenient, the customer has physical contact with the goods only after their delivery. Unlike traditional shopping in brick-and-mortar stores, where the customer can try the product, see it, and then buy it.

Therefore, even when shopping online, many customers prefer to pay for the product only when they hold it in their hands. This may be due to the customer’s lack of trust in the seller, lack of access to digital payment methods, or the need to see the product first.

Cash on delivery refers to payment made only after the package has been delivered to the customer. This can be done by paying the courier after handing over the product in cash, but also by card or phone.

How cash on delivery works:

  1. The customer orders a product and selects the cash on delivery option
  2. The package, together with the invoice, is sent to the customer by courier
  3. The customer pays the courier for the product
  4. The cash on delivery is subsequently registered with the courier, who sends the funds to the seller

Importance of COD by the seller

Cash on delivery orders are not much different from online payment orders. With online payment, the money goes to you immediately, but with cash on delivery, the carrier first takes it from the customer, who then sends it to the seller.

Cash on delivery thus requires more effort during processing, but it offers the possibility for the e-shop to reach a larger range of customers. This is especially advantageous when expanding abroad, where preferences differ.

In order to avoid the effort involved in processing COD but also to save time when dealing with overall logistics, e-shops have recently turned to outsourcing these duties to third parties. There are several 3PL fulfillment companies on the market that can significantly help the e-commerce business, for example, with cash on delivery.

This can, for example, be the complete processing of COD. That means the fulfillment company processes money for cash on delivery, also in different currencies, converts it into the necessary currency, and sends it to clients with 1:1 reports to their account.

This is particularly beneficial for e-shops that cannot deal with cash on delivery on their own, especially when trading in different countries, or for online stores that need help with logistics as such.

Advantages and disadvantages of COD

However, selling products with cash on delivery can have several advantages, but on the other hand, also a few disadvantages. Therefore, each seller must carefully consider whether it´s worth it or if they can offer payment on delivery.

Among the basic advantages is the already mentioned popularity among customers, which means that the seller can reach a larger spectrum of consumers. Transfers between banks may be delayed when paying online, so it is also an advantage for the seller that he can work on the order earlier and thus speed up the overall delivery.

Customers, on the other hand, can consider the security of their purchase as an advantage, as they do not have to worry about losing their bank details. Likewise, the customer may appreciate the time suitable for considering the purchase or have more flexibility.

From the seller’s point of view, however, the customer’s advantage can be a disadvantage at the same time, which brings several unpleasant situations during delivery. When shopping and paying online, the customer impulsively buys the product and pays for it, thereby reducing the time to think about the purchase and the possibility of non-acceptance of the shipment.

This does not apply to COD, where the ordered goods travel to the customer for a day or two, during which he can consider the purchase and reject the goods. The disadvantage of this type of payment is also the slowdown of couriers delivering on the last mile, due to which they handle fewer shipments during the day.

We should also not forget the management of cash on delivery, which requires extra work and is often associated with the need for additional employees. However, this part is easily solved when outsourcing logistics to a 3PL company that offers complete COD processing as part of their services.

Payment alternatives

Clients typically pay the courier in cash after receiving their packages via COD. However, it is not an exception if these methods are also being modernized, and customers can already pay for products by card even when choosing COD.

Payment by card or bank transfer are two other online methods that can be used instead of cash on delivery. These forms of payment belong to the top 4 payment methods in Europe.

Payments via a digital wallet are especially popular, which can be, for example, a payment via Paypal and the like. Payments with Bitcoin or other cryptocurrencies have also entered the e-commerce environment as digital currencies have grown in popularity.

Payment options and customer preferences are evolving in tandem with technological advancements. An e-commerce company must therefore regularly follow the trends in the countries it operates in order to bring its customers the best possible consumer experience.

Cash on delivery management at Fulfillment by FHB Group

Despite the greater popularity of online payments around the world, we continue to respect the fact that cash on delivery still has a strong presence in several countries. As a result, even for our clients who sell all over the world, we offer complete cash on delivery processing.

In addition, with a transfer from several currencies, we make sure that the exchange rate is as favorable as possible. The courier companies will take the money and send it to our account during the last mile delivery.

We manage this money for the client, convert it if necessary, and transfer it to his account in a 1:1 ratio. The client thus receives as much money as his customer paid, without having to deal with their processing.

We send money for COD to clients regularly, and this transfer is supplemented by reports. In addition, through our top-notch information system, he has a constant overview not only of orders and goods but also of CODs, so he can look up the exact amounts that are to be sent to his account.

Thus, during international sales, the client can offer its customers more options, which makes the transition to doing business in new markets all the easier.

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