by Marshall Ukpoma

April 12, 2019

Cash on Delivery (COD) is the most commonly used method of payment amongst e-commerce retailers in Nigeria. According to insights from a new e-commerce market trend report, most online shoppers prefer cash on delivery to online payments method.¹ 

Cash on delivery (COD), sometimes called “collect on delivery”, is the Payment method in which ordered goods are carried to the buyer's place but are handed over only upon full payment.² Here, payment is made on delivery rather than in advance. If the goods are not paid for, they are returned to the retailer. Originally, the term applied only to payment by cash but as other forms of payment have become more common, the word "cash" has sometimes been replaced with the word "collect" to include transactions by cheques, credit card or debit card payments.³ 

For COD to work, the consumer needs to be physically available to receive the goods in order to provide payment. Often times the consumer is not available, which means that multiple delivery attempts are made for just one order. At other times, the customer is available but may refuse the order for just any reason. In some other instances, the Point of Sale (POS) device may just not “co-operate”. What this translates to is that e-commerce retailers with high COD orders face the risks of higher logistics costs as a result of the non-availability of the buyers and higher cancellation rates due to the buyers’ refusal of orders. For example, the consumer may feign non-satisfaction with their purchase upon delivery and refuse payment. In such a case, the seller is responsible for all costs associated with the return of the item: increasing logistics costs.⁴ One then begins to wonder how pragmatic and efficient cash on delivery is, in the future of e-commerce.

Cash on Delivery or Payment on Delivery is not bereft of advantages. Such advantages as safety from online fraudsters, easier return of products which saves the retailers time and cost of recovery from customers are commendable. Notwithstanding, the Founder/CEO of Drinks.ng, Lanre Akinlagun has identified payment on delivery, prevalent among online retailers, as one of the greatest impediments to the growth of the sector. He said, "Payment on delivery is a bad idea because consumers are as indecisive as they are choosy thereby raising businesses’ operational cost when they reject delivered items. So, when a delivery person arrive your house and you don’t like the item, you send it back at the cost of the company that is trying to deliver. Also, there is high cost of logistics including lack of time keeping by consumers,” he added.⁵

The increasing risk and security challenges posed by this payment option need not be emphasized. As it would be recalled that sometimes in March 2017, a delivery staff of Jumia, an online store, was brutally murdered in Port Harcourt, Rivers State, after delivering goods to some customers on the POD basis. Following this incidence and other security challenges posed by Payment on Delivery (POD), an online store, Payporte, suspended the system as part of its payment options. The Managing Director of PayPorte, Bassey Eyo, made this declaration, noting that the decision was in line with the new Central Bank of Nigeria cashless policy and the need to serve their customers better. He said:

“Our decision was necessitated by the increasing risk and security challenges posed by this payment option. Also to reduce the amount of cash carried from one location to another by our delivery staff. We encourage our customers to make use of our other secured electronic payment options such as online payment or bank transfer for payments. We believe this will also play an active role in the growth of e-commerce business in Nigeria as well as give a new dimension to the business,”⁶  

In the course of my research, I had an interview with the operations manager of ICT Cart, Marshall Ukpoma and Eric Ididia, a Field Sales Executive of DHL International Nigeria Limited, and they both shared the same opinion that pay on delivery is not the future of e-commerce in Nigeria. Marshall Ukpoma categorically stated that: 

“Pay on Delivery option will slow down delivery speed as delivery agents need to spend longer wait time per location. Also, POD system can encourage fraudulent practices and may be a perfect solution for money launderers (cleaning out dirty money)!” 

The above, thus, raises the foregoing questions: Will cash on delivery play any active role in the future of e-commerce? What active role will cash on delivery play? Will the cancellation of cash on delivery option cause more harm than good to customers and retailers or will it be profitable to both retailers and customers? What should be the way forward? 

REFERENCE

1. Technology Times, “Most Nigerian Online Shoppers prefer cash on delivery payment method”. Retrieved from http://technologytimes.ng/nigeria-online-shoppers-stick-cash-delivery-mobile-payment-method on Monday, 23 October, 2017. 

2. Business Dictionary, “Cash on Delivery”. Retrieved from http://www.businessdictionary.com/definition/cash-on-delivery-COD.html on Monday, 23 October, 2017.

3. Wikipedia, “Cash on Delivery”. Retrieved from https://en.wikipedia.org/wiki/Cash_on_delivery on Monday, 23 October, 2017.

4. Business Insider, “Cash on Delivery remains the preferred method of payment in India”. Retrieved from http://www.businessinsider.com/cash-on-delivery-remains-the-preferred-method-of-payment-in-india-2016-6?IR=T on Monday, 23 October, 2017.

5. Nwokpoku J. - Vanguard, “How payment on delivery threatens e-commerce growth in Nigeria”. Retrieved from https://www.vanguardngr.com/2015/05/how-payment-on-delivery-threatens-e-commerce-growth-in-nigeria on Monday, 23 October, 2017.

6. Premium Times, “Insecurity: Nigerian online store suspends payment on delivery service”. Retrieved from https://www.premiumtimesng.com/business/business-news/227941-insecurity-nigerian-online-store-suspends-payment-delivery-service.html on Monday, 23 October, 2017.