Online shoppers turn away from cash-on-delivery

The share of cash-on-delivery (COD) orders in India’s e-commerce shipments has reduced to 28% for months of August and September

Tarush Bhalla
Updated1 Oct 2020
Keeping customer safety in mind, e-commerce firms including Amazon, Flipkart and others are also offering a slew of fintech-based payment products
Keeping customer safety in mind, e-commerce firms including Amazon, Flipkart and others are also offering a slew of fintech-based payment products

Bengaluru: With contactless deliveries and safety being the central theme for online fulfillments, Indian shoppers are increasingly moving away from using cash on delivery and are opting for pre-paid methods to order online.

The share of cash-on-delivery (COD) orders in India’s e-commerce shipments has reduced to 28% for months of August and September, as compared to 41% during pre-covid months, data procured from management consulting firm, according to data by consulting firm RedSeer.

To put it in context, COD constituted 60% of India’s e-commerce shipments before India’s demonetisation, in 2016, with digital payments increasingly biting on to this share.

Keeping customer safety in mind, e-commerce firms including Amazon, Flipkart and others are also offering a slew of fintech-based payment products to replace cash-based deliveries altogether, this pandemic.

These include leveraging unified payments interface (UPI) infrastructure, providing payment links through SMS, pushing users to leverage digital wallets, and offering new pay-later options to replace cash.

“Cash-on-delivery (including both card and cash transactions) has seen a significant decline from 40% during pre-covid levels. While a large part of this shift has been organic driven by the low contact deliveries and customers' low willingness to transact cash, some of this has also been promoted by e-tailing players by creating awareness of prepaid options for the safety of delivery teams, and putting fees on non-prepaid transactions,” said Mrigank Gutgutia, director e-commerce, at RedSeer.

Gutgutia pointed out that while there have been a couple of times in the past where digital payments have seen a spike, including demonetisation, users have invariably shifted back to COD in no time.

“This is the first time that the digital shift in payments has sustained for a long period and we believe that this will lead to stronger habit creation and retention towards digital payments,” he said.

The shift towards digital payments and pre-paid orders canalso be associated with changing habits of Indian consumers, who were forced to make pre-paid orders, during India’s lockdown to curb the growing menace of covid-19.

“There is no doubt that the current pandemic has led to many new-to-internet users to embrace digital payments. Consumers are opting for services that allow them to maintain social distancing [...] We saw almost an 80% jump in digital transactions in May, over March, when our non-essential business resumed and we initiated COD again. This jump is testament to the fact that digital payments are not just a ‘safeguard’ anymore, but what we can quote as the ‘new normal’,” said Ranjith Boyanapalli, Head - Fintech and Payments Group at Flipkart.

Digital payment firms are witnessing a 50% spike in digital wallet transactions, compared to pre-covid, due to contactless commerce, Mint recently reported.

“User growth (for digital wallets) has accelerated from 2 million per month to 3 million per month. Use cases like online grocery, e-pharmacy and bill payments have grown 50% in the last four months," said Bipin Preet Singh, co-founder and CEO, MobiKwik, in an earlier interview.

During delivery, e-commerce firms like Amazon and others are remitting loose cash change to customers, by loading it in their respective digital wallets, to spur more demand.

While customers in metros and Tier 1 cities are fast to adopt digital payments, Tier 2 customers are gradually embracing the change.

“Digital payments have doubled for Snapdeal during the pandemic as many buyers choose contactless deliveries and the volume for non-cash deliveries continues to grow [...] More than 85% of our buyers are from non-metro cities, where digital payments are slowly getting popular, however cash is still the preferred mode of transaction,” said a Snapdeal spokesperson.

The push towards online ordering, has caused daily e-commerce and grocery shipments to jump by 1.3 times to 5.1 million in months of August to September, as compared to 3.7 million during pre-covid months, this year.

RedSeer predicts that close to 50 million shoppers will flock to e-commerce, during the first festive sale event, which includes Flipkart’s Big Billion Days sale event and Amazon’s Great Indian festival sales.

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