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What is cash on delivery (COD) and should I use it in dropshipping?

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What is cash on delivery?

Cash on delivery (COD) is also known as "collect on delivery." It is a payment method sometimes offered by ecommerce and dropshipping retailers. COD allows the customer to order online but only pay once it is delivered to their door.

How does COD work?

This payment method has various rules, depending on the provider. In some cases, customers can wait to pay immediately upon receiving their goods. They can decide after checking their purchase and trying them on whether or not they will keep them.

Deposit

Often, a deposit is made by the customer at the time of purchase. This is to cover the risk associated with customers receiving their goods but not paying.

Leaving card details

Alternatively, card details are given at checkout so the retailer can charge the customer if no payment is made after delivery.

Delivery payment

Some businesses charge for the shipping only and allow customers to pay for the product once delivered.

Can customers only pay with cash when using COD?

Unlike the name suggests, there are different payment options for COD. These include cash, card, mobile, bank transfer, cheque, and digital wallet.

What are the advantages of COD for dropshipping?

Cash on delivery is a great payment option to offer your customers. Especially in certain countries where the use of cash is predominant. Online shoppers like to have a lot of choices with which payment method they can use to buy ecommerce goods.

The benefits of COD:

  • It offers a flexible payment option for the customer
  • Attracts a larger customer base
  • The customer can review the product before purchasing
  • No dependency on card payments
  • No risk of online credit card fraud if using cash

What are the disadvantages of COD?

With every payment method, there are some downsides that you might experience. However, the benefits of using COD outweigh these. Review the pros and cons listed here and decide if this payment option will work for your dropshipping business.

The disadvantages of COD:

  • No guarantee that the customer will pay
  • Possible high return rates
  • Extra preparation for the business

Can I offer cash on delivery with dropshippingXL?

DropshippingXL doesn't offer the option for cash on delivery with our delivery carriers at the moment. To let your customers pay by COD, you will need to have your own warehouse and delivery carrier. When your customer places an order, you will send the vidaXL package to your warehouse address. From here, you would send the package using your own shipping methods that support COD.

Countries where cash on delivery is popular

Asia and the Middle East predominantly use cash on delivery for online purchases. According to a G4S report, 75% of online orders in these geographical regions are paid cash on delivery. The following table shows some countries that have a high preference for COD as a payment method.

Rank Country Popularity Source
1 Vietnam 90% Asian Banking & Finance, 2017
2 Romania 78% Cash Matters, 2021
3 Indonesia 65% Asian Banking & Finance, 2017
4 Bulgaria 64% Cash Matters, 2021
5 Slovakia 64% Statista, 2021
6 India 62% Rakuten Insights, 2022
7 Pakistan 58% Checkout.com, 2022
8 Malaysia 51% Asian Banking & Finance, 2017
9 Hungary 50% Statista, 2023
10 Thailand 49% YouGov, 2023
11 Philippines 47% Asian Banking & Finance, 2017
12 Jordan 45% Checkout.com, 2022
13 Egypt 38% Checkout.com, 2022
14 Qatar 22% Checkout.com, 2022

How can I set up COD for my Shopify store?

Cash on delivery may not be offered as a payment method by all ecommerce website providers. Shopify, for example, only offers cash on delivery for online stores in India that use Indian rupees as the store currency. You will need Shopify's Advanced Cash on Delivery app to set up this payment for an Indian Shopify store. Follow Shopify's cash-on-delivery instructions.

How can I set up COD for my WooCommerce store?

WooCommerce allows users to set up cash on delivery as a payment option. Go to WooCommerce > Settings > Payments. On this screen, search under payment methods and look for "Cash on delivery." Use the toggle to enable this as a payment option on your dropshipping store. Follow WooCommerce's cash-on-delivery instructions.

Key takeaway

Cash on delivery is an alternative form of payment for online goods. It can be beneficial as a flexible way for customers to pay. COD allows customers to try products before deciding whether to pay and keep them. Decide if this payment method will work for your dropshipping business by

  • Reviewing the country you are selling in
  • Researching if your customers prefer cash
  • Finding out if your customers feel happier trying products before buying

One way to gather this information is by sending surveys to your customers about their preferred payment methods.

Related articles

  • How to create a pricing strategy for dropshipping
  • Reasons to dropship in Eastern Europe (2023)
  • The advantages of having multiple income streams

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