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4 Reasons Why Skipping Cash On Delivery Can Save A Small Business

Updated: Oct 24, 2023

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4 Reasons Why Skipping Cash On Delivery Can Save A Small Business


Here's Why You Shouldn't Go For Cash On Delivery

If you’re an online shopper, these words are likely to sound like music to your ears! According to a survey by Nielsen, around 83% of Indian consumers prefer using Cash on Delivery (COD) when they place orders online. Surely, we understand why.


Cash has been a large part of how the average Indian household handles its expenses. From daily groceries to the house help’s salaries, we’ve been a cash-first nation for a long time. With digital payments taking over, things are changing, but cash comes with its conveniences:


  • Ease of transaction

  • Many consumers, especially those ordering from a new or small brand tend to find cash safer, as it keeps them away from the risk of online payment frauds.

  • Cash on delivery allows a consumer some more time to consider the final buying decision. Since your money isn’t paid upfront, you always have the choice to skip the ultimate buying decision altogether.

  • If you are not sure about your availability at the time of delivery, you tend to feel less obligated to receive the package.

However, you may have noticed that many cool, edgy local brands you like, don’t seem to offer cash on delivery as a payment option. This is especially true for small scale, homegrown businesses. Does that mean they aren’t to be trusted, or is there a more significant reason as to why this service isn’t always offered? Well, those are the questions we’re going to help you find answers to today.


Let’s take a deeper look and understand why COD isn’t a small business’ favourite choice and the role you as a consumer play in this sentiment:


1. It’s an expensive service: For a small business, every expenditure matters a great deal. From marketing to production and delivery expenses, everything is budgeted and accounted for. In its early stages, such businesses suffer from the added cost that cash on delivery brings. To provide you with easy access to COD, brands must pay an additional fee to the courier services that bring these orders to your doorstep. When unaccepted by the customer, they also need to pay for the to and fro shipment costs to the shipping partner. Often, these costs are borne entirely by the small business you ordered from, and not shifted onto you. This is also why some sellers now opt to charge you extra for cash on delivery- So they can recover these additional costs.

Some studies have also found, that COD parcels end up making typically 2-3 rounds at your address before they are finally delivered. This could be due to multiple reasons, such as the courier arriving when you’re not at home. In the case of pre-paid orders, the delivery executive can save these extra trips by leaving them with a neighbor or at your doorsteps. But since COD orders are dependent on the cash payment, this scenario increases the trips made before delivery. Whenever an order makes a repeat attempt for delivery, that cost is borne by the seller as well.

2. It increases the chances of losses:

Now you must be wondering how something as lucrative as cash might hurt a business. Shouldn’t it be welcomed instead? Well, not really and here’s why-

The first and obvious reason is that often customers may refuse to accept cash on delivery orders or return the order from their doorstep. While you surely have the right to change your mind, this can lead to significant losses for a small business. Once a cash order is placed, the brand starts the process of packing, shipping and delivering it to your home. Each step comes with expenses that are left unrecovered when the order is returned. Not to mention the packaging waste generated in the process!


Additionally, small businesses also suffer from fraudulent experiences. One such is the case of volatile customers who may keep the product but refuse to pay the delivery service owing to their own reasons. This often leads to a long-drawn process of customer complaints, and follow-ups and in some cases may even lead to legal action. All of these are added expenses that can drown a small brand and the added risk of reputation loss also hangs as a threat to the business. Sure, these instances aren’t very common, but for a small business in its early stages, sometimes just one such incident is enough to create long-term damage. 3. It adds to the carbon footprint:

Besides the more obvious financial difficulties that could arise with cash on delivery services, another impact it brings is the environmental cost. Everything you order online requires transportation of some sort to reach you. For inter-city or state deliveries, this could mean road transport and for longer distances, this could mean shipping the products.


Transport already accounts for 13.5% of India’s total carbon emissions and some studies suggest that the emissions from doorstep deliveries globally will increase up to 30% by 2030!


Now you must wonder- What does cash on delivery have to do with all this? Well, as you must have learnt above, COD orders tend to have more travel associated with them- From increased rounds to fulfil delivery, to shipping and returns of unfulfilled orders. In fact, it has been found that almost 30-40% of online orders in India tend to get cancelled or returned! All these added rounds made by the delivery service, not only add to the brand’s carbon footprint but your footprint as well! This factor may not seem a very important one to you, but for eco-friendly and climate-conscious businesses, this is one of the most important considerations. Additionally, in the era of overconsumption and climate change, being mindful of your shopping habits is also the need of the hour. In an order placed and paid online, a great deal of this is avoided, as your orders can typically be cancelled before they are shipped, avoiding the emissions from transport and returns. Besides choosing online payment modes, another way you can avoid adding to your carbon footprint is to opt out of express deliveries. By letting orders take their due time to reach you, you prevent the chances of added emissions that come from expedited deliveries!

4. Cash payments slow down operations: After considering the initial reasons, another reason why you should avoid cash on delivery services is that they tend to slow down operations for your local businesses. Often, small businesses rely on their payment clearances to further their operations, and cash deliveries can delay this process.


Additionally, small businesses often produce in small batches and have limited stock. This is especially true for planet-positive, zero-waste brands. If for any reason you do reject an order at the doorstep, it would take a while before the brand can re-list the product for sale. This can potentially affect their business and profits too.



Product Dispatch Details


Other than these key factors mentioned above, there are several other reasons why cash on delivery is a tough but necessary call for new brands. With the rising competition and market saturation, it becomes necessary for new brands to stick to the standard or they risk losing a chance to establish themselves.


However, as conscious consumers, you can use this new knowledge to empower the homegrown brands you wish to support. When given the choice, opting for online payments can go a long way in helping a local business scale and grow. Additionally, you can also make it a point to be sure of your requirements before you shop and curb your impulsive buying habits, so the chances of returning a product are drastically reduced. This isn’t just helpful to the brand, but also convenient for you! The bonus? When you shop mindfully and in limited quantities, the pressure on our environmental resources also reduces!


So you see, if you do intend to support ethical, local businesses, you can do in more ways than just endorsing the brand. At Dwij, we willingly offer cash as a payment option for our Pan-India deliveries. While we do so with great faith in our customers, we do hope that this new perspective helps you have a more seamless and planet-friendly shopping experience with us.


To explore our range of 100% upcycled and vegan accessories, click here.



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