Despite factors like inflation, social-political issues and growing competition among the industry players, eCommerce in Europe is developing at a dynamic pace, with more and more customers preferring the speed and convenience of online shopping. However, despite the growing adoption of digital payments upon purchase, traditional methods like Cash-on-Delivery (COD) continue to play a significant role in certain markets, where customer trust and payment flexibility remain key factors in purchasing decisions. While digital payments prevail in Western Europe, COD remains one of the most preferred payment methods in Central and Eastern Europe (CEE). According to various studies, in countries such as Spain, Portugal, Italy, Greece, Bulgaria, Romania, Hungary, the Czech Republic, and Poland, over 50% of online orders are paid for upon delivery.
But why does this method remain so important for online merchants, and how can they address the challenges associated with it?
The main reason for the popularity of Cash-on-Delivery is that it provides security for the online customers. When paying in cash or by card upon delivery, customers can first receive and inspect the product before making any payments. This eliminates concerns about receiving the wrong or damaged item, which is especially important for first-time buyers who are uncertain about the reliability of the online store and its products quality.
For online merchants, this payment method can lead to a higher completion rate of orders, as it removes one of the main barriers to purchase – distrust of upfront payments. In regions where digital payment methods are less widespread, offering COD can lead to a significant increase in orders. This is especially true for developing economies, where people prefer using physical cash and making payments upon receiving the goods. This is also why many large international retailers like Amazon and eBay offer this method – to attract a broader audience and increase their customer base.
Another aspect that makes Cash-on-Delivery attractive for online merchants is its impact on order abandonment and cancellations. eCommerce often faces challenges such as order cancellations or even failed deliveries after an online customer has placed an order. With COD, the customer is not financially committed upfront, which can reduce the rate of cancellations and increase the likelihood of successfully completing the transaction. This is particularly useful when selling high-value products, where consumers may hesitate before making a purchase.
Additionally, the COD method enables online businesses to achieve faster cash flow without waiting for payments to be processed through card transactions or electronic payment systems. The collected amount is received directly upon delivery, allowing online merchants to reinvest these funds into business growth by expanding their product range, improving marketing campaigns, or increasing order processing capacity. In this way, COD can support stable financial management and reduce reliance on delayed payments and invoices.
Cash-on-Delivery also enhances customer satisfaction. Many consumers appreciate the opportunity to inspect and accept their products before making a payment. This creates a sense of security and ensures that they do not pay for an item that does not meet their expectations. If the product does not meet their requirements or is not in good condition, they can refuse payment, minimizing the risk of dissatisfied customers and potential returns. This, in turn, can improve the overall customer experience and foster loyalty to the online store.
Using Cash-on-Delivery as a payment method eliminates the need to navigate complex banking and payment infrastructures that are typically required for online transactions. When entering new markets, especially in countries with different financial and regulatory requirements, online mercahnts often need to establish local bank accounts or work with local payment systems to accept payments. Depending on the market, integration with specific platforms and services for processing online payments may be necessary, often requiring additional setup and monitoring of evolving technologies and requirements regarding electronic payment processing, including data protection and anti-money laundering regulations. Complying with these regulations is often a complex and time-consuming process.
However, using COD eliminates these challenges. When an eCommerce business chooses to offer this payment method, they can avoid the need to establish local bank accounts or integrate with various payment platforms because payment is made directly to the courier upon delivery. This saves time and resources while reducing the administrative costs associated with setting up banking relationships and processing payments across multiple countries. This is particularly beneficial for online merchants expanding into new markets, as Cash-on-delivery removes barriers related to financial infrastructure and allows businesses to focus on other aspects of expansion, such as marketing, logistics, and customer service.
Challenges of working with Cash-on-Delivery
Despite its advantages, this method also has its downsides. Online retailers working with COD must address several key challenges:
- Delayed receipt of collected funds
With card or bank transfer payments, funds are deposited directly into the retailer’s account. However, with COD, money passes through courier companies. This means that the retailer may receive the funds with a delay of several days to weeks, depending on the courier’s terms and the country of operation.
- High operational costs
COD often leads to higher transaction processing fees compared to card payments. Additionally, handling COD requires more resources for management, including tracking collected amounts from couriers, accounting for different currencies and fees (also currency conversion requires additional costs), bank transfers to receive payments from different countries.
- Increased risk of order rejections
When the customer is not financially committed to the order, there is a higher likelihood of refusing delivery. This results in losses for the retailer – expenses for transportation in both directions and blocked inventory.
How online merchants can optimize the Cash-on-Delivery process
For online merchants, managing Cash-on-Delivery payments can be a complex and resource-intensive process, especially when selling in multiple countries. Dealing with different couriers, various currencies, and differing payout timelines can lead to delays and challenges in managing cash flow. In such cases, specialized eCommerce logistics companies step in to help by handling COD deliveries and managing the payout of collected funds on behalf of online merchants.
Outsourcing the entire logistics process, including Cash-on-Delivery shipments, is an effective solution for most online stores operating with COD in Europe. Partners like euShipments.com provide fast access to all 17 European countries where COD is the most popular payment method, covering all six EU currencies. Merchants can process payments without the need for a local bank (IBAN) account or a bank account in the local currency. Additionally, there is no need to sign contracts or communicate with local courier companies, significantly simplifying operations.
Funds are settled in the online merchant’s preferred currency, which can be either the originally collected currency or another currency through conversion. Payouts are made daily, accelerating cash flow and improving liquidity for businesses. Moreover, funds can be transferred to various fintech accounts as well as all traditional bank accounts. This solution saves costs on banking fees, currency conversion fees, and transfer charges while ensuring fast and efficient payments – an essential factor for the successful management of an eCommerce business.
Unlike all other solutions for deliveries and COD management, euShipments.com transfer the amounts as soon as their last-mile partners provide a protocol for the collected COD payments. Then these amounts are transfered to the online merchant according to the pre-agreed schedule.
euShipments Cash-on-delivery management workflow
Step 1: Online merchats make sales with Cash-on-delivery through their online store and use euShipemnst.com logistics network to deliver orders to the 17 EU countries where this payment method is active and popular.
Step 2: euShipments.com takes full responsibility for the cross-border deliveries (and fulfillment) of online orders and collecting the COD payments on behalf of the eCommerce business. The company’s team and partner courier companies ensure the safe and reliable collection of payments from the customers upon order delivery.
Step 3: Once the payments are collected, euShipments.com transfers the amounts periodically – with the option for daily payouts – in the merchant’s chosen currency and to the selected bank or fintech account. This provides maximum financial flexibility and convenience in managing eCommerce revenues.
euShipments.com-developed process ensures the smooth and efficient management of the online merchant’s financial resources, relieving of the administrative burdens associated with collecting and processing COD payments. With flexible payout in various currencies, eCommerce businesses do not lose valuable capital due to currency conversion, and the option for daily transfers guarantees that the funds from online sales are available as soon as the business need them. This way, online merchants have the assurance and peace of mind to focus on expanding their online sales and serving their customers, while euShipments.com take care of the rest.
Conclusion
Cash-on-Delivery remains a crucial tool for successful eCommerce in Europe, especially for companies looking to expand into Central and Eastern European markets. While this method presents challenges, with the right fulfillment and logistics partners like euShipments.com, online merchants can optimize their processes, reduce risks, and provide a better customer experience for their online users. Ultimately, COD is not just a payment method – it is a factor that can influence an online business’s overall strategy and growth in the European markets.
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