When selling online via Cash on Delivery
When dealing with Cash on Delivery, more often than not the shipping, courier or fulfillment companies get the blame or for a high RTO (Return to Origin) percentage of their client’s consignments. The quality of their service or the choice of their delivery partner is scrutinized and questioned heavily.
In our business getting the blame for an SDP (Successful Delivery Percentage) of Cash on Delivery orders below 70% is a common thing. Despite the fact that we fulfill and ship on the same day the majority of orders we receive from our customers (the exact timeframes may differ from country to country), despite the fact we enable many ways of pre alerting and following up with consignees (SMS messages, emails, follow up phone calls) and offer sophisticated tracking tools for consignees to view what time their order was packed, what products were packed, modify delivery time and date, we are still in some cases, witnesses of low conversion rates when dealing with Cash on Delivery orders.
All mentioned above does not imply that if you sell products online, offering Cash on Delivery as an option, you will not reach a high SDP (above 70% is believed to be satisfactory) but that if reviewing the SPD of your first sales you realize that your RTO is high, it does not mean that you should pick a fight with your fulfillment or last mile provider or even attempt to switch to another. Indeed, such a spontaneous reaction may probably lead to disruption and further costs for no reason.
It is true, however, that a low-quality fulfillment service or a bad quality last mile provider service could lead to a higher RTO percentage than anticipated. If your provider does not fulfill the orders within the promised timetables (when dealing with Cash on Delivery orders, every minute counts!) or cooperates with last mile providers that do not deliver within the promised timetables or offer sufficient tracking information or customer support to the consignees, you could see your SDP lowering a few units.
But what is the case when in general terms your providers quality of service is above average? We often hear from clients that buyers have justified their refusal to accept an order due to an impolite delivery driver, due to the failure of a driver to fulfill a tight delivery schedule or even due to the fact they could not perform a 3rd delivery attempt or even did not have change on him to give back to them.
Imagine if you have placed an order demanding a Cash on Delivery option for a pair of shoes you are eager to buy or for basic household products, products that are a necessity. If the driver was not at your doorstep as early as you wanted or if he lacked manners or even if you were absent upon the first delivery attempt and you were told that the second time you had to wait home a little longer, would you reject the order or avoid receiving it? Mostly likely no. You might choose not to order from the same provider next time or choose to file a complaint towards the courier company; nonetheless, more than likely you would not refuse the delivery of a placed order that easily. But what if it was a product you chose to purchase spontaneously and upon second thoughts you realized it was not that important for you to have? If it did not arrive on your doorstep “tout suite” , such as 1 to 2 days after placing the order, you could easily change your mind or just make up a quick excuse to get rid of the annoying person who called or messaged to remind you that your shipment is on its way. What if the buyer had not verified your address and personal data properly; thereby causing a delay until the courier company managed this issue? Probably as the days go by, you will realize you don’t need it that much.
In our company’s history we have indeed had to deal with cases of last mile delivery providers that scored lower SPD’s than others. We were witnesses of situations in which working with 2 different last mile delivery providers in the same country (express courier companies) the SDP for consignments of the same client and for his exact same products had a 7% difference. The last mile delivery provider scoring the lowest SDP was in a state of rapid and aggressive expansion and during that process was not delivering his promised services.
It is true that there is always room for improvement and as the owner of the branded delivery company Biz Courier I have set some criteria that some of the other larger delivery brands are not interested in following or are not able to due to the size of their companies. It is also a fact, that some last mile providers do not believe much in the Cash on Delivery option on account of when dealing with a buyer who has already paid for his purchase, he tends to be more cooperative. This means that in most cases the first delivery attempt will be enough or the option of picking up from a nearby location, will be a key element in achieving a successful delivery. Courier companies do not appreciate the fact they have to attempt the same delivery two or three times. Who can really blame them when such actions increase their costs dramatically?
Certainly, by this article I am not recommending e-commerce businesses to drop Cash on Delivery as a provided option to their clients. I would encourage them however not to depend solely on this option. Depending on the market they intend to sell to, COD can be more or less popular. E.g. in Italy and Greece, it still is a popular option. As time goes by though, banks are gaining more and more ground by providing their clients with well-developed tools connected to their smart phones and the use of ‘plastic money’ as it is known, is getting more and more common, not only to the younger generation but also to the older.
If you are planning to sell in the UK or in Germany, I wouldn’t depend solely on a Cash on Delivery option for sure. Another important factor is the business model and commercial practice of a retailer. What you sell and how you sell it matters!
To conclude, working with a provider who offers you a Cash on Delivery service can definitely boost your sales and in some markets, it’s still considered to be the basic way to trade online. However, do not depend solely on Cash on Delivery and should your RTO percentage be higher than expected or raising your costs to non-cost effective or unaffordable levels, then you probably need to check how your orders are being approved and if you have all the necessary data in order for your provider to give you the best of his service by shipping fast and accurately.
Paul A. Duff