Mumbai: Covid-19 has certainly changed the economy in ways that we hadn’t predicted. Just like every industry, Indian e-commerce has experienced a whirlwind of change, with businesses innovating for ‘the now’. One of the biggest characteristics of the Indian market has been its affinity for Cash on Delivery (CoD). E-commerce players are now witnessing strong demand for non-essential items as compared to the first two phases of the lockdown which were limited to purchasing only essential items like grocery, healthcare, and pharmaceutical products.
While digital payments are rapidly picking up, CoD still remains to be the preferred mode for customers shopping online. For an online store, offering CoD helps increase sales manifold. But, offering CoD comes with its own set of problems too. Customers usually place orders impulsively, and this leads to a high amount of cancellations leaving the seller going through the painstaking process of shipping the order back and forth, resulting in over 30% Return to Origin (RTO) losses, a significant cost for e-commerce players.
Razorpay Thirdwatch is India’s first solution to reduce RTO orders (which doubles up as CoD losses). The product empowers the sellers from being charged for risky orders by providing them with a unique offering that identifies and filters out only the risky CoD orders so that online sellers can review them and make informed decisions.
A lot of us believed that COVID-19 would be the end of the cash market, however, the Indian shopper preferences surprised us once again. Here are some interesting insights about the CoD behavior of SME e-commerce sellers, based on transactions held on the Razorpay Thirdwatch platform:
- Current cash preference in India is almost back to the pre-pandemic levels with close to 65 percent of customers still preferring to pay via cash.
- While tier-1 cities like Mumbai, Delhi, Bangalore & others. have a significant uptick in prepaid orders, the vast majority (80%) of shoppers in tier-2 and 3 cities still prefer to pay via cash.
- Guwahati has the highest share of 86.7%, followed by Ranchi at 84.5% and Lucknow at 78.9%.
- Among tier-1 cities, Delhi has 72.4% of customers who prefer cash payments; also the only metropolitan city to have >70% CoD rate followed by Hyderabad has 68.3% and Mumbai has 58.5%.
- Many states are also seeing higher adoption rates for e-commerce majorly due to the fact that Cash on Delivery is offered. Particularly, customers from states in North-Eastern India prefer COD – Manipur 89.6%, Sikkim 88.3%, Assam 87.4%.
- During the lockdown, a lot of businesses, especially the ones that sold essential goods, moved towards online. And since May 2020: 65% of orders were placed via CoD and 35% via digital channels.
- The third watch spoke with its customers and learned that on average, cash handling charges can range anywhere between INR 20 to 50 per order. The cost rises even further in case of returns as marketplaces/logistic companies deduct courier fees.
With Thirdwatch’s latest PrePay CoD option, the product now allows its customers to send payment links for the high-risk CoD orders and convert them to prepaid orders. PrePay CoD helps boost delivery rates, increase revenue, and reduce RTO.
Harshil Mathur, CEO, and Co-Founder, Razorpay said, “Cash on Delivery has experienced a lot of ups and downs over the years and the past 6 months have been a rollercoaster for everyone. The good news is that the e-commerce industry is already on its way to a fast-paced recovery! The question we all have is, ‘will cash continue to be the king?’ Because the supply chain was severely hit after the pandemic, deliveries are taking longer than usual, and online shoppers prefer CoD so that their money is not locked for the entire duration in uncertainty. However, from an e-commerce company’s perspective, CoD purchases come with a certain level of risk – the losses arising from order cancellations and RTO. With offerings like the PrePay CoD, we want to minimize the losses for these businesses while also ensuring that the customer trust is not compromised. At RazorpayThirdwatch, we want to continue to enable all e-commerce businesses to slowly recover from the impact of this pandemic.”
