How the Cash on Delivery (COD) Works in Dropshipping?

What’s Cash on Delivery?

COD (Cash on Delivery), also known as ” Collect On Delivery“, refers to an online sale where payment is made at delivery and not in advance.

The seller or retailer will automatically return the goods if they have not been paid for.

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shopify dropshipping store set up

Originally, the term “COD” was only used to refer to cash payments. However, over time other forms of payment have grown more popular.

The word “Cash”, therefore, has been replaced by the word “Collect”, which refers to transactions made with credit cards or debit cards.

COD makes e-commerce more secure for buyers because they won’t have to pay for products that they don’t yet see.

It doesn’t mean that it is safer for buyers, but it does not necessarily favor the seller. This is because these payment methods are vulnerable to product returns which can be bad for businesses.

After I have discussed dropshipping, I will be discussing the advantages and disadvantages.

Dropshipping: How Does Cash On Delivery Work?

This is a common mistake. Dropshipping is done by looking for suppliers who are willing to dropship their products.

After you have earned your own profits, they will be able to fulfill all your orders.

Dropshipping might be new to you. Let me briefly explain how this business model works.

What’s Dropshipping?

Dropshipping allows an online store to fulfil orders without having to keep products in stock.

It displays images of products instead.

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shopify dropshipping store set up

It then buys the product from a third-party seller or supplier when it sells it. They then pack the product and ship it directly to the buyer.

Dropshipping is basically selling products without having to physically see them. The third-party seller, also known as the suppler, does all the heavy lifting.

Dropshipping with Cash on Delivery

Let’s now look at how dropshipping works.

This might sound complicated because most of the drop shipped products are sourced from China (AliExpress), and cash on delivery is not allowed on AliExpress.

Dropshipping is the only way to go.

You will also be paid on delivery. Finally, you will receive your profit once the payment has been received by your customer.

The difference between the price paid by the supplier and your price is your profit. This means that you have the ability to decide how much product you want to sell on your online shop.

Favorable circumstances and impediments of COD for dropshipping:

The Advantages of COD for Customers are:

1. The client doesn’t have to possess a credit card to buy;

2. In a few different ways COD is a method for shielding the client from a seller who might take the money and afterward neglect to convey settled upon things;

3. COD offers customers the preferred position in time for sparing to make a full installment since the client is required by a middle person to pay at delivery;

4. COD can help customers maintaining a strategic distance from the danger of purchaser personality extortion, halted installments, or electronic card questions. In the end, may improve consumer confidence in another organization that doesn’t yet have strong brand recognition.

Cash on Delivery

Let’s look at the benefits of cash-on-delivery and how it can help increase store conversion.

#1: Customers prefer the most preferred option

Buyers prefer cash on delivery because they will have to inspect the product before they pay.

It protects them against exposing their payment information online when they make payments for products using their debit or credit cards.

This means that people will convert more stores if they see your ads or products as pay-on-delivery.

#2: It encourages impulse purchases

Cash on delivery also offers the advantage of impulse purchases. Many people who buy your products aren’t planning to purchase it in the future.

They’ll be more interested in buying if they see your product ads and are able to pay for delivery.

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shopify dropshipping store set up

They don’t need to buy the product right away, which increases your store conversion.

#3: It increases customer trust in the seller

A payment on delivery has another advantage: the customer is more likely to trust you than those who pay prepaid.

Because they can see the products in person, they believe it is safer to shop at your store. Instead of paying under the possibility of seeing the product, or that the products were genuine.

These are the things that encourage customers to pay cash for delivery. They also increase your store conversion.

#4: It discourages the selling of counterfeit products

Sellers won’t be tempted by inferior or counterfeit products because they know that the buyer will reject them.

This is a win-win situation for both buyers and sellers, as the issue of product returns and low-quality products are eliminated.

The transaction will be a win-win situation for both the seller and buyer.

#5: High Return On Investment (ROI).

You can also tap into a product market where the cost per conversion/purchase is much lower than the competition.

This allows you to make up to 1000% profit on a single product sales.

You can also pay less for Facebook advertising and make a higher profit on all products that are sold successfully.

#6: Faster Delivery Method

Cash on Delivery is faster than traditional prepaid payment methods and ships quicker. You will be dealing exclusively with a premium courier service.

Your products should be delivered within 2-5 days. Payments can be sent within one week, depending on the courier service.

#7: No Payment With-hold or Payment Method

Payment methods have always been a problem, especially when Stripe does not exist for merchants around the world.

Cash on Delivery eliminates the need to worry about these things. There are no transaction fees, chargebacks or placing your payment on hold.

Once your customers have paid, all payments are processed within a week.

The Principal Disadvantage is That:

The client won’t design fittingly for installment or abhorrence the items they acquired, it increments the hazard on the other hand that a lot a bigger number of requests will be returned than if they had paid ahead of time. Returned buys forego proposed benefits and may require shipping return expenses which are the two impediments for the dealer.

The notoriety of COD in the Developing World:

In certain nations, COD stays a well-known option with web-based retailers, since it is far simpler to set up for independent ventures and doesn’t require the buyer to have a credit card. Numerous independent companies favor cash installment to credit card installment, as it keeps away from credit card preparing expenses and time. A few shops likewise offer limits whenever paid in cash, since they can offer a superior cost to the consumer.

The lion’s share of dropshipping transactions in the Middle East is COD. 60% of online transactions in the UAE and the Middle East are done by COD and this has additionally prompted the development of dispatch organizations offering COD assistance. In certain nations like India, COD transactions are boosting web trade. COD transactions can likewise speak to consumers who don’t have built up credit or elective methods for payments of merchandise.