Cash on delivery (COD), sometimes called collect on delivery, is the sale of goods by mail order where payment is made on delivery rather than in advance. If the goods are not paid for, they are returned to the retailer. Originally, the term applied only to payment by cash but as other forms of payment have become more common, the word “cash” has sometimes been replaced with the word “collect” to include transactions by checks, money orders, credit cards or debit cards.
Advantages and disadvantages for retailers
The advantages of COD for online or mail order retailers are:
- The customer does not need to own a credit card to purchase
- Impulse purchases may increase as payment is not due at the time of ordering
- The credibility of retailers may be increased because the consumer only has to pay when the item is delivered
The principal disadvantage for retailers is that many more orders will be returned as buyers are less committed to the purchase than if they had paid in advance.
Most operators impose a limit on the amount of money that can be collected per delivery or per day using COD services. Limits may be higher for non-cash payments. Canada Post, for instance, applies a limit of C$1000 for cash, but C$5,000 for payment by check or money order.
Popularity in the developing world
In some countries COD remains a popular option with internet-based retailers, since it is far easier to set up for small businesses and does not require the purchaser to have a credit card. Many small businesses prefer cash payment to credit card payment, as it avoids credit card processing fees. Some shops also offer discounts if paid in cash, because they can offer a better price to the consumer.
The overwhelming majority of e-shopping transactions in the Middle East are COD. 60% of online transactions in the UAE and Middle East are done by cash on delivery and this has also led to the growth of courier companies offering a COD service.
- ^Cash On Delivery – COD Investopedia, 2013. Retrieved 28 December 2013.
- ^Collect on Delivery (COD) Canada Post, 2013. Retrieved 28 December 2013. Archived here.
- ^Triska Hamid (2014-05-14). “Cash on delivery the biggest obstacle to e-commerce in UAE and region”. The National.
- ^“Cash on Delivery : Courier Perspective”. Parzel Express. 2014-11-17. Archived from the original on 2014-12-14.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.