Cash on Delivery orders were seeing a higher rate rate of cancellation, which led to increased costs for sellers.

Two Flipkart boxes and one package with the logo on the packagesPicxy
Atom E-Commerce Thursday, July 16, 2020 - 13:11

Flipkart on Wednesday introduced part payment for cash on delivery (COD) orders on Wednesday, as COD orders often have a higher rate of cancellation.

Customers usually have three ways of paying an order — by debit or credit card (prepaid), COD or on EMI. In an email to sellers on Wednesday, Flipkart said that most buyers choose to go for COD and while that results in more units being sold, it has a higher cancellation rate.

With part-payment, the buyer will have to pay a part of the amount at the time of purchase, and the rest after delivery — either in cash or online.

“Part-payment is a new payment construct which helps you enjoy higher unit/GMV growth while ensuring that cancellations are low,” Flipkart said its email.

By making customers pay a small amount at the time of purchase, Flipkart said that it diminishes the chances of cancellations or returns.

“This new mode of payment will prompt buyers to go for a pre-paid transaction, which will reduce the chances of customer cancellation and returns,” Flipkart’s email said.

The commission paid by sellers will remain the same, Flipkart said.

The All India Online Vendors Association said that this move “can lead to 2-3% reduction in prices for consumers as currently losses of such undelivered orders were factored as a cost.” Terming the move as a “masterstroke”, AIOVA said that this is a step towards making e-commerce entirely prepaid, like it is in the USA, EU and other developed nations.

According to Entrackr, sellers see returns of upto 20% on COD orders, with the seller bearing the cost of packaging, as well as logistics to send and return the product. COD, the report said, is a major reason for fake buying and in order to make for added costs, sellers inflate costs by 3% to 5%.

A decade ago, Flipkart had introduced cash on delivery, a move that is said to have opened up the e-commerce market in the country at a time, with some estimates saying that COD orders amount to over 60% of e-commerce transactions in India. 

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