Anyone watching the ecommerce space in the past few months would notice how payment on delivery (POD) has come under a certain amount of scrutiny.
The argument is that, POD doesn’t insulate the seller from returns and usually, they are left to bear the cost of a two-way fruitless delivery trip alone. POD bumps up cost of logistics and there is no confidence in any sale until the logistics guys return with the cash. “This is not good for the ecosystem,” anti-POD evangelists say.
It is true. One of the other pitfalls for POD is how it increases the length it takes to convert inventory to cash , and the leeway for theft that it leaves open.
In the September of 2014, Amazon cut back on the payment on delivery option in Uttar Pradesh, India, because residents were beating up dispatch riders, robbing them of orders, before sending them on their way.
Things are not looking good for POD. But it will be great to consider how POD itself is not such a bad idea afterall.
One justification for payment on delivery is that, for a country like Nigeria where card penetration is still low (it was at 23 million in 2013), pay on delivery becomes the best way to increase the pool of people that can engage with ecommerce platforms.
Aspersions have been cast in the direction of the two largest e-commerce stores in Nigeria; Konga and Jumia. The argument is that they promoted POD at the expense of smaller players who are not as cash-flushed to manage the expense that comes with it. Therefore giving themselves an unfair advantage.
While I don’t have an opinion about the fairness, for online stores who are out to get new users, one way to get them on board is give them something closer to what they are used to; pay for a product in the same way as in a brick-and-mortar outlet.
POD becomes the thing that makes e-commerce more relatable. Building trust in the process. Online shoppers in Nigeria – especially first-time online shoppers – are reluctant to use their cards online. Who can blame them, after the Nigerian Prince saga that was the staple in the early 2000s?
POD to the rescue then.
A strong argument can also be made for the fact that the delivery agent will treat the merchandise more carefully if he knew the package is yet to be paid for and the customer paying rests on what condition the product arrives in. This POD-motivated care means buyers won’t meet their deliveries in the trash with a note from the delivery guy.
While POD gets a fair amount of flak from people right now, it’s good to remember some – perhaps unintentional – good it has done the ecosystem. Whereas removing POD could help e-commerce stores on the short term (helping them cut down cost of logistics), it reduces the rate at which awareness and use of e-commerce grows among the population. There is a conversation around this on Radar (check it out).
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