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, credit cards or debit cards.
The advantages of COD for online or mail order retailers are:
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. This lead to a lot of infomercial products in the United States to stop using COD as an option by the mid 1980s.
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$25,000 for payment by check or money order.
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.
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