What is COD Cash on Delivery & COD Cash on Delivery Review: Features, Pros & Cons, and Best Use Cases

Cash on delivery (COD) is the abbreviation of cash on delivery, which is what we often call "payment on delivery". The courier collects the money first and then the goods are delivered. At the same time, the customer pays the courier. It is also generally used in e-commerce (online shopping). Many companies in the popular third-party logistics do cash on delivery.

About COD

Typical domestic enterprises using the COD model include Yixun, JD.com, Dangdang, Joyo, Vancl, Redbaby, Letao, and Intime Department Store.

Cash on Delivery (also known as Cash on Delivery) is a high-risk transaction method for sellers that allows sellers to mail order products to buyers. COD allows buyers to pay when they receive the goods, rather than paying in advance at the time of purchase. If payment is not made at the time of delivery, the product will be returned to the shipping company without further obligations on the buyer.

COD also has some specific restrictions, such as many logistics companies limit the transaction amount of the payment received. For example, UPS will not ship COD packages over $50,000.

The rise of COD logistics model

The current COD logistics model is mainly concentrated in emerging market countries such as Southeast Asia and the Middle East. The Southeast Asian market is mainly Thailand, Vietnam, Malaysia and Indonesia.

E-commerce markets that use COD services have one thing in common, which is that the local network, payment methods, logistics and other basic supporting facilities are relatively backward, and the e-commerce model has not yet formed consumer habits. It is precisely because of these objective factors that the cross-border e-commerce market has a strong demand for COD payment services.

At present, there are very few cross-border logistics companies in the market that can maturely operate the COD business model. Everyone is in the stage of crossing the river by feeling the stones, and is relatively still in the period of huge profits in the extensive development stage.

The biggest advantage of COD mode

At present, COD cross-border e-commerce B2C logistics is popular in the cross-border e-commerce logistics industry, and many companies have launched cash on delivery services.

The biggest advantage of the COD logistics model is that it abandons the advance payment costs and bad debt risks of the traditional logistics model, and reverses the entire cash flow operation process compared to the traditional model.

The seller's sales revenue and profit cash flow are all controlled by the freight forwarder. What attracts sellers the most is the huge and considerable cash flow and the absence of the risk of bad debts.

COD model development bottleneck

The current market average acceptance rate of the COD logistics model is only about 60%-70%, which means that about 30% of the goods delivered to customers are rejected for various reasons and need to be returned to the warehouse for re-shelfing or destroyed on site.

Among this series of returns, the most common reason is that the goods are not the same as the pictures. The discrepancy between the pictures and the actual goods has become the main reason for returns. This is because some cross-border sellers will sell products with quality defects on the platform in order to pursue huge profits.

This puts logistics companies that use the COD model in an awkward and passive position - because the logistics company collects the payment on behalf of the recipient, the recipient will directly ask the logistics company for a return and refund instead of looking for the cross-border e-commerce seller. This return and refund dilemma will be directly transferred to the logistics company.

A large number of returned items can easily cause a backlog of goods in the warehouse, putting great pressure on the logistics company's inventory management.