Cash on Delivery in Eastern Europe
Market leaders are those organizations that have managed to live a permanent impression on their customers. The dream of every organization is to succeed in its task to estimate its brand name as a term for its product or even better for the category. Such examples are widely known: Tempo, Labello, Tesa, Uhu und Co. those are so-called Deonyme.
How to achieve that is a science on its own. One is sure being first in a market is a step in the right direction. Most certainly, that is the reason why many central European, US, and Asian organizations are competing to penetrate the not-so-developed east-European markets.
In their way, they quickly realize that the experience from central and west Europe is not going to be helpful in some areas. In the time of digital payment and services like PayPal, google pay, and apple pay, it is hard to imagine that the payment of online purchases may be complicated and even be a barrier for some organizations.
The problem is not hiding in the fact that the East European are technologically behind or cautious of their data being sent to other countries. The reason why the East-Europeans are avoiding virtual payment methods is mostly cultural and related to some trust issues.
Purchasing over the internet, for the central Europeans, is more likely a daily task, in comparison to some East-European countries, where shopping over the internet looks more like searching for products that are not easy to find in the typical stores. The problem of trust may be considered in three dimensions:
– Trust in the platform, online shop, and whether the platform is going to deliver the promised product to the customer
– The problem of the post system. Do the customer is going to receive anything at all
– And the third one, often used as an argument, is a question of the east Europeans: “How may I give my money for something, that I did not saw or touched?!”
COD is the abbreviation of Cash On Delivery, which is the momentary answer to the three problems. COD is a delivery model in which usually the courier picks up the parcel, delivers it to the customer, and collects the payment from the customer. The delivery of the parcel usually includes an option for the customer to open the package and make a quick decision if he or she wants to keep it and pay for it or not.
Offering the COD payment method comes with some pros and cons for the customer and the e-commerce. It may be considered that most of the time those pros and cons are being a mirrored reflection, when something is good for the customer, it creates a higher cost for the organization.
Receive, check it, and then pay – the third party in E-commerce
That convenience for the customer comes with some substantial price and complications for the seller, as involves another external stakeholder in the chain. The option for the customer to check the product before paying for it means, that the customer must be convinced to buy the product once again and that on a doorstep.
So, what happens when the customer does not accept the purchase? Who is carrying the cost of delivery? The Cash on delivery payment method may turn to be a deal with a negative result for the Ecommerce.
Speaking of third parties being part of the daily business of e-commerce companies, some topics must be always considered! Topics like Integration of logistics, bookkeeping, time management, and for all process synchronization are some difficulties that the business must face offering the COD payment method. And all of that in a narrow timetable.
Received, accepted, and paid for just to be returned later
In the ideal case of successful delivery, acceptance, and payment of the product, further complications may occur after the transaction has happened. Being part of the European Union, the same regulations apply for the East-Europeans as in Germany, France and Italy as an example. One frequent situation is that the customer decides to send back the parcel and require a refund in the regulated minimum of 14 days after delivery.
As an additional step, the regular return of online-purchased products holds more complications to the Ecommerce organization, as the product must be returned, accepted, the integrity of the product checked and the refund to be sent and received on the other end. As in the purchase and delivery of the product to the customer, the return and refund processes include the transaction of physical goods, but also the parallel transaction of information in both directions. Furthermore, the COD payment method initially requires only the address and name of the customer, so that erects another question.
How businesses may refund the customer?
The Cash in the Cash on delivery payment method creates a problem for the potential refunds to the customer. The simple solution to the problem may be requesting the bank information as taking the COD order from the beginning. So, in the case of a potential refund may be transferred directly into the customer’s account.
But how to be sure, that the Bank information entered from the customer is the correct one? And that the customer did not, on purpose or over a typo, change a number or two? And in the case of high return rates, how to automatize those processes and reduce the spending on customer contact?
5 major topics to solve COD difficulties
Potential solutions to some of the presented difficulties may be found in the following list. Those solutions may differ or are depending on the market properties.
1. Do not underestimate the COD payment method and the difficulties that come with it!
In other words, do not count on the experiences that you may have from your business in Central Europe. That experience being nice-to-have may not help the organization, as the culture of doing business in east European countries may differ from the initial impression. That statement holds in the B2B but as well in the B2C sectors.
2. Search for a suitable partner!
If you have the choice, consider looking-up for a stable partner as a high-priority task, which may help your business in the future. Like many things in life, sometimes the cheaper turns to cost more in the end, do not let the price influence you.
3. Educate your customers!
If the business is one of the first of its kind in a particular region, some proper education of the processes and ways may do wonders! Do not try to hide the real reasons for things from your future customers. A great example of that may be the benefit of entering and checking the personal bank information before confirming the COD payment and delivery method to the customers.
4. Test the processes for possible scenarios!
Entering a new country or region is usually accompanied by a great deal of marketing efforts to attract the attention of the customers. As wonderful a great start with thousands or even hundreds – thousands of orders may be, the business must deliver. Great practice before disappointing your future customers with the first order, is to assure that the “main case” of the processes are functioning and checked, not once or twice. Consider a well-thought price limit to handle edge cases.
5. Look at the right number as doing your business analyses, do not believe the CAC!
Offering the COD payment and delivery method in east Europe may bring some great Customer Acquisition Cost (CAC) numbers at the beginning, but do not let the numbers trick you! The time-consuming procedures are increasing the operational cost of the COD returns and orders, which may not directly appear in the CAC and Cost Per Sale (CPS).
Concerning the COD delivery method, the businesses may try to walk the way on its own, burning resources, or acquire experience consulting support. The difficulties presented in that article and many more obstacles must be considered in the quest to be first on a market and become a market leader.