The good, the bad, the demerits of Payment on delivery (POD) in Nigeria’s E-commerce space.
Firstly, POD on perishable goods such as cooked meals are a No No. But for smaller start-ups looking to acquire customers/users. There's a crazy shout about 'we do payment on delivery'
I had an ugly experience during the beta testing of our product, Instakitchin. A buyer made an order and it was confirmed, he was answering his calls and texts until it’s time to receive and make payments.
He was on voicemail, he's no where to be found, caused confusion for the operations team and the dispatcher., it resulted into order cancellation and a loss to the company, refunds was made eventually.
Going by the stats in Lagos, Nigeria. As much as 80% customers of top E-commerce sites in Nigeria use the option of paying on delivery (POD) and many of these sites have credited POD for fueling their rapid growth. While POD for obvious reasons such as Trust & originality makes a lot of sense for Nigerian customers and definitely opens a new market (students etc) to e-commerce.
Here are some of the things wrong with POD
COST: Nearly all courier companies charge extra for collecting cash.
DELAY IN PAYMENT: Unlike credit card transactions, POD payment generally takes 1-2 days or more to be transferred to your account. This bites your cash flow especially as the POD amounts start becoming huge.
HIGHER RETURNS/CANCELLATION: Since the customer hasn’t paid in advance, they can always cancel/refuse to take the delivery and sight reasons like I found this phone cheaper locally and have bought it from there or I have changed my mind, will buy a new laptop later.
Some buyers from an aggregated food delivery startup will even disappear at the point of receiving and making their agreed POD. it's very ugly.
Some buyers from an online fashion store will tell the dispatcher at the point of delivery and making POD, this is not what I saw online my friend. I'm not interested any more.
OVERHEADS: Collecting the cash, collating the receipts and maintaining records et all is a nightmare.
With increasingly every online business offering it despite its disadvantages(to retailers) the situation might just go out of hand and turn into a death spiral (at least for some non/less funded businesses that rely heavily on their internal cash flows).
Small startups are the ones that should be really concerned about these issues instead of blindly coping others and starting POD.
With time as the e-commerce market in Nigeria matures, there *might* be more trust in established mechanisms of swiping cards for paying and some people will get over the liking for POD and prefer pre-payments.
But, given the case as it stands right now, it looks like unless the e-commerce majors, talking about the JUMIA's & KONGA's of this world deliberately start enforcing Trust, standard and originality on their merchants, in that way demoting POD and promoting other payment options, we just might replicate what’s happening elsewhere i.e 60-85% people using e-commerce sites paying by POD.
Some ways around POD
-Multiple Payment Options (at least 5-6)
-Pre-payment methods (like wallets, cards)
-Mobile banking and SMS payments
-Giving incentives to users for choosing online payment against POD
-Alternative payment methods such as Quickteller, PAGA, Flutterwave etc
While POD is a good option to have in some cases its double edged sword which should be used with a lot of caution and foresight. What do you think?
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Photo : @techpoint Ng