Cash on Delivery — What Is It and Is It Worth Offering to Customers?

In the past, in mail order commerce, the choice was simple: either you prepay by traditional transfer, or you pay for the package only upon receipt. Today, despite many modern payment methods, cash on delivery shipping still holds strong — nearly 40% of e-consumers admit to using it. What is the reason for the popularity of this solution, and is it worth offering to customers? We explain below.

What Is Cash on Delivery?

Cash on delivery (COD) is a form of finalizing transactions where the customer pays only upon receipt of the shipment. Although it is one of the oldest forms of payment, it is still very popular. The "E-commerce in Poland 2024" report published by Gemius shows that 39% of people who shop online have used cash on delivery shipping.

Payment by cash or card upon receipt of the package is an alternative to prepaid shipping, where payment is a prerequisite for shipping the order. In the case of cash on delivery, there is no need to wait for the payment to reach the seller for them to confirm the crediting of funds and start processing the order.

Why Do Customers Choose Cash on Delivery?

The first reason is the aforementioned time. Customers appreciate fast order shipping without having to wait for the transfer to be credited. While fast online transfers or BLIK also provide instant transaction confirmation, those who choose traditional transfers usually have to wait for bank sessions. And these can delay shipping by up to several days if, for example, the order is placed on a Friday.

The second argument is convenience and a sense of security. Some customers believe that payment upon receipt minimizes the risk of losing money in the case of goods that are not as described or damaged. They also use this method to check out stores where they are shopping for the first time. However, it is important to remember that the ability to inspect the package before payment is not always available by default and sometimes requires an additional fee. Therefore, choosing cash on delivery does not automatically guarantee that the goods can be inspected before payment (unlike, for example, PayPo). If opening the package before payment is crucial for the customer's purchase decision, it is worth choosing a carrier that offers this option or purchasing the appropriate additional service.

The third issue is the lack of need to provide sensitive data online, which is valued by customers. By choosing cash on delivery shipping, they do not have to log in to their bank, provide credit card details, or otherwise authorize payments. This increases their sense of cybersecurity.

Cash on Delivery from the Seller's Perspective

Shipping goods and covering the delivery fee in advance puts the seller at potential risk. If the customer does not pick up the shipment and it is returned, the transport cost (both ways) usually falls on the store. Moreover, in most courier companies, handling cash on delivery payments is more expensive than delivering a prepaid package. You can, of course, adopt a strategy where the buyer pays for delivery in advance, and only pays for the products upon receipt. However, this method may discourage people who are looking for convenient and simple solutions.

Cash on delivery shipping also means that the goods disappear from the warehouse inventory, but the seller has no guarantee of payment for them. Only after the shipment is delivered and the fee is settled by the courier company, the money goes to the store's account. This usually means a delay of several days in settlement, when the store has neither the funds to continue investing nor the goods to sell to another customer. If there are few cash on delivery orders, this will not be a problem. However, if the number is large, it can worsen the store's financial liquidity.

On the other hand, this method also has significant advantages, including expanding the pool of potential customers and building their trust. According to the aforementioned "E-commerce in Poland 2024" report, nearly one in three customers confirms that the option to pay upon receipt affects the credibility of the store. This applies not only to people who do not have much experience with online shopping or who value traditional forms of payment (e.g., older users). Cash on delivery shipping is often the preferred form of delivery for orders of higher-value goods, such as electronics, household appliances, or furniture, when customers want to personally assess the condition of the product. However, it should be noted that courier companies impose limits on the maximum cash on delivery amount. For example, in DHL it is 6.5 thousand PLN for a single shipment, in InPost — 5 thousand PLN, and Poczta Polska in the Pocztex service allows cash on delivery up to 20 thousand PLN.

Is It Worth Offering Cash on Delivery to Customers?

The decision to introduce cash on delivery depends largely on the specifics of the industry in which you operate and the customer profile. It is a solution that can increase conversion and competitiveness and reduce the number of abandoned carts. However, you must also be aware of the disadvantages of this solution: payment upon receipt means additional handling costs, the risk of undelivered shipments, and delays in the flow of funds.

If you are considering implementing cash on delivery in your online store, you can start by considering a test introduction of cash on delivery for selected product categories. An alternative is, for example, offering free first delivery with prepayment. You can also intensify promotions for other payment methods such as PayPo or BLIK Pay Later, which allow customers to receive goods before paying for the order. As a result, you reduce the business risk associated with traditional cash on delivery shipping, while maintaining the advantages of this method — convenience for the customer and an increased sense of security.

Cash on Delivery. Summary

From the buyer's point of view, cash on delivery provides a guarantee of security and comfort, especially when purchasing more expensive products or in new stores. For sellers, this means a chance to acquire more customers and increase conversion. Cash on delivery is safe as long as the risk is managed properly. It is important to control costs and minimize undelivered shipments.

The risk can be reduced by analyzing your industry and using tools like Przelewy24.