由 caicai8478 I. Advantages of the cash on delivery model in cross-border logistics
(I) Improving consumer trust and willingness to buy
Consumers can pay after receiving and inspecting the goods, eliminating the worry of “not receiving the goods after payment” or “the goods do not match the description”, which is especially suitable for high-value goods or unfamiliar brands. For example, in the Middle East market, cash on delivery accounts for as much as 70%, and local consumers prefer this “seeing is believing” payment method.
For consumers with less cross-border shopping experience, cash on delivery lowers the psychological threshold and avoids giving up purchases due to concerns about the complexity of cross-border after-sales service, which helps to expand the consumer groups in emerging markets.
(II) Enhancing the market competitiveness of merchants
In Southeast Asia, Africa and other regions with low mobile payment penetration rates, cash on delivery has become an important means for merchants to seize the market. Compared with competitors who only support prepayment, merchants that provide cash on delivery can cover a wider range of consumer groups and improve order conversion rates.
For merchants who are new to the cross-border market, cash on delivery can be used as a differentiation strategy for initial promotion. By eliminating consumers’ payment concerns, it can quickly accumulate brand reputation and lay the foundation for the subsequent shift to a prepayment model.
(III) Reduce technical barriers in the payment process
Consumers do not need to have cross-border payment tools such as international credit cards and PayPal. They only need to prepare cash or support local e-wallet payment, which simplifies the purchase process and is especially suitable for elderly users or groups with weak digital payment capabilities.
Avoid order loss due to payment system compatibility issues. For example, banks in some countries set strict risk control for cross-border online payments, and cash on delivery can bypass such restrictions.
(IV) Provide a buffer period for goods acceptance
Consumers can check the quantity, specifications, and quality of the goods in person. If they find damage or discrepancies, they can refuse to accept them on the spot, reducing subsequent return and exchange disputes. This instant feedback mechanism can effectively reduce merchants’ after-sales costs.
For categories such as clothing and 3C that require high physical experience, cash on delivery allows consumers to confirm whether the goods meet expectations before signing for them, reducing the return rate caused by subjective satisfaction issues.
II. Disadvantages of the COD model of cross-border logistics
(I) Merchants face high financial risks
The payment collection cycle is long. Usually, the payment can only be received after the logistics company completes the delivery and collects the funds. The payment period may be as long as 15-30 days, which affects the merchant’s capital turnover rate. If the logistics company has a settlement delay, it may cause the merchant’s cash flow to be tight.
There is a high risk of rejection. According to industry statistics, the average rejection rate of cross-border COD is about 10%-15%, and some high-risk areas can reach 25%. Rejected goods need to be returned or destroyed. Merchants not only lose logistics costs, but also face the risk of unsalable goods.
(II) Increased logistics and operating costs
The COD business requires logistics companies to provide collection services, which usually require additional handling fees (generally 2%-5% of the payment amount). Combined with the high cost of cross-border logistics itself, the overall operating costs have increased.
To ensure the safety of goods, more packaging costs (such as anti-tampering materials, shockproof packaging) and monitoring measures (such as blockchain traceability, GPS positioning) need to be invested, further pushing up logistics costs. It is estimated that the logistics cost of the cash on delivery model is 15%-20% higher than that of the prepayment model.
(III) The operation process is complicated and inefficient
The entire chain needs to add identity verification, face-to-face inspection, payment collection and other links. The delivery time of the deliveryman is more than 30% longer than that of ordinary orders, resulting in slower logistics timeliness, especially when the order volume is large. Delivery delays are prone to occur.
The fund settlement process is complicated. Logistics companies need to settle the collected payment in foreign exchange before transferring it back to the merchant account. It may involve multi-currency conversion and cross-border payment fees, which increases the difficulty of financial processing.
(IV) There are large management loopholes
When collecting payment, deliverymen may face risks such as cash theft and misappropriation. Especially in areas with poor public security, the personal safety of deliverymen is also threatened. Although the risk can be reduced through background checks and training, it cannot be completely eliminated.
If the goods are damaged or lost during transportation, it is complicated to determine the responsibility. For example, the damaged packaging caused by customs inspection may be mistaken by consumers as a defect in the goods and refused to sign, which may easily lead to liability disputes between merchants and logistics companies.
(V) Policy and compliance risks are prominent
Some countries have strict controls on the cash on delivery model. For example, India stipulates that cash on delivery orders must declare detailed product information to the customs in advance, otherwise they may face detention; Brazil has set strict restrictions on foreign exchange settlement for cash on delivery, which increases the compliance difficulty for merchants.
Tax processing is complicated. Cash on delivery goods may be regarded as “temporary imports” in the destination country. If they are refused and returned, they need to go through the export tax refund procedures again. The process is cumbersome and prone to tax risks.