由 lltx1822 Conditions for COD (Cash on Delivery): Which Industries and Regions Are Most Suitable?
Abstract
COD (Cash on Delivery), as a unique hybrid payment and delivery model, plays a significant role in cross-border e-commerce and traditional trade. However, its high rejection rates and slow capital turnover deter many businesses. Based on 2025 global market data, this article systematically analyzes COD’s applicable industries, regional preferences, cost structures, and risk control strategies, incorporating case studies from emerging markets like Southeast Asia, the Middle East, and Latin America to provide a scientific decision-making framework.
Key Questions Answered:
- Which industries are best suited for COD? FMCG and low-price goods perform best.
- Which regions have the highest COD acceptance? Analysis of Southeast Asia, the Middle East, and India.
- Why does COD have a 30% rejection rate? How to reduce losses with prepayments + blacklists.
- Opportunities and challenges for COD under 2025 logistics regulations.
Target Audience:
- Cross-border e-commerce platform operations managers
- Independent store sellers
- International logistics service providers
I. Core Logic and Characteristics of COD
1.1 The Nature and Workflow of COD
COD is not an international trade term (e.g., Incoterms®) but a “payment + delivery” hybrid model with the following core process:
- Seller ships goods: Delivers to the buyer’s address via a logistics provider.
- Logistics collects payment: Collects cash/card/scan-to-pay upon delivery.
- Funds settlement: The logistics provider deducts service fees and transfers payment to the seller (typically 3–15 days).
1.2 Key Differences from DAP and DDP
| Aspect | COD | DAP | DDP |
|---|---|---|---|
| Payment Timing | Payment on delivery | Pre/post-shipment | Pre/post-shipment |
| Rejection Risk | High (15–40%) | Low (<5%) | Very low (<2%) |
| Capital Turnover | Slow (7–30 days) | Fast (1–3 days) | Fast (1–3 days) |
Note: COD is better suited for markets with low trust or unique payment habits.
II. Industry Analysis for COD
2.1 Top Three Industries for COD
- Fast-Moving Consumer Goods (FMCG)
- Examples: Personal care, snacks, small home goods.
- Advantage: Low unit price (<$50) lowers buyer hesitation.
- Case: On Thailand’s Lazada, 62% of COD orders are for face masks and shampoo.
- Fashion
- Examples: Clothing, accessories, footwear.
- Requirement: Offer free returns (or rejection rates rise 15%).
- Electronics Accessories
- Examples: Phone cases, charging cables.
- Avoid: High-value items (>$100) like smartphones.
2.2 Industries Unsuitable for COD
- High-value goods (e.g., luxury items, precision instruments).
- Customized products (e.g., engraved gifts, B2B industrial parts).
- Perishables (e.g., fresh food).
III. Regional Preferences and Market Performance
3.1 Southeast Asia: The COD-Dominant Market
| Country | COD Share | Avg. Rejection Rate | Optimization Strategy |
|---|---|---|---|
| Indonesia | 75% | 28% | 20% prepayment |
| Philippines | 68% | 22% | SMS confirmation |
| Vietnam | 55% | 18% | Local logistics partners |
Success Case:
A Shenzhen 3C seller on Shopee Indonesia:
- Reduced COD rejections from 35% to 12% using blacklists + prepayments.
- Key tactic: Auto-block buyers with 3+ rejections.
3.2 Middle East: Advanced COD Models
- Feature: High average order value ($100–$300) still works with COD.
- Reason: Low credit card penetration but affluent consumers.
- Innovations:
- COD + card payment: Couriers carry POS machines (e.g., Souq’s Cashless COD).
- Partial prepayment: Collect 30% deposit, balance on delivery.
3.3 Latin America & India: Potential and Risks
- Brazil: 40% COD share but high customs holds (requires RFID pre-registration).
- India: High COD acceptance in tier-2 cities, but 30-day settlement cycles.
IV. Cost Structure and Risk Control for COD
4.1 Cost Breakdown (Indonesia, $30 Order)
| Cost Item | Amount | Notes |
|---|---|---|
| First-mile shipping | $2.5/kg | Sea freight small parcels |
| Last-mile delivery | $1.8 | Includes COD fee |
| Rejection loss | $9 | 30% rejection rate |
| Total Cost | $13.3 | 44% of order value |
vs. DAP: DAP costs $10.2 (no rejections) but has 50% lower conversion.
4.2 Four Strategies to Reduce Rejections
- Prepayment: Collect 20–30% deposit (Shopee supports Partial COD).
- Blacklists: Auto-block frequent rejecters.
- Logistics partners: Use providers with pre-delivery confirmation (e.g., J&T Express).
- Promotions: Free shipping for COD orders over $50.
V. 2025 Trends and Compliance for COD
5.1 Policy Impacts
- EU: From 2025, COD parcels must label “7-day free returns” (increases seller costs).
- Saudi Arabia: All COD requires national ID binding (reduces fake orders).
5.2 Tech Innovations
- Blockchain tracking: UAE logistics firms enable real-time COD settlements.
- AI risk control: Predicts and blocks high-risk orders (85% accuracy).
VI. Decision Flowchart: Should You Use COD?
Do ALL apply?
1. Target market COD share >40% (e.g., SEA, Middle East).
2. Unit price <$50 and non-customized.
3. Can tolerate 15%+ rejection rates.
→ Yes → Use COD + prepayment.
→ No → Choose DAP/DDP.