How to reduce cash-on-delivery in Middle East e-commerce
At a roundtable hosted by PayPal last week, representatives from
some of the region’s biggest e-commerce players gathered to discuss
the results of PayPal’s new Insights report on e-commerce in the
Middle East and North Africa, researched by Ipsos.
As leads at flash sales site MarkaVIP, logistics company Aramex, and previously of fashion e-commerce
site Namshi,
gathered to discuss sector challenges, the conversation quickly
turned to the industry’s nemesis: orders placed requesting
cash-on-delivery (COD). COD is routinely listed as the single
biggest challenge for e-commerce players in the region, as the lag
time before order and payment, the subsequent high return rates,
and the need for delivery people to carry cash are all major risks.
But, thanks to high rates in the region, it’s become a near
requirement for any e-commerce company, and the industry seems to
be currently stuck with it.
While PayPal assured that
cooperation between major payments players would lead to a new
initiative that could alleviate COD rates soon, there's not much a
small startup can do currently to avoid offering COD from the
outset. The biggest weapon might just be bravery; Sohrab Jahanbani,
COO of MarkaVIP, pointed out that when he co-founded GoNabIt he
never offered COD, and the business scaled just fine (however, the
company did later turn the service on when they entered Egypt).
Otherwise, PayPal and
others expect that COD use will decline as consumers become more
confident about the safety of online payments and online merchants.
This is being helped along by the presence of globally-trusted
online brands like Amazon, globally-trusted payment gateways like
PayPal, and ongoing consumer education.
In individual
presentations, the representatives of Aramex, MarkaVIP, PayPal, and
previously of Namshi, discussed the challenges they faced in the
ecosystem and where they are playing a role:
- After entering the market last year, PayPal is within the top
three payment methods in most markets in the region (that were
measured in the survey).
- Aramex has developed an offering to serve e-commerce startups,
and while they provide COD services, they also support encouraging
its disappearance for the health of the broader ecosystem.
- MarkaVIP is affected by COD, which accounts for nearly 80% of
its orders, Jahanbani explained. These orders take dedicated staff
to process and handle, and they also drive up returns. COD also
adds complexity to the logistics process, as concerns arise when
having a delivery fleet handling large amounts of cash; COD orders
also have four times as many customer interactions as online
payments, requiring more customer service staff.
- Muhammed Mekki, previously a cofounder at Namshi, now running entrepreneurship training company Astrolabs, highlighted that challenges for e-commerce center around funding, talent, and support, particularly in areas like legal and marketing. Their programs focus on workshops for ecommerce startups and they’re looking to work with the best ones in each market.
So what is a small startup to do to be successful at not offering COD?
- Be open and available for enquiries and questions, letting
customers know that they can contact you, and that the CEO assumes
responsibility for any problems.
- Use globally trusted payment gateways to process payments,
which could broaden trust in the ecosystem.
- Do research on the best practices and get the required
certifications to demonstrate that you are committed to
security.
- Place payment options at the top of your website, so that
customers don’t have to search for them.
- And last, if you can bear it, don’t include COD on your list of options. It’s a lot easier to never start than to take it away later once your customers are hooked.