In India, a country where Cash on Delivery (COD) has long been a preferred payment method for online shoppers, small businesses are now taking a step back from this payment model. Many small brands have slashed their COD orders by as much as 70 per cent, a move driven by the rising operational costs and the desire to streamline their business operations. This shift is part of a growing trend where small businesses are adapting to changing consumer behaviours, managing their costs more efficiently, and reducing risks tied to cash transactions.

The Burden of Rising Operational Costs

For small businesses in India, handling COD orders has always been costly. The main issue lies in the extra expenses that come with COD transactions. Every time a customer chooses COD, the business incurs additional delivery charges, as logistics companies typically charge more for collecting cash from customers at the time of delivery. On top of this, there are also the costs associated with managing returns or failed deliveries, which are more common with COD than with pre-paid orders. Delivery agents often return empty-handed if the customer is unavailable or refuses the package, which creates inefficiencies and additional costs. 

For small brands, these added charges can quickly eat into profit margins. In a highly competitive retail environment, these margins are already tight, and the added burden of COD-related expenses only makes it harder for businesses to stay profitable. These challenges are compounded by the fact that small businesses often have limited resources to manage complex payment and logistics systems. 

A Shift Towards Digital Payments

In response to these challenges, small brands are pushing for more customers to embrace digital payment options, such as debit/credit cards, UPI, and digital wallets like Paytm, PhonePe, and Google Pay. These payment methods not only lower transaction fees but also eliminate the need for handling cash, making the entire process smoother and more cost-effective for both businesses and customers. 

Digital payment platforms have also made significant strides in India, with the government’s push for a cashless economy and the widespread use of smartphones. These platforms offer businesses affordable and secure payment processing options, further encouraging small brands to move away from COD. With digital transactions, businesses can save on collection fees, reduce the risks associated with cash handling, and streamline their cash flow management. 

Consumer Behaviour and Changing Preferences

The preference for COD in India, which was once seen as a safe and convenient option, is slowly declining. In recent years, especially post-pandemic, more Indian consumers are becoming comfortable with online payments, particularly as digital payment systems have improved in convenience and security. Government initiatives such as the promotion of UPI (Unified Payments Interface) and the rise of mobile wallets have played a big role in this shift. 

Small brands are also finding that offering digital payment options can enhance the customer experience. With features like one-click payments, stored payment methods, and easy refunds, customers are enjoying faster, more convenient transactions. Moreover, many small businesses are incorporating Buy Now, Pay Later (BNPL) services, which allow customers to make purchases and pay in instalments—combining the flexibility of COD with the security of digital transactions. 

Risk Mitigation and Fraud Prevention

Fraud and payment disputes have always been a concern when it comes to COD. Indian small businesses, particularly in sectors like fashion and electronics, often face the risk of fraudulent returns, fake claims of non-delivery, and even cases where the customer refuses to accept the product at the door. Reducing COD orders minimises exposure to these types of risks, allowing businesses to maintain better control over their operations and reduce the number of returns. 

Digital payments, on the other hand, come with built-in security features, such as transaction records, which help both businesses and customers avoid fraud. As a result, small brands can offer a more reliable and secure shopping experience while cutting down on the risks associated with cash-based transactions. 

Looking Ahead: The Future of Retail in India 

The move to cut COD by 70 per cent may seem like a bold decision for small brands in India, but it reflects a necessary evolution in the retail landscape. Rising shipping and fuel costs, coupled with the challenges of managing COD orders, are pushing small businesses to rethink their payment models. In this changing environment, businesses that embrace digital payments will be better positioned to thrive in the long term.

Moreover, as more consumers shift towards digital payments, the idea of COD may become less relevant. Over time, even traditionally cash-dependent customers may find digital payments more convenient and secure, especially with increasing access to smartphones and digital literacy. Small businesses in India are taking advantage of these trends to streamline their operations, reduce costs, and improve customer satisfaction. 

In conclusion, reducing COD orders by 70 per cent is a strategic move that allows small brands to stay competitive, reduce unnecessary costs, and improve the overall customer experience. While COD has been a cornerstone of Indian e-commerce for years, the future belongs to businesses that embrace secure, digital payment options. As more consumers become comfortable with online transactions, small brands are positioning themselves for success in a rapidly changing retail landscape.