Tuesday, March 13, 2012

Cash on delivery eroding margins of e-commerce firms.

As Indian e-commerce looks to accelerate from a slow trot to a gallop, the innovation that got the sector up and running - cash on delivery - may prove to be a handicap.

The expenses involved in physically collecting cash, higher rejection rates and longer turnaround time to receive money make cash on delivery a less efficient model to sell merchandise online. 

In developed Western markets, nearly 80% of online transactions are paid for by credit or debit cards, net banking and alternative online payment channels such as PayPal, according to a report by Nielsen. Only about 15% of deals were settled by cash on delivery.

In India, on the other hand, cash on delivery is the payment method for up to eight in 10 transactions.  

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