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A  Retailer’s Dilemma: Payment Before Delivery Or Payment On Delivery

In a recent article I wrote on delivery, I stated that the rapid growth of e-commerce has birth delivery and the responsibility lies on the shoulders of the retailer. Surprisingly delivery has become the customer’s favorite choice contrary to the times when customers would walk in to pick their products. Delivery has thus become a major part of online retailing which obviously comes with a lot of challenges.

The topic for discussion today is how payment is done with online retailing. Generally there are two main ways of payment with e-commerce, payment before delivery and payment on delivery.

Payment before delivery (PBD)

Payment before delivery simply means customers will have to pay for their confirmed orders before delivery is done. Retailers who opt for PBD thus provide electronic payment platforms like, hubtel, mobile money transfers, paypal etc, for their customers to make payments. The process for PBD is order, confirm order by paying and finally delivery. Retailers are more inclined towards this type of payment model.

Payment on delivery (POD)

Payment on delivery also means customers will receive their items, confirm and finally make payments. This type of payment comes in different ways; payment can be made using an electronic system or be paid to the person delivering the item. Customers also love this mode of payment. The process for this type of payment is order, deliver, then finally payment.

Hear this!

These payment models have risks either on the retailer or the customer depending on the system of payment being used.

Payment before delivery secures the retailer while putting the customer at risk. Why do I say this? Customers may have trust related issues with online sellers due to online fraud situations they may have experienced or heard from others, thus most customers are likely not to order if they have to pay before delivery. Apart from being defrauded, customers want to confirm their orders physically before they pay for them, like when they visit a physical shop.

On the other, payment on delivery also puts the retailer at risk while protecting the customer. This payment model often leaves the retailer frustrated especially on occasions when customers refuse to pick up items they have ordered. In such cases, the retailer is burdened with delivery cost and cost of returning back their products. In other cases, some customers also receive products and do not make payments to the retailers.

A tip for the retailer

Q. How do you encourage customers to comply with payment before delivery?

A. Through building trust online with customers.

Q. How do you build trust with customers?

A. You can build trust by:

  •     Encouraging reviews
  •     Using user generated contents
  •     Engaging customers in communication on your platform
  •     Providing valuable content

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