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Cash on Delivery Needs To Die Already

Several articles have been written condemning the cash on delivery method in Nigeria but these voices have been very few and they are the lone voice(s) in the wilderness. Those who argue for the cash on delivery method cite the lack of trust on the part of the Nigerian as the reason for the continuous rise of this trend but I think Konga is already having a re-think and have acted on that thought.

I have it on good authority that about 1/3 of Konga’s purchases are returned on an average day with various reasons cited from the customer not being around to the customer not having enough to pay for the item. I won’t disclose more than this, at least for now. The point is this, with a return rate of over 30%, they are obviously losing about that much in sales. These are not potential sales, they are sales that have ‘happened’ because the customer has already made the order and even confirmed the order because the order wouldn’t have been shipped otherwise.

You see, part of what pushes the ecommerce business is the impulse buying factor. This is when a potential customer sees an item he/she likes and makes the purchase before thinking it through which in more generally terms is unplanned purchase. With percentages ranging from 40% to about 90% accounting for impulse buying and about $4.2trillion in 2010 in the US alone, it is definitely a mainstay of the ecommerce industry. However, when the customer orders in Nigeria and he/she has time to see that the money that was thought to be available for the on-the-spur is no longer available, then a return will definitely happen resulting in loss for the ecommerce company.

From the figures above, it is obvious that this works out this way – with about 30% return rate and a minimum figure of 40% in impulse buying, this amounts to only about 10% sticking with their decision to purchase an item which is definitely a significant drop in revenue which Nigerian ecommerce companies have to deal with.

I am very interested in what Konga’s KPay will offer and how it will pan out in the long run. The wallet worked  for some people but it obviously didn’t make much difference since most of the big players have wallets but still have a high return rate since most consumers don’t use them unless they can’t get their cash after they have made payment for a purchase. Which brings me to a very important point, service delivery on the part of the ecommerce companies. Unfortunately, most ecommerce companies especially the major ones still default on a lot of things including timely delivery, correct order placement and more. The smaller ones seem not to have these issues because their inventory is small and so their response time is faster.

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Coder. Digital Media Maven. Editor. I tweet from @TheOluwapelumi.

2 Comments

  1. Awesome piece man. COD is a disease most eCommerce startup are finding it hard to kill because they don't want to lose customers.

    Well, if they really love you, they won't budge.

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