How to reduce cash-on-delivery in Middle East e-commerce

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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. 

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