Despite the rapid shift towards digital payments in India after Covid-19, a recent online consumer behavior survey conducted by the Indian Institute of Management-Ahmedabad (IIM-A) revealed that cash-on-delivery (CoD) remains the top choice for online purchases. The survey findings suggest that concerns about trust may be influencing consumers’ payment preferences.
“Nearly 65 per cent of consumers used cash to make payments in their last online transactions. In particular, consumers use cash more to buy fashion and clothing products exclusively. Cash is also the preferred payment mode for consumers from low-income groups having annual household income less than INR 3.6 lakh,” states the findings from a survey of 35,000 consumers conducted by IIM-A across 25 States.
The survey, titled ‘Digital Retail Channels and Consumers: The Indian Perspective’, utilizes consumers’ most recent online shopping transactions to evaluate their behaviors and perspectives regarding online shopping.
Continue Exploring: Amazon to challenge Meesho with budget-friendly fashion vertical ‘Bazaar’
“While our survey did not ascertain the reasons why consumers prefer CoD, trust may be an issue. However, one needs to think about trust more broadly, say factors that create doubt across product categories. For example, consumers looking to buy fashion and clothing may be concerned about the size and fit of the clothing, and consumers buying electronic products may be wary about the product being a used product. However, more research is required to ascertain these facts, and our data may not speak much regarding whether these are leading to greater use of CoD,” said Pankaj Setia, IIMA Chair Professor, Professor of Information Systems.
Professor Setia collaborated with Professor Swanand Deodhar and Ujjwal Dadhich from the Centre for Digital Transformation of the institute to co-author the survey report.
When asked which cities in India reported greater use of CoD, Setia stated, “Compared to others we do see greater use of CoD in cities such as Kolkata, Patna, Agra, Amritsar, Bhiwandi, Arrah, Ranaghat, Phulia, Bokaro Steel City and Puruliya.”
According to the findings of the IIM-A survey, fashion, clothing, and electronic items emerged as the primary product categories for online purchases. Remarkably, 87 percent of consumers opted for cash-on-delivery (CoD) exclusively for purchasing fashion and clothing products, whereas 75 percent exclusively used CoD for buying electronic products.
“For Indian consumers, CoD is the most preferred payment method for online shopping. It provides consumers the convenience to pay when the correct order is received. Initially, CoD was started to encourage online shopping and gain the trust of consumers in E-commerce. With time, several payment methods, including digital payment systems, have evolved, but consumers still prefer CoD for online shopping,” states the survey where Flipkart was the principal partner of the retail tech consortium that funded it.
Continue Exploring: Flipkart revives same-day delivery service across 20 cities, taking on Amazon’s Prime model
The consortium included Croma, Fabindia, Flipkart, Kotak Mahindra Bank, Nykaa, OYO, Patanjali, P&G, Snapdeal, StarQuik, and Unilever as additional partners.
“However, for retail channels, CoD is not as efficient as the logistic partners handle the transactions. In this process, the retail firms receive the payment a little later compared to other payment methods. For the CoD-based return, the process is even more complicated. At the time of initiating a return, consumers have to fill out the return form and share their bank details. Once the refund team validates the credentials and approves the refund status, the refund is transferred to the bank account. This entire process takes around 5 to 7 days to complete. As the turnaround time for CoD is longer, E-commerce firms usually promote other payment methods by giving discounts and cashback offers to consumers,” it added.
The survey findings also indicate that male consumers tended to spend more in online shopping transactions compared to women. “While this spending pattern needs further examination, it aligns with the gender gap in economic participation and opportunity in the country, wherein females lag behind males.”
The survey also indicated that a higher proportion of female consumers purchased fashion and clothing products, while a larger proportion of male consumers bought electronic products. Additionally, online consumers from smaller cities spent more than those in Tier 1 cities.
Continue Exploring: E-commerce firms boost efforts for gender diversity in supply chain roles