The future of cash on delivery in the MENA region

In order for COD to grow further, and therefore support the e-commerce eco-system further, Faris Fallouh, global express and ground operations director at Aramex looks at the five things couriers in the GCC need to do.
Faris Fallouh, global express and ground operations director at Aramex
Faris Fallouh, global express and ground operations director at Aramex

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The Cash on Delivery (COD) service has played a significant role in fuelling the growth of e-commerce in the region. Currently, 70 to 80% of e-commerce transactions are paid through COD, with the highest online payment in the UAE and the lowest in Saudi Arabia and Egypt.

In order for COD to grow further, and therefore support the e-commerce eco-system further, couriers need to do five things:

Provide faster remittance of COD amounts

Courier companies are collecting huge amounts of money from the consumers every day. Carriers who have exceptional cash flow management supported by technology to speed up remitting the COD back to shippers would certainly encourage this payment solution for both start up and mature e-commerce businesses.

Revise COD service fees

Competition will surely play a role in making COD services more affordable as time passes, but this will also come with a more defined service level agreement that enables the carrier to better define what the COD delivery cycle entails in terms of human and digital touch points.

So it is likely that competition will bring down the cost of offering COD services that would make it even less expensive than payment gateways or digital wallets.

Improve percentage of delivered COD orders

The COD service is notoriously problematic when it comes to on-time and successful deliveries. At best, only 80% to 90% of shipments are successfully delivered.

The percentage of successful deliveries of COD shipments is influenced by a wide range of factors that depend a lot on how the e-commerce seller handles the orders, and the supply chain speed and the final mile protocols being adopted to successfully deliver and collect the money.

There are best practices that can be adopted to make the COD delivery more successful, hence carriers will strive to deliver more and keep both e-commerce sellers and buyers happy.

COD needs to go cross-border

The MENA region has seen an influx of e-commerce start-ups based in China and Hong Kong, the United Kingdom, and Turkey competing against the regional mega-players like Souq, Noon, and Jumia who offer COD by default.

Amazon international website adopted the COD payment to UAE during 2016 acknowledging the popularity and necessity of the payment method in this region. Naturally newcomers will follow the tested success recipe and introduce COD to masses as part of their plan to gain market share.

Subsidised COD services

This is being done to capture market share and maximise volume even at the expense of increased cost due to inherent inefficiencies related to the COD cycle. In many instances, the additional cost of COD services is subsidised to encourage consumers to shop.

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