The D2C market in India is witnessing an unprecedented growth. It is projected to hit $61.3 Bn by 2027, with early-stage brands entering the ecosystem at a rapid pace. These brands are leveraging the power of digital commerce to build direct relationships with their customers, offering niche products, personalised experiences, and competitive pricing. However, with growth come unique challenges, and Cash on Delivery (COD) emerges as both a catalyst and a complication in their journey.

India’s shopping behaviour is heavily influenced by its low-trust economy, with COD being the preferred payment mode. According to a February 2024 survey report by the Indian Institute of Management Ahmedabad (IIMA), over 65% of ecommerce transactions in India are COD orders. 

For early-stage Direct-to-Consumer (D2C) brands, COD becomes a key growth driver, allowing them to gain traction by overcoming shoppers’ apprehensions about new or lesser-known brands. However, COD is a double-edged sword. While it increases order volume and makes customers feel secure, it also exposes brands to significant Return to Origin (RTO) challenges. 

Shoppers cancel COD orders for various reasons: they find a better deal elsewhere, act on impulse and later regret the purchase, or simply lose interest and refuse delivery when the product arrives.

This leads to revenue leakage, logistical costs, and potential product damage, which are especially burdensome for early-stage brands with limited resources. High RTO rates can quickly eat into margins, derail growth strategies, and erode the trust these brands aim to build. While trust drives prepayments, the convenience of COD keeps it firmly entrenched in the system, creating a complex landscape for ecommerce businesses in India, particularly for new and emerging brands trying to establish themselves in the market.

The latest app launched by GoKwik is set out to lower RTO rates by fine-tuning the COD process with a layer of network-level intelligence.  In July 2024, GoKwik launched the Kwik COD, a Shopify app to help brands manage the influx of COD orders effectively thereby reducing RTO and increasing their bottomline. 

The enabler claims to house 120 Mn shoppers in its network and uses insights to flag risky orders, authenticate COD orders, offer multiple payment options, and offer partial COD options to reduce losses. It swiftly gained traction, especially after ecommerce enabler Shopify discontinued its Advanced COD (A-COD) app in August 2024. 

In an interaction with Inc42, Head of Product, Checkout and Payments, GoKwik, Vineeta Vora delves deep into the boon and bane of the COD system, how businesses can encourage customers to switch to prepaid orders and how the startup’s playbook helps brands optimise their earnings during the seasonal spikes due to sales season. 

Here are the edited excerpts.

Inc42: Cash on delivery is immensely popular in India despite a thriving digital payment ecosystem. How would you explain it?

Vineeta Vora: Well, we have been closely observing the ecommerce trends for the past three years and nearly all D2C (direct-to-consumer) brands we work with continue to rely on COD as a payment option. It is a 60:40 split, with 60% being COD transactions. Yes, more and more people are opting for digital payments. But COD remains the starting point for ecommerce businesses.

There are clear reasons behind this, as distinct patterns have emerged. To begin with, COD is a more convenient payment method for many. If you compare it with other prepaid options like credit/debit cards, UPI, BNPL (buy now, pay later) or net banking, you will see that it offers an easy, one-click experience. Since the time I have worked with GoKwik, I have had the chance to observe a multitude of different D2C brands catering to over 120 Mn customers. From this vantage point, I would like to say COD is one of the most preferred payment options due to its simplicity.

Again, trust is a major factor in payments. With so many D2C brands entering the market, customers often hesitate to trust unfamiliar platforms and are reluctant to make prepayments. Therefore, convenience and trust are primarily driving COD’s popularity. 

Inc42: High return rates associated with COD orders remain a crucial challenge for online sellers. How can it be fixed without hurting customer experience?

Vineeta Vora: Yes, it is a tricky thing. When customers prepay for ecommerce orders, the RTO percentage remains relatively low. But COD can push the RTO rate to 30-40%. It makes one wonder whether offering COD as a payment option is wise.

From what we have seen, I would say, yes, we should stick to it. The first clear advantage of COD is business growth, specially for early stage ecommerce players.  When they offer COD, their business can grow 3-4X because cash on delivery is highly convenient for online shoppers.

Coming back to the RTO issue, it is no doubt a concern and a deep-rooted problem. According to GoKwik’s data, the Indian eCommerce industry witnesses an average RTO rate of about 20-25% and goes up to nearly 40% depending upon a brand’s industry, the states, cities, and pin codes that they’re servicing, the kind of products they’re selling, and more. 

More often, an issue of intent and mindset needs to be addressed at the source. There are ways to resolve this without compromising customer experience. A softer approach is to nudge users towards prepaid options by offering a small discount, say 5%, for choosing prepaid over COD. If you gently remind people about a discount on prepaid payments, it will encourage many to switch, and the RTO rates may significantly come down. This can help lower RTO rates while maintaining customer satisfaction.

One should not worry about additional costs due to discounts. Whatever you offer (INR 5-10, for example), reducing RTO costs will compensate for it and lead to an overall improvement in business.

Inc42: How does GoKwik’s Kwik COD app deal with RTO issues?

Vineeta Vora: After Shopify discontinued its Advanced Cash on Delivery (ACOD) app on August 31, 2024 and started recommending GoKwik’s COD app, we are working closely with the company to ensure that COD remains a viable option on that platform. COD has not been a primary focus for the global platform, which is primarily US-centric and caters to markets where prepayment is more common. In contrast, an ecommerce business launching without COD is almost unheard of in India. Many companies start here with COD alone, as e-payments require KYC (know your customer) verifications and integration with a payment aggregator, which can take time.

GoKwik’s flagship COD suite has been specifically designed to solve the COD-related RTO challenge, a persistent issue for ecommerce businesses. The real advantage lies in our network level intelligence. It can look for RTO possibilities based on customer behaviour across ecommerce sites. When brands get that insight, they can make decisions that align with their business strategy. They can block COD for those shoppers, nudge them towards prepaid payment or opt for other flexible options like a partial COD.

For example, if a customer’s cart value is INR 500, she may pay INR 50 upfront and the remaining INR 450 after delivery. In this way, ecommerce players can still offer COD but reduce the merchant’s risk in this entire process while retaining customer convenience. 

Inc42: How would you define your USP in a space full of COD pitfalls?

Vineeta Vora: We have developed a holistic approach that treats prepayment and COD as integral parts of the payment landscape. COD is a reliable fallback if one cannot use prepaid options. We don’t want high-intent customers to abandon their shopping due to payment issues caused by a bank problem or something else. 

Given the critical importance of cash on delivery, we have made GoKwik’s COD app fully customisable, putting the power in the hands of brand owners. We give them all the tools they need to manage their COD offerings however they see fit.

During peak shopping periods, when product launches are frequent, many brands prefer to restrict cash on delivery for new collections to avoid RTO risks but still want to provide COD convenience for older products. Based on their requirements, we can tailor COD settings to give brands more flexibility. In essence, our latest offering fits perfectly with our vision at GoKwik, boosting conversions while reducing RTO. The COD suite is also user-friendly. Brands can set it up and start operating under 60 seconds. 

We also encourage them to offer COD to low-risk customers. This can boost sales and optimise payments without RTO losses.

Inc42: With the Black Friday sales coming up, how can brands manage the spike without operational hiccups? 

Vineeta Vora: We recently launched the app but onboarded close to 7K merchants. They sought our services as automation is crucial for managing a vast number of COD orders, especially during peak seasons.

It all comes down to understanding the psychology behind why a shopper chooses COD over prepaid and how we can make them choose prepaid over COD. 

As you have mentioned, there are times when we see a spike in orders, and merchants naturally want to avoid the operational hassles of returns and cancellations. Hence, we developed a playbook based on our experiences of demand surge during this Diwali that will be customised for Black Friday and other seasonal spikes. 

For example, low average order value (AOV) tends to impact COD availability. According to our observation, brands with higher AOVs, typically exceeding INR 2-2.5K, are more inclined to offer cash on delivery or partial COD payments. On the other hand, merchants often block it for lower AOVs (anything under INR 2K), as RTO rates are significantly high in such cases due to the impulsive nature of purchases that a lower AOV item can be. In fact, most of them end up with a high volume of returns and subsequent financial losses.

In sync with this insight, our platform provides the flexibility to configure COD settings based on AOV, product launches, customer segments, cart items, cart weight, country, currency and specific pin codes. To help early stage ecommerce merchants manage operational hassles, we offer guides, tutorials and our comprehensive playbook, which has received excellent feedback. We are continuing to build and evolve this offering so that brands get a kick start for their growth right from the beginning and move towards sustainable profitability soon.

We have received positive feedback and reviews from partner merchants. Based on our run rate, we expect to onboard around 20K merchants by the end of the current financial year.

The D2C market in India is witnessing an unprecedented growth. It is projected to hit $61.3 Bn by 2027, with early-stage brands entering the ecosystem at a rapid pace. These brands are leveraging the power of digital commerce to build direct relationships with their customers, offering niche products, personalised experiences, and competitive pricing. However, with growth come unique challenges, and Cash on Delivery (COD) emerges as both a catalyst and a complication in their journey.

India’s shopping behaviour is heavily influenced by its low-trust economy, with COD being the preferred payment mode. According to a February 2024 survey report by the Indian Institute of Management Ahmedabad (IIMA), over 65% of ecommerce transactions in India are COD orders. 

For early-stage Direct-to-Consumer (D2C) brands, COD becomes a key growth driver, allowing them to gain traction by overcoming shoppers’ apprehensions about new or lesser-known brands. However, COD is a double-edged sword. While it increases order volume and makes customers feel secure, it also exposes brands to significant Return to Origin (RTO) challenges. 

Shoppers cancel COD orders for various reasons: they find a better deal elsewhere, act on impulse and later regret the purchase, or simply lose interest and refuse delivery when the product arrives.

This leads to revenue leakage, logistical costs, and potential product damage, which are especially burdensome for early-stage brands with limited resources. High RTO rates can quickly eat into margins, derail growth strategies, and erode the trust these brands aim to build. While trust drives prepayments, the convenience of COD keeps it firmly entrenched in the system, creating a complex landscape for ecommerce businesses in India, particularly for new and emerging brands trying to establish themselves in the market.

The latest app launched by GoKwik is set out to lower RTO rates by fine-tuning the COD process with a layer of network-level intelligence.  In July 2024, GoKwik launched the Kwik COD, a Shopify app to help brands manage the influx of COD orders effectively thereby reducing RTO and increasing their bottomline. 

The enabler claims to house 120 Mn shoppers in its network and uses insights to flag risky orders, authenticate COD orders, offer multiple payment options, and offer partial COD options to reduce losses. It swiftly gained traction, especially after ecommerce enabler Shopify discontinued its Advanced COD (A-COD) app in August 2024. 

In an interaction with Inc42, Head of Product, Checkout and Payments, GoKwik, Vineeta Vora delves deep into the boon and bane of the COD system, how businesses can encourage customers to switch to prepaid orders and how the startup’s playbook helps brands optimise their earnings during the seasonal spikes due to sales season. 

Here are the edited excerpts.

Inc42: Cash on delivery is immensely popular in India despite a thriving digital payment ecosystem. How would you explain it?

Vineeta Vora: Well, we have been closely observing the ecommerce trends for the past three years and nearly all D2C (direct-to-consumer) brands we work with continue to rely on COD as a payment option. It is a 60:40 split, with 60% being COD transactions. Yes, more and more people are opting for digital payments. But COD remains the starting point for ecommerce businesses.

There are clear reasons behind this, as distinct patterns have emerged. To begin with, COD is a more convenient payment method for many. If you compare it with other prepaid options like credit/debit cards, UPI, BNPL (buy now, pay later) or net banking, you will see that it offers an easy, one-click experience. Since the time I have worked with GoKwik, I have had the chance to observe a multitude of different D2C brands catering to over 120 Mn customers. From this vantage point, I would like to say COD is one of the most preferred payment options due to its simplicity.

Again, trust is a major factor in payments. With so many D2C brands entering the market, customers often hesitate to trust unfamiliar platforms and are reluctant to make prepayments. Therefore, convenience and trust are primarily driving COD’s popularity. 

Inc42: High return rates associated with COD orders remain a crucial challenge for online sellers. How can it be fixed without hurting customer experience?

Vineeta Vora: Yes, it is a tricky thing. When customers prepay for ecommerce orders, the RTO percentage remains relatively low. But COD can push the RTO rate to 30-40%. It makes one wonder whether offering COD as a payment option is wise.

From what we have seen, I would say, yes, we should stick to it. The first clear advantage of COD is business growth, specially for early stage ecommerce players.  When they offer COD, their business can grow 3-4X because cash on delivery is highly convenient for online shoppers.

Coming back to the RTO issue, it is no doubt a concern and a deep-rooted problem. According to GoKwik’s data, the Indian eCommerce industry witnesses an average RTO rate of about 20-25% and goes up to nearly 40% depending upon a brand’s industry, the states, cities, and pin codes that they’re servicing, the kind of products they’re selling, and more. 

More often, an issue of intent and mindset needs to be addressed at the source. There are ways to resolve this without compromising customer experience. A softer approach is to nudge users towards prepaid options by offering a small discount, say 5%, for choosing prepaid over COD. If you gently remind people about a discount on prepaid payments, it will encourage many to switch, and the RTO rates may significantly come down. This can help lower RTO rates while maintaining customer satisfaction.

One should not worry about additional costs due to discounts. Whatever you offer (INR 5-10, for example), reducing RTO costs will compensate for it and lead to an overall improvement in business.

Inc42: How does GoKwik’s Kwik COD app deal with RTO issues?

Vineeta Vora: After Shopify discontinued its Advanced Cash on Delivery (ACOD) app on August 31, 2024 and started recommending GoKwik’s COD app, we are working closely with the company to ensure that COD remains a viable option on that platform. COD has not been a primary focus for the global platform, which is primarily US-centric and caters to markets where prepayment is more common. In contrast, an ecommerce business launching without COD is almost unheard of in India. Many companies start here with COD alone, as e-payments require KYC (know your customer) verifications and integration with a payment aggregator, which can take time.

GoKwik’s flagship COD suite has been specifically designed to solve the COD-related RTO challenge, a persistent issue for ecommerce businesses. The real advantage lies in our network level intelligence. It can look for RTO possibilities based on customer behaviour across ecommerce sites. When brands get that insight, they can make decisions that align with their business strategy. They can block COD for those shoppers, nudge them towards prepaid payment or opt for other flexible options like a partial COD.

For example, if a customer’s cart value is INR 500, she may pay INR 50 upfront and the remaining INR 450 after delivery. In this way, ecommerce players can still offer COD but reduce the merchant’s risk in this entire process while retaining customer convenience. 

Inc42: How would you define your USP in a space full of COD pitfalls?

Vineeta Vora: We have developed a holistic approach that treats prepayment and COD as integral parts of the payment landscape. COD is a reliable fallback if one cannot use prepaid options. We don’t want high-intent customers to abandon their shopping due to payment issues caused by a bank problem or something else. 

Given the critical importance of cash on delivery, we have made GoKwik’s COD app fully customisable, putting the power in the hands of brand owners. We give them all the tools they need to manage their COD offerings however they see fit.

During peak shopping periods, when product launches are frequent, many brands prefer to restrict cash on delivery for new collections to avoid RTO risks but still want to provide COD convenience for older products. Based on their requirements, we can tailor COD settings to give brands more flexibility. In essence, our latest offering fits perfectly with our vision at GoKwik, boosting conversions while reducing RTO. The COD suite is also user-friendly. Brands can set it up and start operating under 60 seconds. 

We also encourage them to offer COD to low-risk customers. This can boost sales and optimise payments without RTO losses.

Inc42: With the Black Friday sales coming up, how can brands manage the spike without operational hiccups? 

Vineeta Vora: We recently launched the app but onboarded close to 7K merchants. They sought our services as automation is crucial for managing a vast number of COD orders, especially during peak seasons.

It all comes down to understanding the psychology behind why a shopper chooses COD over prepaid and how we can make them choose prepaid over COD. 

As you have mentioned, there are times when we see a spike in orders, and merchants naturally want to avoid the operational hassles of returns and cancellations. Hence, we developed a playbook based on our experiences of demand surge during this Diwali that will be customised for Black Friday and other seasonal spikes. 

For example, low average order value (AOV) tends to impact COD availability. According to our observation, brands with higher AOVs, typically exceeding INR 2-2.5K, are more inclined to offer cash on delivery or partial COD payments. On the other hand, merchants often block it for lower AOVs (anything under INR 2K), as RTO rates are significantly high in such cases due to the impulsive nature of purchases that a lower AOV item can be. In fact, most of them end up with a high volume of returns and subsequent financial losses.

In sync with this insight, our platform provides the flexibility to configure COD settings based on AOV, product launches, customer segments, cart items, cart weight, country, currency and specific pin codes. To help early stage ecommerce merchants manage operational hassles, we offer guides, tutorials and our comprehensive playbook, which has received excellent feedback. We are continuing to build and evolve this offering so that brands get a kick start for their growth right from the beginning and move towards sustainable profitability soon.

We have received positive feedback and reviews from partner merchants. Based on our run rate, we expect to onboard around 20K merchants by the end of the current financial year.