In a recent interview with techpoint, the founder of drinks.ng Lanre Akinlagun talked about the demerits of the cash on delivery system of payment in Nigeria. To summarize it all, he emphasized the fact that it was terribly bad for business in an economy such as ours and it gave rise to a whole new debate on e-commerce payment systems in Nigeria. In his opinion, the cash on delivery system does not encourage commitment to the products ordered by the customers thereby giving room for excessive returns. He reasons that since the customers do not initially make a financial commitment to their orders they do not care. This situation he says causes a huge loss for the company because the company would have to pay logistic fees for the delivery and return of the product rejected by the customer.
This issue sparked a hot debate on social media with a significant majority disagreeing with his stance. They feel that the age old saying “a customer is always right” should apply in this situation. They argue that a customer should have the freedom of choice to be able to return a product he or she is not satisfied with. For example a customer orders an edible product and on arrival, finds out that the product is expired or deformed in some way, the only thing to do in this situation is to return the product which is the customer’s right. In a situation where a customer deals with a company that does not operate the COD payment system, this could lead to weeks and even months of long discussions, and unending processes.
There is also the issue with our current digital banking platforms; half of the time, customers and merchants complain that they do not work due to network problems. So picture a scenario where the delivery man delivers a product to a customer, whips out his POS machine, the customer keys in his/her details and gets a message that says “issuer inoperative” or something equally disappointing. The customer does not have cash at home and the delivery man has to return the product.
On the other side of the divide are those who feel that customers are becoming irresponsible. They maintain that if someone really wants a product then they should pay for it upfront. They opined that if a business has put itself out there and is serious about growth and expansion, they would do everything to ensure that they build a business founded on integrity and trust. Confirmed sales ensure that businesses are sustainable; revenue generated is then ploughed back into the business to encourage growth and increased productivity. Some people suggested that if customers were very adamant and particular about what they wanted they could walk into an offline store and take their time to make a choice. But the question is this, what would this then mean for the future of e-commerce in Nigeria?
A senior director at Deloitte India, Gaurav Gupta gives an illustration of the cash flow system for an e-commerce platform. He says, “In a cash transaction, merchants receive money only after a product is delivered, for the extra few days, the vendor needs more working capital; There is a cost to it”. From his analysis it can easily be noted that this poses a serious operations issue for merchants.
Amazon, Ebay are just a few of the e-commerce sites that demand financial commitments from their patrons before commencing delivery. Could this be the secret to their billion dollar businesses? If this is true then what does this say for the future of Jumia and other e-commerce sites that operate the C.O.D policy? Should we start leaning more towards the escrow system like Aliexpress has done?
Image source:yallahoman.com
