PAYMENT ON DELIVERY VS PAYMENT BEFORE DELIVERY (My Experience)


#1

Payment on delivery or payment before Delivery which is better for the Nigerian Small business owners.

Over the past few month, I have set out time to study Payment on delivery and payment before delivery to find out the best option for the Average eCommerce business owner in Nigeria.

First of All, I set up a campaign to sell a wrist watch, I made my fb advert and sent visitors to my konga store… (PAYMENT ON DELIVERY) I spend 20$ on Ads and i got 15 orders. After 10 days 9 items was delivered and 6 was returned.

I set up another Campaign with same Amount of Money and same product (WITHOUT PAYMENT ON DELIVERY) I got only 5 Orders.

This made me to wonder why people are screaming everywhere kill POD Everywhere. Payment on delivery is a good business model I stand to be Corrected

Because of Nigerian Past History on Internet Related Business Not so many Nigerians are ready to Part in their hard earn money before seeing the product.

Not every Nigerian have access to DIGITAL Payment and most times Payment will fail due to network problem (QUICK-TELLER). Thanks to konga pay.

I come to Understand that POD Givers buyers the confidence to place order for a certain product even when the merchant has no reputation.

On the other Hand My Entire Bounce Rate is 30 percent with 70% Delivery Rate (POD) I spend About N220,000 Every month on Unserious Buyers (People who has Refused to Pick up their Goods) I also pay 1.5% for cash Handling.(POD).

I Wont be having so many orders if i am operating on Payment Before Delivery Model (My Entire business started smiling since I introduced PAYMENT ON DELIVERY) I don’t have to spend so much time convincing costumers to trust me. (MAKING THEM BELIEVE THAT I WILL NOT SCAM THEM)
To me, PAYMENT ON Delivery is a good business Model don’t know what anyone else think.

Just my 1 cent

By the way, How has payment on delivery affected your business? share


Pay on delivery, demon of Nigerian e-commerce?
eCommerce in Nigeria | My Experience so far With POD Should I Quit?
#2

Bro, I must say I have suffered same fate using the POD model. I also sell wrist watches across the Konga, Jumia and Kaymu. The returns on Konga lately have been very annoying. Some customers place an order for an item, you confirm their interest and they still fail to receive it when it is delivered to them. Some do not even pick their calls when the delivery men try to reach them. The returns are not as a result of quality issue but due t the inability of the customers to receive what the ordered for.

The worst thing that POD has enabled them do is that, customers now order the same item from 2 or more stores and pay/receive the one that is delivered first. The other sellers that shipped to them will have their items returned.

The fact remains that POD is not a good business model. If you want to enforce customer confidence/trust, run a trusted ESCROW service. Customers pay ahead and when they have issues with the quality of the item they ordered for, they return it and get a refund within the stipulated time frame covered by the return policy. That is the way to go.


#3

As a consumer, there’s something about card based payments that just stresses me… I can’t really pin it. It’s somewhere between the fear of network failure, trapping my transaction and debiting me after returning an unsuccessful popup… Or It could be the drastic length of the card numbers… If it only were short and memorable…


#4

Nice… :joy::laughing:


#5

Pay On Delivery as currently practiced in Nigeria is a crap model for the merchant. It’s a band aid treatment to a fundamental problem of trust (or lack thereof). It shifts the risk without solving the problem, and thereby creates more risk due to unforeseen emergent behaviour (i.e. buyers placing phantom orders)

Like most problems, it isn’t new and has been solved elsewhere. In other countries, trust issues are solved by credit or feedback ratings. In this case, what may solve the problem is a simple way for merchants and buyers to provide feedback on each other. If a buyer decides to renege on the transaction, give them a 1-star and a crap review. Same applies for the seller.

Multi-billion dollar companies (Experian, Opentable, Yelp, etc) have been built on this foundation, and Nigeria (the largest trust cesspit in the world) is a fertile market in desperate need of a solution.

There you go, that’s my Startup Idea of the Day. I might just implement it myself. :smiley:

Quick poll: Would you use such a service?


#6

@techscorpion thanks for the note.


#7

@Malachi - I think the nature of the business should determine payment mode. While POD will work perfectly for your type of product, it might never work for others. For instance, instant food ordering, service rendering, hotel room reservation, delivery of package, consultancy e.t.c e-commerce is not limited to selling physical products. We need to build trust among ourselves. Trust is the new currency - That’s the only way forward


#8

You are very right @manifest The question now is how do we get costumers to Trust Merchants.


#9

Like I mentioned before, the buyers will not easily trust the Merchant but the system. Implement a functional escrow service where a customer gets a refund/compensation for low quality product/service then they will be willing to part with their money ahead.

Nigerians buy from foreign websites like Amazon,Aliexpress,EBay,Alibaba etc. Do we Pay on Delivery?


#10

Its a gradual process. Customers will not trust merchant overnight. A good way to start is when a merchant offers money back guarantee. If you do not like our product or we do not deliver what we promised, you have the right to request for a refund.

The banks in Nigeria aren’t helping either. It works well in the western world because there is a legal system/framework in place. (among other ways to recover your money back) In Nigeria, you can’t even trace a money that was deposited wrongly into an account. Normally, I use my cc to buy online. If a merchant did not deliver as expected, I request for a refund. Charges can easily be refunded by the banks when you have a reasonable claim especially with the use of credit cards.

Personally, I believe every Nigerian over the age of 18 should be eligible for a credit card. Of course, limits should be based on several factors (i.e. minimum balance on their checking acct e.t.c). The use of credit cards, though perceived to be bad, is the beginning of building trust and a better commerce system.


#11

Payment on Delivery is actually a stupid model…

  1. You pay for the cost of Good returned + Whatever happens to that Good on its way back from customer if he or she doesnt like your product meaning you might end up sending a product 2x the actual delivery value borne by you…that is NOT a sustainable way to run a business

  2. Customer change mind on a whim! to lock them in, you must let them pay for Good, it even gives the Merchant a reason to work hard to deliver Good as promised, if u choose POD then mediocrity sets in, after all the Cash is on Probability compare to Cash at Hand right now and ask me why i will choose a POD Model

  3. Building trust is simple, Escrow, Money Back Guarantee, Reproduction of Good + Extra Gift, Customer Service, if you dont trust the system to buy a Good why should i as a merchant trust you to pay? its a Catch 22…pay for the Good if you truly want the Good its as simple as that.

  4. Time is ripe for a Credit Agency to help Consumers/Merchants to provide risk based intelligence on a consumer or merchant behaviour ranking from different usage on other stores…

  5. Merchants or Banks should introduce Escrow Service Accounts OR Products for Consumers so they shop in peace.

  6. Finally, Customer Service/Experience breeds Trust

Its high time to kill Payment on Delivery.


#12

Dude, I will be very gentle on you but you need serious advice on how to run your business because with your POD model you are loosing in the long run. Let me take you to class and let’s assume the following parameters with all other variables remaining constant

cost of processing an order = x
cost of delivery = y
cost of processing returns = z
For simplicity, lets assume that x = y = z = 1 Naira

POD: 9 items delivered, 6 returned = (9(x+y) + 6z)/9 = 2.66 Naira per each successful order

Non PoD: (5(x+y))/5 = 2 Naira per each successful order

Can you see that you are loosing 66Kobo per order on the POD? As you scale, the number of returns scales at the ratio of 15 : 6 that can be simplified to 5 : 2 or in Ojota terms, for every 5000 you sell 2000 will be returned costing you an extra 1,320 Naira (2000*0.66) which you could have used to buy some medicinal plant from me.

Think it through and all the best …


#13

That justification of his didn’t seem right as well but I’m just glad you bothered to do the maths.


#14

One thing I would say as a consumer…I don’t trust any Naija coy when it comes to my money. This is not to say that the merchants in Nigeria aren’t trustworthy. They may be. But nobody wants to find out if they are.
After the experience I had with Jumia a couple of years ago, it’s better to pay on delivery.
That being said.
If you can implement an escrow system or any other system that assures the customer that they will get their money should anything go wrong with the transaction…I’m sure many people will be willing to pay before delivery.
Consider it


#15

I may be wrong, but I feel that the problem, as peculiar to the Nigerian consumer mentality, could be approached by “making the purchaser risk less” than “making him trust more”

Allow me depict a fictional analogy;

Ezra works on the last floor of a three story building in yaba. The building has no elevator. On a fateful Monday afternoon, Ezra gets a call from a bread seller called Olabode. This breadseller happens to be at Ezra’s house in Lekki. On the phone, Olabode introduces himself as a bread seller and pitches a new kind of bread to Ezra. An agbalumo flavored sliced bread. He is so convincing, Ezra wants to buy out Ola. 2000 products in total. Ezra has about 800k in a locker inside his house. (perhaps from demo donations). The key to the locker is with Ezra. Olabode, upon sensing his first willing customer, suggests to Ezra: he would send a Taxi guy, by name Tola to get the key from him at the office, so that he’d be able to collect only 25k from his locker, which is his price…

Ezra gives this a thought. Olabode sounds like a nice guy, with a nice product. His thoughts drifts towards his 800k… towards the effort of walking down the stairs…

Ezra’s key could be likened to the bank card. To Ezra, it isn’t just about letting Ola have access to his 5k… It’s about the 800k.
But what if Ezra had 26k in his locker. Less risk right?

I dont know if this even makes sense.
My point is; Making the Nigerian purchaser pay first requires trust. This trust is harder to build than is being depicted.


#16

you’re exactly right. With the way Nigerians treat trust, nobody is ready to be called names because they trusted their fellow human being,


#17

Two things:

  • Non PoD: (5(x+y))/5 = 2 Naira per each successful order

This works out to N1

  • POD: 9 items delivered, 6 returned = (9(x+y) + 6z)/9 = 2.66 Naira per each successful order

It depends on what z is.
If z tends to zero, then his unit overhead tends to N1.

z can be a zero or nominal value when:

  1. Your 3rd party courier costs already includes the cost of returns
  2. You handle your own delivery so your cost of return is already merged into the delivery cost

All that is moot though because PoD only seems to scale well when you have tight control over the entire supply chain, something very few merchants have been able to crack.


#18

You don’t need to make the payer trust the seller as the issue of trust is subjective. You just need to guarantee the payer that he is protected by a consumer’s right act - i.e. if the payer can prove that the seller did not live up to expectation, then the payer’s money will be refunded with interest. Paypal calls it Dispute resolution, in the UK, there is the Consumer Ombudsman and in the US there is the Consumer Bureau. Maybe PayStack can offer or push-for such guarantees to protect consumers…


#19

(Experience as a customer)

After my experience with Konga on a shirt I tried buying sometime ago, I concluded I’ll never risk paying before delivery.

In my case, I paid on delivery. But I used the POS. I found in minutes, the shirt I got wasn’t the size I ordered. But at this point, I had already paid. Read again. I paid on delivery, but with POS.

So I talked with the delivery guy, on refund of my cash. It was 8k or so. And I was confident he had that much cash with him. Easy reconciliation, bah? Hell fucking No. He declined me, saying I used his POS, and will only refund if I paid cash. So instantly I regretted not paying with cash.

No wahala. It was a Friday. I needed the shirt for an event the next day. And I was not intending to go to my place that night.

Any way, the delivery guy lied to me. He gave me a form, said I call a certain number and he would come back for the undersized shirt, and refund my number. Most likely that day. In fact, in his words, Bros I go back now now once my Oga hear from you.

Players, I was played. I called Konga. BTW, that Konga Web livechat isn’t working. Or never worked for me. The agent logs you out in the middle of your conversation after waiting for 20mins. You’d think it’s MTN 180.

So after several calls, Twitter DM and tweets, and about a week plus, I was told to go to their office. So I left my office to return the shirt. Thats not the type of experience that’ll ever make me pay online. And the Konga Merchants? Forget it.

Again, I’ll never pay before delivery on any Nigerian e-commerce site. Imagine if all I had was the 8k, and my event was dead important. Imagine all the several ways I could have been fucked because I trusted them.

Let me not even start with Jumia. Also a shirt problem. These guys brought rough and dirty shirt. Almost like it’s been used. I take it, or I pay N500. Lol. As a rule for me now, I don’t order fashion items online.

To this day, I have friends that buy only from Amazon. One bought a PC from Naija e-commerce, it was a month of story when he complained about it. They don’t even mind waiting 2 weeks for Amazon.

With e-commerce in Nigeria, the operators need to earn that trust and deliver the best experience. Less of all these billboards and BRT banners, that money should be invested in getting me my shirt asap if it’s the wrong size. Or I am refunded cash so I go to a real shop.

If you make me regret paying with POS, na online payment I wan trust you with?


#20

I think you underestimate the trust issues nigerians have… As in, not even trusting the consumer’s right act itself…