Cash on delivery (COD) is a type of transaction where a customer pays for a product upon delivery. Retailers assume a greater financial risk when offering COD as a payment option, as there is a possibility the buyer will decide not to keep the item and send it back without having to pay. However, COD is appealing to customers, as they can assess the item in person before purchasing. Retailers can offer cash on delivery for both perishable and non-perishable goods. COD can improve cash flow, as sellers can collect payments immediately upon delivery instead of issuing an invoice with net payment terms that give the customer several weeks or months to pay. COD also attracts those customers who may not have credit cards or may not want to exchange their credit/banking information online. COD can help build a brands reputation.

However, there are also disadvantages to collecting payments through COD. For example, there is a greater risk that goods will be refused on delivery, and there are costs involved in returning items. For buyers, it may be more difficult to return items if they have already paid for them at delivery. A seller may be reluctant or under no obligation to accept returns, even if the consumer is unhappy with the goods. COD can also create cash flow issues for retailers, as they don’t receive cash at the time of order that they could invest in other parts of the business.

In summary, COD is a payment method where the recipient pays for a good at the time of delivery rather than using credit. COD can be beneficial for both buyers and sellers, but it also has its drawbacks. Ultimately, the payment options that a seller provides depend on how much risk the seller is willing to assume and their capacity to handle complications such as returns and cash flow management.