Customers increasingly refusing to hand over cash if they are unsatisfied with an item resulting in pointless delivery costs for the merchant.
Cash on delivery the biggest obstacle to e-commerce in UAE and region
The region’s e-commerce sector is being held back by cash-on-delivery (COD), industry experts say.
About 60 per cent of all online purchases are paid once the goods are delivered and increasingly customers are refusing to hand over cash if they are unsatisfied with an item resulting in pointless delivery costs for the merchant.
“Cash on delivery is the biggest challenge for e-commerce players in the region,” said Abdul Malik Jaber, the chairman of Middle East Payment Services (MEPS). “There are high return rates, a big lag time between order and payment and the need for delivery people to carry cash is a major risk.”
In 2012 the e-commerce sector was worth $9bn in the region, next year it is set to be worth $15bn across the Middle East & North Africa (Mena).
Landmark Group, which owns Emax, Centrepoint has already introduced e-commerce portals for a few of its brands, but the company still suffers from the effects of cash on delivery.
“We are looking at the most suitable methods for our e-commerce,” said Sawsat Mohanty, assistant retail manager at MAX, which is also part of the Landmark Group. “Many customers still prefer cash on delivery.”
The current number of internet users in the Middle East stands at 90 million, but some are estimating a rise to 413 million by 2015. These users are all potential customers for retailers with an online or mobile phone presence.
“As we move into mobile and beyond, every connected device will be a commerce device,” said Garry Lyons, the chief innovation officer at MasterCard.
MasterCard is about to launch its mobile payment system, MasterPass, over the next few weeks in the UAE. Similar to Paypal, it logs the users credit card details and allows them to purchase goods via their mobile phones by simply logging in with their user name and password.
“We need to give consumers a better experience than they’re getting from cash,” said Mr Lyons. “We want to use technology to provide value to customers before, during and after a transaction.”
Providing incentives and discounts for paying online or via mobile digital wallets is one way to cut down on cash on delivery and help merchants be more efficient and save costs.
Follow us on Twitter @Ind_Insights