Cash on delivery (COD) is still very much alive and well in the Spanish economic market.
As reported by Pymes y Autónomos, one in five purchases in an e-commerce business are paid via bank transfer or cash on delivery.
That study, conducted by Palbin, showed that 8% of online transactions in Spain are carried out via the cash on delivery method.
Therefore, if you are looking to enter the Spanish market, in this article we review all the advantages and opportunities you will have when setting up your E-commerce in Spain using the cash on delivery service as one of the payment options.
The COD Landscape in Spain
Current trends and statistics of COD usage in Spain
Comparative analysis of COD usage in Spain with other European countries
Although, due to the characteristics of its population and economy, Spain is one of the countries in Europe that is most reliant on COD for online transactions, there are other countries where this payment method is also common.
Although the prestigious Rapyd does not include COD among the 10 most used payment methods by Germans when making an online transaction, there are freight forwarding companies that offer it as an additional service.
It is Outvio that exposes each of the cases in its article “Cash-on-delivery service in eCommerce: is it a safe method?”.
A COD service is available for local shipments up to 3,500€ at a cost of 5.60€ + VAT.
Offers a cash on delivery service with 3 delivery attempts and receiving payments up to 500€ per day. The cost of the service varies according to the shipping method but averages at 2.8%.
According to the article “Contre Remboursement (COD): avantages et inconvénients” from ShippyPro, companies such as Chronopost, La Poste and DHL offer this service for e-commerce.
However, COD is included alongside gift certificates or in-store payments in what they call “other forms of payment”, with only 3.9% usage.
With no official figures regarding the percentage of COD usage for online transactions in Portugal, the company GLS offers the service with a maximum of €2,500 in cash and €4,000 via check.
At Beeping, we also offer the cash on delivery service for shipments to Portugal with very competitive prices in the market. See this article for more information.
Italy is a very particular case, as reported by Statista in its analysis “Importance of cash on delivery payment option when shopping online in Italy…”, 93% of respondents said they consider it very important to offer this form of payment when making an online purchase.
Strategic Benefits of Offering COD in Spain
Offering the cash on delivery payment method will allow you to expand your sales segment to an audience that is not yet willing to enter their credit card information in an online transaction.
Because, believe it or not, it is a cultural issue that, although it has been modified over the years, still retains that traditional style that is a far cry from the new virtual trends.
The cash on delivery payment allows you to build a relationship of trust with Spanish online shoppers on the basis of some interesting points:
- The customer will pay when they receive the product, so when making the purchase in the online store the idea that “they will keep my money and I will never receive the product” will never cross their mind.
- The possibility of fraud will be considerably reduced, since by requiring a signature and payment in cash, the possibility of the customer claiming that the product has not arrived when in reality they have received it can be avoided.
- Your brand image will receive a welcome boost, since by receiving payment in cash, customers will believe that you only get the money if the product arrives safely and in optimal conditions, meaning a good service is essential to the business.
Case studies of successful Spanish e-commerce businesses using COD
El Corte Inglés
El Corte Inglés is one of the most recognized brands in Spain.
Its history dates back to before 1900, but it was founded under its present name in 1940.
Its online store was launched in 1999 and today has more than 11 million users.
As we expressed in our article about the most successful online stores in Spain, one of the most important factors for their success has been the ease of payment.
Cash on delivery is included among the payment methods of their online store and as reported by the website in its payment methods section: “You can pay cash on delivery if you choose home delivery”.
Bershka is another leading fashion retailer that accepts payment on delivery for its e-commerce sector.
Unlike El Corte Inglés and Zalando, if you need to return the product, you will have to go in person to any of the brand’s physical stores to carry out the exchange.
Implementing COD in Spain: A DIY Approach
Understanding local Spanish courier services that support COD
In Spain, there are several companies that offer a cash on delivery service.
Below you will find a table with the special features of the service for each of the services.
|Company||Service Features||Link to description|
|Correos de España||Available for the following products: registered letter, blue package, today package, premium package and standard package. The maximum amount to receive is 1000€ per order.||No specific link is available|
|Express Mail||Available as part of the services for companies in its Paq10, Paq14 and Paq24 services.||Link to the portal|
|MRW||Offers the service with a maximum of 2500€ per order within Spain and 1000€ for cash on delivery to Portugal.||Link to the portal|
|SEUR||The service does not have a maximum amount and clarifies that the money will be deposited in a bank account within 24/48 hours from the payment confirmation.||Link to the portal|
|UPS||Included as an additional service when you create an online shipment.||Link to the portal|
Overview of Spanish regulations related to COD
Although there is no specific law about COD regulations in Spain.
In this context, the General Law for the Defense of Consumers and Users (Law 3/2014) establishes a series of rights and obligations to protect consumers from their transactions on the Internet.
In this sense, since there is no specific section on cash on delivery, in general, it is the company offering the service that establishes the amount limits or the charges that will be applied to this payment method.
In addition, the Electronic Commerce Law (34/2002) also does not specifically address cash on delivery, but states that “COD service providers must provide clear and transparent information on the contracting conditions, including the accepted forms of payment”.
Mitigation strategies for non-payment and return risks
Uncompleted sales, false orders, excessive returns and decreased profitability are some of the most common problems when using the COD method.
But what strategies can you employ to reduce these risks?
Double check the address
When a customer fills in the form to provide the delivery address, sometimes they make a mistake. Therefore, you can use Google Maps to confirm that the address exists and, consequently, that it is correctly written.
Call the customer to confirm the order
Another way to reduce risks and combat false orders is to call the customer with the intention of securing the order or for data confirmation.
Be clear from minute 1
Establishing a clear cash on delivery policy will prevent your customers from rejecting their package before receiving it. When we say clear, we mean being very precise about what cost(s) the customer will have to pay when receiving the product.
Control of the entire distribution chain
In order to obtain the maximum possible profit, it is essential to have control of all the expenses necessary for the cash on delivery process to be carried out. The more controlled the process is, the higher the profitability will be.
Outsourcing COD in Spain: A Guided Approach
One of the best options to carry out the COD process in your store is to outsource the service.
In other words, it won’t be you who has to deal with the inconveniences of this payment method, but a specialized company that carries out the process and, consequently, improves your level of conversion and customer satisfaction.
Evaluating the cost-benefit analysis of outsourcing COD
It is important that before deciding to hire a company specialized in the management of cash on delivery payments, you take into account a number of factors.
|Handling company fees: This cost is unavoidable and will represent an additional percentage to the one you will already have to pay for the courier service. Normally, the selling company includes in its percentage that of the courier company.||Specialists: One of the greatest benefits of contracting and outsourcing the cash on delivery process is that you will have specialized staff at your disposal that are accustomed to solving the most common problems associated with this form of payment.|
|Integration through software: Another point to consider is the inclusion of a software you need to keep track of the status of each of your orders. This could mean an additional cost in the management of the tool.||Time savings: By dealing with specialists, you will save a lot of time allocated for this type of task and you will be able to focus your energy on growing the business and, ultimately, increasing profit margins.|
|Communication system: The support and communication process in the event of issues in the delivery of packages could entail the allocation of additional costs in terms of human and economic resources.||Expansion of payment methods: As these are specialized companies, it is likely that you will also be able to offer other payment methods in addition to cash.|
|Risk reduction: Another of the benefits of hiring an external company is being able to solve the problem of false orders or fraud since the company will have to verify the veracity of each of the orders.|
Legal and operational considerations when working with a COD service provider
The legal aspects of the relationship between the store and the COD service provider must be governed by the regulations set forth by the company.
From compliance with all aspects of personal data protection, confidentiality rights regarding shipped products, preservation of intellectual property and even a dispute resolution manual.
In addition, it is important that the agreement includes a contract establishing the service rates as well as the company’s responsibilities in the event of any conflict.
From an operational point of view, the company must guarantee the correct operation of the service from the technical aspects to everything related to the integration of the software with the store.
What’s more, you will have to be attentive to all aspects of customer service and payment processing to ensure customer satisfaction.
How Beeping can help
Beeping is one of the leading specialized companies in digital business.
Its logistics service for e-commerce includes the Correos Express service, personalized assistance, shipping throughout Europe and the possibility of a software from which you can manage all your cash on delivery orders quickly and efficiently.
Unlike other competitors, Beeping offers the best specialized staff to solve all doubts as well as its own warehouse where you can store your merchandise to streamline the entire logistics process of your store.
From Beeping’s software, you will have access to all your Cash on Delivery orders.
By clicking on any item, you will be able to access the detailed information of that order.
With the tracking code, you will know in real time where your order is.
In short, Beeping can be your fundamental ally in streamlining the entire logistics process of your store and at the same time increase your customer satisfaction.
Utilizing a cash on delivery service can be one of the best solutions if you are looking to grow your business in the Spanish market.
Mainly because, as we have explained in this article, there is a sector of the public that prefers this type of service instead of using their credit card.
That is why successful companies such as El Corte Inglés, Zalando and Bershka have cash on delivery as a payment method in their online stores.
Outsourcing this service through Beeping will give a boost in quality to your store and will allow you to offer better solutions for your customers, which will unfailingly translate into a higher profit for your business.
Regarding the Returns Policy in COD transactions, your store’s returns policy must be adapted and aligned with the company that manages the cash on delivery service, since the whole process also depends on them.
Commissions depend on the company that carries out the cash on delivery service, as it varies from case to case, but usually ranges between 2% and 5% of the total value.
As mentioned in the article, Spain and Italy are the European Union countries where the cash on delivery service is currently most popular. Other Eastern European countries also have this service, although it is not as widespread.
By relying on strategies such as double-checking the customer’s address, calling the customer to avoid false orders, hiring specialized companies in the sector and keeping an exhaustive control of each order.
“Mucha gente suele enamorarse de un producto creyendo que es perfecto, pero lo realmente importante es que cumpla con una cierta cantidad de requisitos y responda a la mayor cantidad de preguntas de la checklist para que valga la pena invertir en él”
No doubt about it. What’s more, with the help of a specialized service like Beeping, it can become one of the most important sources of income for your e-commerce business.