Definition
Cash on Delivery (COD) is a payment method in which customers pay for their order when the product is delivered, rather than paying online at the time of purchase.
It is commonly abbreviated as COD.
What It Means in Dropshipping
In dropshipping, Cash on Delivery is often used in markets where customers prefer not to pay upfront or have limited access to digital payment methods.
With COD, a customer places an order online, the supplier ships the product, and payment is collected upon delivery by the courier or logistics provider.
Because customers don’t need to pay in advance, COD can help increase trust and improve conversion rates in certain regions.
However, it may also lead to:
- Higher order rejection rates
- More returns and failed deliveries
- Longer payment cycles
- Additional operational complexity
For this reason, COD is typically most effective when combined with reliable fulfillment and order verification processes.
Example
A customer orders a phone accessory from a dropshipping store and selects Cash on Delivery at checkout.
The supplier ships the product, and when the package arrives, the customer pays the delivery driver before receiving the order.
The payment is collected only at the time of delivery.
Why It Matters
Cash on Delivery can help ecommerce businesses reach customers who are hesitant to prepay online.
While it can increase order volume in some markets, it also introduces additional fulfillment and payment risks. Dropshipping businesses should carefully evaluate whether COD aligns with their target market and operational capabilities.