C.O.D. - Care of the Devil?

Speaking about International eCommerce

International eCommerce seems to be a hot topic right now. Retailers, and most especially Brands, who have invested in their online capabilities for their domestic market, see an opportunity to leverage this investment by extending their offer to the whole world. I presented recently on this subject at at RBTE Expo 2014 at Earls Court (as well as being on the panels at eCommerce Futures in both London and New York) and I plan to use it as the basis of another short series of posts.

It's always rather challenging trying to select material from such a broad subject in order to fit into a short presentation. At RBTE I was given a longer-than-usual 30 minute slot (typically the best/longest slots inevitably go to the sponsors of course!) which gave me a chance to cover a wider range of areas than usual. What's always particularly interesting about speaking at these events is to see which topics or slides get the strongest reaction from the audience.

And then last week I had the opportunity to work onsite with a client in Kiev Ukraine, a consumer electronics retailer interested in learning the lessons from Amazon vs BestBuy / Amazon vs Currys history to make sure that they don't go the way of Comet. Online retail in the Ukraine is probably around 8-10 years behind the UK or US, which creates lots of opportunities for them to study the mistakes western retailers made in failing to adapt fast enough and avoid repeating them. (And yes, although Amazon are not in Ukraine, local online pure-plays are trying to learn lessons from Amazon themselves and make sure the local brick-and-mortar players make the same mistakes as Comet did...)

Cash on Delivery

What's been particularly fascinating about having these experiences close together was that the same slide got the strongest reaction at both events - this one, about the percentage of eCommerce transactions that are completed in cash. 

My Ukrainian clients found it difficult to believe that so many UK consumers would be prepared to pay for goods in such large numbers before physically seeing them, even from reputable retailers. By contrast: yes, UK and US readers, that means actual folding money handed over on the doorstep.

For western retailers thinking about trying to sell into say Russia, Romania or Ukraine, this presents some interesting issues. On the one hand there actually some advantages to transacting in cash. For one thing, the checkout - normally the most complex part of a website - is rather simple. You just get some basic contact details from the customer, telephone them to sort out delivery (oh yes, this is also standard practice by the way, so start employing some more local language speakers than you planned just for after-sales calls) and that's it. No messing around with multi-step checkouts and all those complicated "what happens if they press the back-button" type questions.

On the other hand - quite apart from the challenge of handling cash anyway - your entire after-sale standard operating procedures, and probably your finance policies, are going to need a rewrite. The problem, simply stated, is that the sale takes place spread over time. If you take credit card payments, then the payment, stock movement, general ledger posting and GAAP compliant booking of the sale are more or less simultaneous. And if there's a problem with the order during shipping, your call-centre knows it needs to cancel/refund the payment: 

By comparison, paying on delivery smears this transaction across time. And now if there's a problem during shipping, then no refund is needed. But of course, if your customer decides not to be at home, or doesn't like the goods on the doorstep, then you just took all that shipping cost and received no money for it.

German retailers, of course, have dealt with this complexity from the get-go. Here's a screenshot taken from www.idealo.de, a German price comparison site:

"Nachnahme" - cash on delivery - with its inherently higher risk of non-completion of the order, is going to cost you a a good bit more than paying upfront. Notice that they really don't want you to pay by expensive (for the retailer) methods like credit card either. Cash up-front or bank-transfer up-front please!

Coda

I'm writing this on 12th April 2014, and of course the situation might change. But I'd like to just take the opportunity to quote from an email invitation (I'm sure the author won't mind) I've just received to do another piece of consulting for a different client in Kiev:

"P.S. Perhaps a helpful note, given the increased media attention to Ukraine these days: Kiev, the capital, is peaceful and safe, despite popular protests in the east of the country."

Since I was there myself at the time I received this particular email, I could see for myself whether this was true. And it was. A little bizarrely the centre of the protests in Independence Square has become a tourist attraction with former protesters selling souvenirs such as spent bullets:

And Kiev really is a beautiful city, especially as the exchange rate has just improved by 50% due to all the uncertainty: