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What Is Cash on Delivery (COD) And How Does It Work?
September 19, 2025 / 1 minute read / By Zoya Naeem
1. Customer places the order
At checkout, the shopper selects cash on delivery as their preferred payment option.
Blog
Learn how COD works, its benefits and risks, and how retailers can simplify COD with integrated retail systems.
Cash on delivery (COD) is one of the oldest payment methods in retail, yet it continues to play an important role in eCommerce and brick-and-mortar fulfillment today. The cash on delivery meaning is straightforward, customers complete payment only when their order arrives at their door. This approach can help retailers win the trust of shoppers who may be hesitant to pay online, while also giving customers more flexibility in how they shop.
Even in an era where digital wallets, contactless cards, and subscription billing dominate, COD remains relevant because it answers a simple question for customers, “Will I really get what I paid for?” By delaying payment until delivery, COD provides a layer of reassurance that strengthens the relationship between buyer and seller.
In this blog, we’ll break down COD in detail, including:
The Definition of COD And How It Works Step by Step
Cash on delivery (COD) is a payment method where customers pay only when their order arrives at their door. Instead of entering card details or paying upfront online, the transaction happens face-to-face with the delivery driver. While the name emphasizes “cash,” in many cases, payments can also be made with debit or credit cards at delivery if the carrier supports it.
Here’s how COD typically plays out in retail:
This step-by-step flow keeps customers in control and reduces hesitation at checkout, especially for those who may not be comfortable entering card details online.
Pros and Cons of COD for Retailers
While cash on delivery can open doors to new customers and boost sales, it also brings added responsibilities for retailers. Understanding both the advantages and challenges will help you decide if COD is a good fit for your business model.
Here’s a quick breakdown of the key pros and cons:
| Pros | Cons |
|---|---|
| Wider Customer Reach COD appeals to shoppers who don’t have access to digital payment methods or who prefer paying at delivery. | Payment Delays Carriers may take several days to remit payments back to retailers. |
| Reduced Cart Abandonment Customers are less likely to abandon checkout when they don’t need to pay up front. | Refusal Risk Customers can decline the package upon arrival, leaving retailers with return shipping costs and unsold stock. |
| Reduced Cart Abandonment Paying after delivery reassures cautious shoppers that they’ll receive their order as promised. | Logistics Complexity Managing COD adds extra coordination for shipping partners and back-office reconciliation. |
COD can be a growth driver, but retailers should carefully weigh these trade-offs. The best approach is to pair COD with strong order management processes and clear return policies to minimize the risks.
Why Logistics and Fulfillment Are Important for COD?
Many of the challenges tied to cash on delivery show up in the last mile, when an order is out for delivery and the customer needs to pay. Failed payments, missed deliveries, or refused packages can quickly add costs for retailers, especially if shipments need to be rerouted or returned.
This is where strong logistics planning makes all the difference.
Retailers with access to multiple carriers like FedEx, UPS, USPS, DHL, or Amazon Prime can better match each order with the most reliable and cost-effective shipping option. The right carrier selection reduces the chances of delivery hiccups and helps COD orders arrive on time.
Apart from selecting carriers, workflows and safeguards are critical.
Features like package tracking, delivery confirmation, and address validation give both the retailer and customer peace of mind while reducing the risk of failed deliveries. Moreover, getting shipping insurance can provide a safety net for high-value COD orders. Especially if a package is lost or damaged, insurance can cover costs that would otherwise eat into margins.
How Celerant + ShipEngine Integration Simplify COD & Fulfillment
If the biggest hurdles with COD happen during fulfillment, the solution is to simplify the process and keep everything under one roof. That’s exactly what Celerant’s integration with ShipEngine does. With access to over 40 carriers, real-time rate shopping, and the ability to manage orders from a single screen, retailers can reduce the back-and-forth that often slows down COD workflows.
As Gabriel Chan from ShipEngine explained:
Large logistics operations want everything to live in one singular location. That’s the benefit you get from using ShipEngine with Celerant because that allows you to basically have all of your fulfillment processes done inside of your ERP.
This unified approach means COD orders don’t have to feel like a special case. Automation handles the heavy lifting, from faster pick, pack, and ship steps to label printing and custom workflows.
Whether the order is prepaid or COD, the process remains consistent, efficient, and manageable.
So, Is COD Right for Your Business?
Cash on Delivery is another way how retailers are trying to meet customer expectations. For some businesses, COD opens doors to new customers and builds trust. For others, it can feel like added complexity. The difference often comes down to whether you have the right systems in place to manage it effectively.
When COD is supported by integrated tools that connect sales, inventory, shipping, and fulfillment, it becomes far less of a risk and more of a reliable way to expand your reach. The key is not looking at COD in isolation, but as part of a larger retail strategy that balances customer convenience with operational efficiency.
If you’re exploring COD, the real question is “Do I have the systems to handle it well?”
That’s where a solution like Celerant’s Stratus Enterprise makes a real difference, and with ShipEngine’s integration, you get access to 40+ carriers, real-time rate shopping, package tracking, and the ability to manage orders without slowing down your fulfillment process.
