Flipkart starts part payment method to reduce cancellations, order returns

Walmart-owned e-commerce firm says option would encourage pre-paid transactions and reduce cash on delivery

Flipkart has launched a new payment method that lets customers pay some amount for a product and the balance on delivery, aiming to reduce returns and cancellations.

The Walmart-owned e-commerce giant, in an email to sellers, said ‘Part-Payment’ would encourage pre-paid transactions. Customers can pay the remaining amount in cash when a product is delivered or either by online transaction. The rate card will remain the same for 'part payment' orders.

E-commerce websites allow customers pre-paid, post-paid (cash on delivery) or EMI (equated monthly instalment) as options to purchase products. Most customers choose cash on delivery (CoD), which results in higher units or GMV (gross merchandise value) but risks companies a higher risk of cancellations.

Flipkart told sellers ‘Part-Payment’ would help them get higher GMV growth and reduce cancellations. The company, which this week received a $1.2-billion investment from Walmart, works with over 200,000 sellers and 250,000 small sellers such as artisans, weavers, and craftsmen.

Experts say that the COD method has been a major cause for fake buying and has led to higher cancellations and returns which has increased logistics costs for the e-commerce companies.

All India Online Vendors Association (AIOVA), an alliance of e-commerce sellers, said on Twitter that it had been advocating this method for years now. “Will other marketplaces follow this move?” said AIOVA on Twitter. It said this is a first step in making e-commerce entirely pre-paid like it is in the US and EU.

“This move can lead to 2-3 per cent reduction in prices for consumers as currently losses of such undelivered orders were factored as a cost,” said AIOVA.

Flipkart recently surpassed 1.5 billion visits per month and reported 45 per cent growth in monthly active customers and 30 per cent growth in transactions per customer for FY20. It offers 150 million products across more than 80 categories. The firm had pioneered customer-centric services such as cash-on-delivery, no-cost EMI and easy returns.