With a market share of 0.5%, cash on delivery (COD) is among the least frequent payment methods used in German ecommerce. That said, it remains an important option for certain customer groups and specific applications.

This article explains how cash on delivery works, the fees involved, and the pros and cons of this approach for vendors and shoppers. We’ll also cover what you need to consider when entering COD transactions into your records, as well as other payment choices available to you as an online retailer.

What’s in this article?

• What does cash on delivery mean?
  
• Cash on delivery fees and limits
  
• What are the advantages of cash on delivery?
  
• What are the disadvantages of cash on delivery?
  
• Key considerations when accounting for cash-on-delivery payments
  
• When are retailers not advised to use this payment method?
  
• What are the alternatives to cash on delivery?
  

What does cash on delivery mean?

Cash on delivery is a payment method in which the buyer pays for the goods they have ordered upon delivery, directly to the carrier. That means settlements are made in banknotes or by card when the package is handed over, rather than in advance. This approach is most common in ecommerce, and some of the larger shipping companies, such as DHL and GLS, offer it as well.

How cash on delivery works

There are just a few steps involved in COD. Here’s how it typically works:

• Offer and select the payment option: Online retailers have to activate this payment option in their shop system. Customers can then select cash on delivery during the ordering process.
  
• Shipping and delivery: A shipping carrier handles delivery as an additional service. The recipient must personally accept the parcel. If the original addressee is not at home, an authorized person could sign for the package as well.
  
• Payment: The recipient settles the invoice total for the product, plus shipping costs and a cash-on-delivery fee, directly to the shipper. They then issue a proof of purchase and hand over the parcel.
  
• Receive funds: After the buyer pays, the shipper transfers the invoice total to the vendor’s business account. The retailer then receives a receipt or a digital confirmation of the transaction and records the funds received.
  

Cash on delivery fees and limits

Shippers generally offer cash on delivery as a paid service and add a COD fee to the shipping costs. Charges vary depending on the carrier and service. Different providers also set different cash-on-delivery limits.

DHL provides cash-on-delivery service with several ways to pay: depending on the shipment type, recipients can pay by money, use DHL’s proprietary POSTCARD, or via an EC card at a local post office. Customers typically choose the pay-in-branch alternative when they are not home during delivery. DHL does not deliver COD shipments to package lockers or pickup points. The maximum cash-on-delivery amount varies by shipping rate, so senders must check the limit before dispatch.

GLS also offers COD shipments, but with its own rules on limits and accepted ways to pay. These caps are usually aligned with the respective liability thresholds and can vary depending on the carrier option you choose.

Because fees, checkout types, and limits vary from one shipper to the next and are regularly updated, retailers have to check the latest terms and conditions with their respective shipping partner before offering cash on delivery.

What are the advantages of cash on delivery?

There are many upsides to cash on delivery, for both ecommerce sellers and shoppers. Here’s an overview of the most important benefits:

Advantages for online retailers

• Security of payment: Cash on delivery gives online retailers stronger payment security. Customers must pay to receive their items rather than getting them for free. If they refuse, the carrier returns the package to the vendor, which results in little to no financial loss.

• Building trust: Shoppers largely appreciate the fact that they don’t have to pay up front. Web retailers offering cash on delivery can reduce purchase barriers and encourage buying decisions. Offering this option works quite well for new or smaller web stores that want to build trust among potential customers.

Advantages for customers

• Fast delivery: Online retailers ship goods as soon as shoppers place an order, since they don’t have to wait for payment to arrive first. That means customers get their items within just a few days.

• Security: Customers pay for items upon receipt, which removes the risk of sending money to fake stores or paying for products that never arrive. They can also check the parcel for damage before checkout and refuse delivery if there are issues.

• Simple payment process: Another advantage of cash on delivery for customers is that they don’t have to provide any transaction data during the order process. Instead of giving out their IBAN (International Bank Account Number) or other bank details, they typically just need to give their name and address. That means COD is a suitable choice as well for people who don’t use online payment services or card payments.

• Make purchases despite bad credit: Generally speaking, individuals with bad credit can order items using cash on delivery. Because there are no credit checks, people can make these purchases having a low credit score. Checkout options requiring settlement after receipt of goods, on the other hand, are frequently unavailable to those with a bad credit score.

What are the disadvantages of cash on delivery?

While there are loads of advantages to cash on delivery, there are some downsides:

Disadvantages for online retailers

• No payment guarantees: It could be a risky approach for vendors if they are producing goods to order. If the buyer refuses to take delivery of their items and the shipment is returned, the retailer bears the production costs. Payment options such as money in advance do not come with this risk.

• Logistical challenges: Cash on delivery demands close tracking of transactions and redeliveries. Vendors must accurately monitor incoming funds, record prompt transfers, and trace return packages. Managing these tasks can place a heavy operational burden on the business—especially at larger volumes—and often requires extra resources for order processing.

• Delayed receipt of funds: It can take several days for carriers to process and transfer invoice totals. The retailer doesn’t have any access to the money while this is happening, which could negatively impact their cash flow.

Disadvantages for customers

• Cash on delivery fee: Customers typically pay an extra cash-on-delivery fee on top of the item price and shipping costs. These added expenses can be unreasonably high, particularly for small orders.

• Correct amounts: Carriers cannot always provide exact change for cash payments, so recipients need to have the proper amount ready when accepting a COD shipment. If they don’t and the driver lacks change, the carrier might try delivery again later or hold the package at a local sorting facility. Either outcome creates extra delays and inconvenience for customers.

• In-person delivery: Cash-on-delivery orders require in-person handover, so the recipient must be home when the package arrives. They often have to make special arrangements and spend more time coordinating delivery.

Key considerations when accounting for cash-on-delivery payments

In addition to practical concerns, cash on delivery also entails several administrative challenges. Web-based sellers need to carefully track their earnings and log them accurately in their accounts.

Shipping carriers usually send vendors a receipt confirming the money transfer, which serves as proof of remittance. After logging the funds received, sellers are required to reconcile them with open orders in the system to match each payment to the correct purchase. If an individual refuses a COD shipment and the carrier returns the package, retailers must also record it accurately.

Manual bookkeeping comes with risks, mainly when many transactions are processed simultaneously. For ecommerce businesses that have large order volumes, an automated accounting system is a good idea. Modern software cross-references incoming payments with outstanding receivables and posts them accurately—minimizing manual labor and the risk of errors.

When are retailers not advised to use this payment method?

Although cash on delivery offers many benefits, it doesn’t always make sense as a payment option. In some cases, it means greater risk for digital retailers, so you must think carefully before offering it to your customers.

High return rate

COD is often not the best choice for products with a high return rate. Products such as footwear or apparel are frequently sent back, which can create added costs for vendors in terms of shipping and handling redeliveries.

Expensive items

Another risk involves higher-priced items. Because shoppers pay upon delivery, a recipient can refuse to accept the shipment. Again, this could result in overhead for shipping and managing returns, all of which fall on the seller. Other checkout methods offer more protection, notably for new customers purchasing expensive goods.

Perishables

Cash on delivery is equally risky when selling perishable or temperature-sensitive products. If persons refuse to take deliveries of foodstuffs, for example, some items might not be resalable—not to mention the additional expenses the retailer will incur for disposing of them.

Fraud risk

In principle, it increases the risk of fraud for ecommerce sellers. Someone looking to harm a business can place orders with the intent to refuse delivery. Retailers then face further logistical complications and financial losses. Incorrect address details can prevent successful delivery and create subsequent charges as well. Once more, if this happens, vendors can expect to see added costs. It’s also possible that fraudsters place purchases under a false name or using stolen identities.

What are the alternatives to cash on delivery?

Retailers aiming for a high conversion rate generally do best by offering people a wide range of checkout options. The reason is that 82% of German shoppers regularly abandon web orders if they cannot pay via their preferred method.

According to the EHI “Online Payment 2025” study, payment on invoice, direct debit, and credit and debit card transactions are particularly popular choices in Germany, with ecommerce revenue shares of 25.8%, 17.3%, and 12.3%, respectively, in 2024. Wire transfers/prepayments and installments each receive a 4.3% share. Cash on delivery accounted for 2.9% of ecommerce revenue in Germany in 2024.

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