Amazon pilots cash-on-delivery service in India

E-commerce giant is reportedly testing the service with India Post to cater to customers who don't want to make upfront payments, and in a country where 80 percent of online transactions are completed with cash-on-delivery.

Amazon is reportedly trialing a cash-on-delivery service in India, tapping the country's 150-year-old postal service to fulfil its last-mile service.  

E-commerce is still nascent, but growing, in India where most are afraid or don't have the means to transact online.

Citing sources familiar with the issue, The Economic Times reported that the e-commerce giant had commenced a pilot with India Post to tap the country's young but growing e-commerce market . The postal service operates India's largest distribution network with over 150,000 branches across the country, 89 percent of which are located in rural areas. 

An India Post official, who declined to be named, said in the report: "We are trying to add capabilities like cash on delivery and reverse logistics. Consumers don't want to make an upfront payment. We are developing software to start the cash-on-delivery service with Amazon."

In its response to The Economic Times on the partnership, the U.S. e-commerce giant said: "We continually look for opportunities that will enable us to reach our customers in the remotest parts of India and offer them a convenient, trustworthy and reliable shopping experience."

Amazon currently operates in India through an online marketplace of third-party sellers and vendors, due to the country's restrictions prohibiting the website from selling direct to Indian customers. A check on its India website revealed an FAQ on its cash-on-delivery service, which noted that this option is only available for items tagged "Fulfilled by Amazon" and with the message "Eligible for Cash on Delivery" on the product details page. 

It added that customers who opted for this form of delivery would not have to pay extra charges, though a "convenience fee" of 39 rupees (about 63 US cents) may be charged at later stage. In addition, this service only applies to orders totaling less than 50,000 rupees (US$804.7) and this amount may differ depending on the customer's shipping address. 

Cash-on-delivery is the preferred mode of payment in India, where 80 percent of online transactions are completed via this form of payment. This option, however, does have its drawbacks.

India's largest e-commerce operator, Flipkart , in June said it was stopping cash-on-delivery for orders  over US$185 to the state of Uttar Pradesh. Noting the high potential for fraud, Forrester Research's research director Vikram Sehgal pointed to the high return rates--when items are unpaid at time of delivery--for this medium of ordering goods, which ranged between 5 and 25 percent. 

According to The Economic Times, India Post said it was investing 1 billion rupees (US$16.1 million) over the next few years to build out warehouses to fulfill e-commerce deliveries.