Is Cash on Delivery (COD) a trap for your budget or a necessity in the Arab market

Sahl Sunday,22 Feb 2026

We reveal the hidden figures behind returns and how to balance customer security with your store's budget stability, along with an action plan to reduce cash risks and convert COD customers to electronic payments.

1. The Psychology of Trust: Why Does the Arab Customer Insist on Cash?

In the Arab market, "touch before you pay" remains the golden rule. Customers see cash on delivery as a way to "protect" against fraudulent websites or products that don't match their pictures. For the customer, cash means control; they don't want to "lock up" their money in a process that could take days to get a refund if they don't like the product. The "easy" merchant understands that COD is not just a payment method, but a "trust-building tool." If you eliminate this option entirely, you're closing the door on more than 60% to 70% of the region's purchasing power, especially with a generation that is still hesitant to put their bank card details online.

2. The Cash Flow Trap: How Does Your Store Stifle While It's "Selling"?
The biggest risk in Cash on Delivery (COD) isn't just returns, but the "delay in receiving payment." When a customer buys with cash, the cycle goes like this: (Product shipped -> Delivery to the customer -> Cash collected from the shipping company -> The company deposits the money into your account). This cycle can take 7 to 15 days. In the meantime, you need cash to buy new merchandise and pay for advertising. Stores that lack the "long-term vision" or reserve capital may find themselves "successful on paper" (with huge sales) but "effectively bankrupt" (due to a lack of readily available cash), and this is the trap that many beginners fall into.

3. The Returns Nightmare (RTO): The Hidden Tax of Cash Luxury
Statistics for 2026 are shocking; the return rate for Cash on Delivery orders could reach 30%, while it doesn't exceed 2% for electronic payments. Why? Because a customer who hasn't paid a single penny doesn't feel "obligated." He might simply change his mind, ignore the delivery person, or discover he spent the money on something else. In this case, you lose the round-trip shipping cost, the opportunity to sell the item to another customer, and, most importantly, the advertising costs that brought that customer in. Cash on delivery (COD) can sometimes turn customers into irresponsible, emotional shoppers, and the merchant ultimately foots the bill.

4. High Operating Costs: Why is COD Always More Expensive?

Shipping companies charge additional fees (COD fees) for collecting, managing, and processing cash. These fees, which often range from 5 to 15 riyals per order, are directly deducted from your net profit margin. Furthermore, COD requires a larger customer service team to contact each customer and confirm their order before shipping to ensure seriousness. If you add up the additional fees, communication costs, and losses from returns, you'll find that an electronic payment sale is far more profitable than a cash sale, even if the product price is the same. A smart merchant accurately calculates these differences and takes them into account when pricing their products.

5. The "Smart Guidance" Strategy: How to Drive Customers Towards Electronic Payment?

Instead of eliminating COD and clashing with the market, use incentives. Offer an additional 5% discount or free shipping only to those who pay electronically (card, Mada, Tabby, Tamara). Conversely, you can charge a nominal fee for choosing cash on delivery. When customers see they will save 20 riyals by paying by card, their "sense of saving" will outweigh their "sense of fear." At "Sahil," we believe that converting just 20% of cash customers to digital payments annually can double your net profits by reducing expenses and cumbersome operational processes.

6. Cash Risk Management: Don't Ship to Everyone!

Not every COD order is worth shipping. A professional merchant uses filtering systems. Before shipping, verify the mobile number (via OTP code) and review the customer's history. If a customer has previously placed an order and refused to accept it, you have the right to cancel the order or require prepayment. By 2026, tools will be available that provide a "customer credibility rating" based on their past purchasing behavior. Using these tools will dramatically reduce return rates, as you will only direct your merchandise and shipping costs to "serious" customers who have a genuine intention to buy and commit.

7. Conclusion: Is COD Necessary? Yes, but with a caveat!

Ultimately, COD is an indispensable necessity for rapid growth and reaching broad segments in the Arab world, but it's a "necessary evil" that must be managed. Don't let your store become dependent on cash; always aim to "enhance the customer experience" and build a strong brand that makes customers feel comfortable paying you in advance. COD is a stepping stone to success, and once you achieve a high level of reliability, you should begin to gradually reduce your reliance on it. Remember, only a merchant who controls their cash flow can withstand economic storms and fierce competition.

COD is deceptively simple, and very profitable if you know how to manage it. What's your current return rate? And have you considered incentives to encourage people to pay by Visa?