This post originally appeared on the JadoPado Blog and has been re-produced here to preserve the JadoPado historical record.

Let’s imagine you run a business and a potential customer has got in touch to place an order for the super cool widgets that you sell. During the course of your conversation, the customer casually mentions that “I operate out in Iceland and could you possibly ship them out to me? I’ll pay once they arrive.”

Would you ship your super cool widgets out? What would happen if your new customer decided that they’d rather not have your super cool widgets once they got to Iceland? What would you end up losing on that transaction?

Now multiply that out to hundreds, if not thousands of potential customers who may or may not decide to accept your widgets on delivery. With no commitment up front.

That’s the problem with Cash on Delivery.

Customers don’t feel like they own their purchase. Cash on Delivery gives them the option to change their mind during the fulfilment or delivery process rather than after the purchase has taken place.

When goods cross borders, the costs add up quickly. The shipper is out of pocket on transportation, customs duties, taxes and other tariffs as well as the cost of the product, with zero recourse to the customer should they decide to change their mind. If you then factor in the cost of reverse logistics to return an item back to the destination, since the GCC and many emerging markets don’t have a concept of returns, not only do you incur the cost of transporting a product back, you also end up having to re-import it back into the country.

Or storing it in a local warehouse. Which probably doesn’t belong to you, and even if it did, you end up carrying disparate inventory across multiple warehouses in different jurisdictions, incurring a carrying and storage cost.

While Cash on Delivery may be manageable within the confines of a country, costs still exist. Within the UAE, if you were to transport an item to a customer from a warehouse in Dubai to Ras Al Khaimah, you’d incur a cost to get the item there. If the customer were to reject the the delivery, you’d incur a cost to bring it back to your warehouse, without even factoring in the opportunity cost of a rejected delivery.

An example from Indian e-commerce giant Flipkart is particularly telling about the negative impact of Cash on Delivery. Recently FlipKart announced that it will stop delivering orders that exceed INR 10,000 to the state of Uttar Pradesh, primarily due to a rise in “Just for fun” orders. Customers order expensive products via Cash on Delivery and then refuse to accept them.

It takes 10 days for an order to get to a customer and to come back to FlipKart in case it is not delivered. That means 10 days of cash flow wiped out due to a rejected Cash on Delivery order. Add shipping, insurance and a complicated bevy of state taxes that makes up India’s e-commerce ecosystem and the decision starts to make sense. The problem is even more telling when you consider that Uttar Pradesh is India’s most populous state and also happens to be “the largest consumer for all trading companies”.

While we continue to accept Cash on Delivery within the UAE, we’ve managed to ensure that our rejection rates are negligible by calling ahead and ensuring that a customer actually wants a product before we process and dispatch his or her order. It’s a far from perfect system and involves manual processes that are the bane of any technology business.

Our data indicates that 60% of customers who shop on JadoPado opt to use their credit cards over Cash on Delivery, which is the opposite of numbers being reported by others. We’re trying to figure out exactly why our numbers differ but gut feel points to UI and possibly service levels. Consider the popularity of Aramex’s Shop and Ship business which gives customers a shipping address in a number of popular e-commerce markets. Not only are customers paying with credit cards on sites outside of the region, they’re also paying their delivery costs up front to Aramex via a stored credit card. All 300,000 of them. Most of whom are in the region.

If customers are not given Cash on Delivery as an option and assuming that viable offline alternatives do not exist to the service that you are providing, customers are more than willing to pay with their credit cards. It remains very important to ensure that pre-payment is accompanied by a fair and comprehensive returns policy. This assures customers that should they change their mind, a merchant’s policy will enable to return goods easily and get a quick refund.

So here is my rallying call: Say no to Cash on Delivery. Spend your time solving greater challenges within your business while sleeping better at night.