Flipkart introduces ‘part payment’ option to curb return rates

Flipkart, known for its innovation in the payments space with cash on delivery and no-cost EMI options, has now come up with another creative solution: part payment option. The idea of this new feature is to reduce the frequency of the number of cancel orders. 

Under this method of payment, the buyer can choose to pay a part of the total purchase value at the time of placing the order and the remaining amount can be paid either online or in cash at the time of delivery. 

Flipkart issued a guideline to its sellers via email on Wednesday explaining all the required details of part payment. Entrackr has seen a copy of the email.

The move seems to be a baby step towards making e-commerce entirely prepaid like it is in the developed economies such as the USA, Europe, and China. "The introduction of part payment options can lead to a 2-3% reduction in prices for consumers as currently losses of such undelivered orders were factored as a cost," said AIOVA spokesperson while welcoming the move.

The rate card of part payment inclusive of fixed fee, commission, shipping fee, and the collection fee would remain similar to the existing payment structure. However, the collection fee would be charged by the seller in two parts from the customer. A part of the collection fee i.e. 2% would be charged at a prepaid amount and another 2% would be charged on the postpaid value of the product. 

For example, if an order costs Rs 5,000 and the amount paid at the time of purchase stands Rs 2,000 with the due Rs 3,000 to be paid at the time of delivery, the collection fee would be charged twice from the buyer. While Rs 40 would be charged initially on account of a 2% collection fee, another Rs 60 as a collection fee of 2% would be charged at the time of completion of an order on the leftover amount of Rs 3,000. 

Cash on delivery has turned out to be a major reason for fake buying, especially in smaller cities, leading to higher returns and cancellations which in turn increased logistics costs for an e-commerce platform in India. Currently, sellers see up to 20% return when it comes to CoD and they largely bear the cost of return that involves packaging, forward, and reverse logistics.

To make up for these added costs, sellers usually inflate prices of their offerings to the tune of 3-5% on marketplaces like Flipkart and Amazon. With the part payment model, this benefit can now be passed on to consumers. 

The part payment model appears to be an interesting proposition for the entire e-commerce value chain - platforms, sellers, and buyers. It will reduce the unnecessary burden of return for sellers and control fake buying on platforms. 

The output of this move from Flipkart would be keenly monitored by other e-commerce companies. If the Walmart-controlled company sees initial success with part payment model, it may quickly get replicated on other e-commerce websites.