Dropshipping in Pakistan with COD: Trials, Tribulations, and Triumphs
Starting a dropshipping business in Pakistan is a real opportunity for aspiring entrepreneurs. With the e-commerce market projected to reach $5.4 billion in retail sales in 2024 and a young population increasingly shopping online, the environment is promising. But local businesses face some unique constraints, chief among them is the dominance of Cash on Delivery (COD).
COD isn’t just another payment option here - it’s a critical channel for accessing customers who don't use digital payments. While COD offers market access, it comes with its own set of challenges. This post breaks down the full journey of running a COD-based dropshipping business in Pakistan, from obstacles to practical solutions.
Why COD Dominates the Pakistani E-commerce Landscape
Pakistan remains heavily dependent on cash-based transactions, and this extends to online shopping. Over 75% of online buyers still opt for COD. Here's why:
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Limited Payment Infrastructure: Services like PayPal and Stripe aren't available to Pakistani sellers, and only about a quarter of the population holds a bank account. As a result, digital payment options are limited, and COD remains the most accessible payment method.
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Low Consumer Trust in Online Transactions: Incidents of fraud and non-delivery have made buyers cautious. COD offers reassurance since payment is only made after the product arrives and can be inspected.
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Familiarity: For many, especially first-time buyers, COD is a process they already understand. It doesn’t require navigating online forms or sharing sensitive financial details.
In short, offering COD is essential for participating in the local market. About 95% of online businesses in Pakistan use COD. However, COD also introduces specific logistical and financial issues that merchants must be prepared to handle.
Key Challenges in COD Dropshipping
1. Payment and Trust Barriers
Setting up digital payment systems is difficult due to limited availability and adoption. COD allows customers to place orders with no upfront payment, which increases the likelihood of cancellations or non-serious orders. Merchants often have to verify orders manually, sometimes calling customers to confirm intent before dispatching goods.
2. Shipping Delays and Import Issues
Products sourced from abroad, particularly from China, can take weeks to arrive. This delay risks cancellations, especially for COD orders where payment is pending. Additional issues include customs duties and unclear delivery timelines. If buyers face unexpected fees or delays, they may refuse delivery. On top of that, unreliable courier networks and remote-area delivery limitations compound the problem.
Returned packages due to customer refusal can become frequent and costly, merchants bear the shipping costs and lost revenue.
3. Cash Flow Constraints
Since payments from COD orders are only received after delivery (and usually after a 7–14 day settlement period), businesses need upfront capital to fund inventory and shipping. This delay puts a strain on cash reserves. Additionally, COD income is subject to withholding tax (e.g., 2% for registered taxpayers), further tightening margins.
4. Fraud and False Orders
With no upfront payment required, it’s easy for pranksters or competitors to place fake orders using made-up names or addresses. These get processed and shipped, only to be returned undelivered - wasting time, inventory, and money.
How to Address the Challenges of COD Dropshipping in Pakistan
1. Improve Fulfillment and Set Expectations
Faster delivery times help reduce order refusals. Try sourcing from suppliers who hold stock in Pakistan or use quicker shipping options like ePacket. Always show estimated delivery times and notify customers of their order status. Products that avoid customs clearance problems are also preferable. Some dropshippers pre-stock best-selling items locally to ensure quicker delivery.
2. Build Customer Confidence
Buyers need to trust your store before they commit to paying on delivery. Offer responsive customer support, clear policies on returns/exchanges, and visible customer reviews. Active social media pages also signal legitimacy. For new customers, a confirmation call can reduce misunderstandings and increase order completion rates.
3. Reduce Failed Deliveries
Use order confirmation steps like OTP (one-time password) verification via SMS or email to filter unserious buyers. Some businesses charge a small deposit (e.g., Rs. 50 via mobile wallet) for high-value orders. Verify shipping addresses using validation tools to avoid undeliverable packages. Manual confirmation for expensive orders may also be worthwhile.
4. Manage Cash and Track Payments
Plan for COD delays by setting aside part of your budget to handle ongoing orders. Track all pending COD remittances carefully. Some courier services offer dashboards to help you monitor deliveries and settlements. Negotiating faster payout terms with courier partners can also ease financial pressure.
5. Use Practical Tools
There are services built specifically to support COD-based e-commerce models. These include tools for order verification, fraud reduction, and customer communication. Implementing these can reduce manual workload and improve your operational efficiency.
Releasit COD Form & Upsells: A Practical Tool for COD Sellers
Releasit COD Form & Upsells is a Shopify app that supports COD-focused dropshipping businesses in markets like Pakistan. It’s rated 4.9/5 by thousands of merchants and offers key features that directly address common pain points:
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Quick Order Form: Lets customers pla0ce COD orders on a single page with minimal steps. This reduces friction and helps increase the percentage of completed checkouts.
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Built-In Upsells: Offers additional items or discounts during the order process to boost order value, which is especially useful in low-margin environments.
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OTP Verification: Confirms that phone numbers used in orders are real, reducing the number of fake or fraudulent orders.
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Analytics & Exports: Automatically sends order data to Google Sheets and supports conversion tracking on major ad platforms. This enables better performance analysis and campaign optimization.
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Reliable Support: Available 24/7 via multiple channels, with a team experienced in supporting businesses in COD-heavy regions like South Asia, Southern Europe, and the Middle East.
Conclusion
Dropshipping with COD in Pakistan isn’t easy, but it is doable. Many have built profitable businesses by preparing for the unique constraints COD brings and adjusting accordingly. From improving shipping times and verifying customers to managing payments and using the right tools, each improvement brings you closer to building a reliable and sustainable operation.
To help you get started, Releasit is offering 200 FREE orders instead of 60 for your first two months, an exclusive offer for merchants in Pakistan.
