Within the Saudi e-commerce ecosystem, Cash on Delivery (COD) has long held a dominant position. However, with upgrades in payment infrastructure and policy guidance, its development over the next 3-5 years will present a dual-track pattern characterized by "resilience and persistence" coupled with "gradual diversion." This means COD will retain its core value in specific scenarios while making room for electronic payments and innovative models.
From the perspective of current fundamentals, COD's resilience still has solid support. Although the share of cashless payments in Saudi has reached 62% (2023 data) and the online payment ecosystem continues to mature, the consumer habit of "inspecting goods before payment" remains deeply ingrained in the market – 70% of consumers prioritize COD due to information security concerns, especially for high-average-order-value categories (like home appliances and luxury goods) and in lower-tier markets. COD remains a "trust-building tool" that lowers the decision-making threshold. Furthermore, Saudi's address and postal code systems are not yet fully perfected. The COD model, which relies on manual locating for delivery completion, still adapts to these current infrastructure shortcomings in the short term. However, the operational pain points of COD are becoming increasingly apparent. Industry-wide refusal rates are generally between 15%-25%, and can even reach 30%-40% in certain scenarios. Coupled with cash management costs, reverse logistics costs, and a cash flow cycle of 7-15 days, the profit margin for a pure COD model continues to narrow.
The core change in future trends will be reflected in the gradual evolution of key metrics. Regarding the share of COD, it is projected to remain at 45%-55% in 2025, further declining to 35%-45% by 2027. Although its share will decrease, reliance on COD will remain relatively high for high-value items, impulse purchases (like live stream e-commerce), and in lower-tier markets. Concerning refusal rates, as fulfillment efficiency improves and risk control is optimized, the industry average is expected to gradually decrease to 12%-18%. Top-tier service providers, with optimized logistics chains, might even achieve rates below 12%. The cash flow cycle will also see improvements, with 7-day settlement becoming mainstream. Some Dubai packet service providers may even trial "instant settlement" models, though vigilance regarding their compliance and fund flow risks is necessary.
The core forces driving this trend stem from a triple push of policy, payment ecosystem evolution, and operational upgrades. Saudi's "Vision 2030" strongly promotes a cashless society, and regulators are continuously optimizing electronic payment infrastructure, providing the policy groundwork for alternatives to COD. Simultaneously, innovative payment models like Buy Now, Pay Later (BNPL) are rapidly gaining penetration, complementing COD by meeting consumer demand for "flexible payment" while reducing seller risk. Furthermore, the improvement of local warehouse and distribution networks, optimization of address tools, and the proliferation of Pick-Up/Drop-Off (PUDO) points are creating conditions for reducing reliance on COD and enhancing fulfillment efficiency.
In summary, COD in Saudi e-commerce will not exit the stage entirely but will transition from a "singularly dominant" model to a dual-track pattern coexisting with electronic payments and BNPL. Sellers can only achieve a balance between cost and conversion amidst these changes, and seize the growth opportunities in the Saudi e-commerce market, by accurately understanding COD's applicable scenarios while simultaneously advancing payment diversification and fulfillment upgrades.