I didn't want all my research to go waste, hence the post. I was a huge fan of shopping online and to a certain extent, I still am! It is just easier to order a certain shade of a nail polish online than to go looking for it from mall to mall. I found my bottle Revlon's 410 Slipper online and I have not found another store/outlet which has it in stock. Oh and I also got free shipping so, it was cheaper than going around looking for it and wasting fuel (which, btw is very expensive in Pune thanks to Octroi and what not taxes).
Coming back to the point, websites are charging extra for COD because
a) People tend to return the COD orders a lot more
b) Courier companies take their own sweet time in handing the money over to the website in question
c)Courier companies charge extra for COD orders.
The reasons mentioned above are the major reasons and a lot of e-comm websites are start-ups so, they have cash flow issues when the courier companies don't pass on the money right away.
Hence, they expect you to pay extra for COD orders. Now, not all of them charge it because they have found a way to work around it. For example, Flipkart has its own delivery in major cities. However, not every site can afford to employ a large work-force to make deliveries.
You do have the choice of paying before hand but there are people like my brother who think it is a needless chore to make a payment online. I think he will stop reading the day Flipkart stops COD. There is obviously the risk of a payment failing or the order not being fulfilled properly but you can always ask for a refund. It is a hassle but then you return/exchange things that you buy from stores too!
Another alternative would be to order the things that are available on huge discount or are really hard to find so, you can justify the whole deal.