COD wins the order, then loses it at the door
COD still accounts for 60 to 65 percent of ecommerce orders in India, according to ET Prime Research. It is how most first time buyers try a new brand, and it is strongest in Tier 2 and Tier 3 cities where trust in online payment is still building.
The same orders carry almost all of the return risk. Shipway ShipNotes FY25 data puts RTO at nearly 26 percent for COD orders, against under 2 percent for prepaid orders. Razorpay puts the gap at 25 to 30 percent for COD and 2 to 3 percent for prepaid. The exact number varies by category and pincode, and the direction never changes.
So the question is not whether to keep COD. Removing it costs you the buyers who will not pay first. The question is how to keep COD and stop paying for parcels that come back.
What one returned parcel costs you
A returned COD parcel costs you twice. You pay forward shipping, then reverse shipping, and you earn nothing on the order. Industry estimates put the logistics cost of one returned order at ₹180 to ₹240, before you count the ad spend that won the sale.
Take a store shipping 1,000 COD orders a month at the Shipway average of 26 percent RTO. That is 260 parcels back at the warehouse. At roughly ₹200 in logistics per return, that is about ₹52,000 a month spent on parcels that never reached a buyer.
Multiply your monthly COD orders by your COD RTO rate, then by ₹200. That is your monthly RTO bill. Most founders find it is larger than their monthly ad creative budget.
Why buyers refuse the parcel
Most RTO is not fraud. It is a buyer who changed their mind, could not be reached, or gave an address the courier could not deliver to. Shipway data shows the pattern clearly.
- Speed matters. Orders attempted within 1 to 2 days saw 22 percent RTO. At 3 to 5 days it rose to 27 percent. Beyond 5 days it reached 35 percent.
- Price matters. Orders priced between ₹500 and ₹1,000 saw the highest RTO at 28 percent. This is the impulse buy band, where a buyer orders on a whim and cools off while the parcel travels.
- Place matters. Patna recorded the highest city level RTO at 35 percent in the Shipway data, while Vadodara recorded the lowest at 18 percent. Your own pincode data will show the same spread.
Each of these is fixable. None of them needs you to remove COD.
Prepaid is already gaining ground
The shift toward prepaid is under way without any brand forcing it. ClickPost tracked a fixed cohort of 200 D2C brands through the 2026 festive season and found prepaid shipments reached 52 percent of the total, up from 46 percent a year earlier. Prepaid shipments grew 47 percent year on year, against 27 percent for COD.
Prepaid buyers also spend more. The median prepaid basket in that festive window was ₹1,044, against ₹870 for COD. A buyer who pays first is a buyer who has already decided.
Your job is to move the buyers who are ready to pay first, and protect the rest with confirmation. Not to push every buyer into prepaid at once.
COD vs prepaid, side by side
| What to compare | What the data says |
|---|---|
| RTO rate | 25 to 30 percent for COD, 2 to 3 percent for prepaid |
| Share of orders | 60 to 65 percent of Indian ecommerce orders are COD |
| Median festive basket | ₹870 for COD orders, ₹1,044 for prepaid orders |
| What the buyer risks | Nothing until the parcel arrives for COD, full payment upfront for prepaid |
Five moves that cut RTO without killing COD
- Confirm every COD order on WhatsApp before dispatch. A short message with the order value and delivery date, asking the buyer to confirm, filters out wrong numbers and cold feet. Published case studies report relative RTO reductions of 12.6 percent to 32 percent after confirmation and verification work. Treat that as a range to test, not a promise.
- Ask for a small advance on high risk orders. A ₹99 or ₹199 partial payment on orders above ₹1,000, or to pincodes with high RTO, turns an impulse order into a committed one. Offer it as a discount on the order, not as a fee.
- Reward prepaid with a real reason. A 5 percent UPI discount, or free shipping on prepaid only, moves the buyers who were going to pay anyway. Keep the discount smaller than your RTO cost per order.
- Ship COD orders first. Same day dispatch and a 2 day delivery window keep RTO near 22 percent. Every extra day in transit pushes it up.
- Score pincodes and act on the score. Hold or confirm orders to pincodes with a history of high RTO, and send prepaid only offers to the worst ones. Your courier data already holds this list.
A simple test to run this month
Pick your 20 worst pincodes by RTO from the last 90 days. For one month, confirm every COD order to those pincodes on WhatsApp and ask for a ₹99 advance on orders above ₹1,000. Compare the RTO rate on those pincodes with the previous 90 days.
If RTO falls and order volume holds, roll the same flow out to the next 20 pincodes. If volume falls, loosen the advance and keep the confirmation. The test costs one month and tells you exactly what your buyers will accept.
COD is not the problem. Unconfirmed COD is.
