COD vs prepaid: how small online stores in India can reduce RTO without losing sales

Cash on delivery (COD) is still how a large share of Indian online shoppers prefer to pay, especially first-time buyers and buyers outside big cities. Turning it off usually costs orders. Leaving it fully open usually costs money, because some COD parcels are refused at the door and come back — returned to origin, or RTO.

The answer for most small stores is neither 'COD for everyone' nor 'prepaid only', but COD with rules.

What an RTO actually costs you

Add those up for your own category and you will usually find one refused parcel wipes out the margin on several delivered ones. That number tells you how much COD risk you can afford.

• Forward shipping you paid for an order that earned nothing.
• Return shipping on the way back, which many couriers charge separately.
• Packaging, and sometimes damaged stock that cannot be resold.
• Stock locked in transit for days, unavailable to a buyer who would have paid.
• Cash on delivery that was collected but is still sitting with the courier until remittance.

Why COD orders get refused

• Impulse orders the buyer has cooled on by the time the parcel arrives.
• Fake or prank orders, which cost the buyer nothing to place.
• Long delivery times that let the buyer buy elsewhere first.
• Wrong or incomplete addresses and phone numbers.
• Buyers who order several options intending to keep one.

Seven ways to keep COD and cut RTO

1. 1.Cap COD by order value. High-value orders are where a refusal hurts most; above a limit, ask for online payment.
2. 2.Set a minimum too. Very small COD orders rarely cover a round trip.
3. 3.Offer COD only in pincodes where your couriers deliver reliably, and keep online payment open everywhere else.
4. 4.Limit how much one buyer can have outstanding in undelivered COD orders at once, so one person cannot tie up a dozen parcels.
5. 5.Use partial COD: a small advance online at checkout and the balance at the door. Someone who has paid an advance rarely refuses the parcel.
6. 6.Score risk from your own delivery history: buyers and pincodes with past refusals can be nudged or required to pay online.
7. 7.Confirm high-value COD orders on WhatsApp or a call before dispatch, and show a realistic delivery date so the buyer is expecting the parcel.

Do not forget the cash itself. COD money is collected by the courier and paid to you later in remittance batches. Reconcile those batches against delivered orders every time — unreconciled COD is one of the quietest ways small stores lose money.

Making prepaid more attractive

Rather than forcing prepaid, make it the easy choice: show UPI first at checkout, make the payment page fast on a phone, and if you offer an incentive for paying online, say so on the product page rather than only at checkout.

How these controls work in Slaby

1. 1

   Set COD limits

   In your store settings, set a minimum and maximum order value for COD, the pincodes where COD is offered, and the most one buyer can have in undelivered COD orders at once.

2. 2

   Turn on partial COD

   Choose the advance as a percentage of the order with a minimum amount. The advance is paid online through your own Razorpay or Cashfree account; the balance is collected on delivery.

3. 3

   Turn on RTO risk scoring

   Scoring is built from your own store's delivery history. Set a score above which COD is blocked and a lower score at which the buyer is nudged to prepay.

4. 4

   Work the failed-delivery queue

   Undelivered orders surface in a queue where you reattempt or mark them returned to origin; the outcome feeds the risk numbers.

5. 5

   Reconcile COD remittance

   Record courier remittance batches and see which COD amounts are still with the courier and which have been paid to you.

Common questions

What is RTO in ecommerce?

RTO (return to origin) is a parcel that could not be delivered — often a refused cash-on-delivery order — and is shipped back to the seller. The seller usually pays shipping both ways and earns nothing on the order.

Should a small store stop offering COD?

Usually not entirely. Many buyers will not order without it. It is normally better to keep COD with limits — order value caps, pincode restrictions, per-buyer limits and partial advances — than to switch it off.

What is partial COD?

The buyer pays part of the order online at checkout and the rest in cash on delivery. The advance discourages fake and impulse orders while still letting the buyer pay most of the amount at the door.

Does Slaby charge extra for COD orders?

No. Slaby charges a flat subscription with no commission on your own store's orders. Your courier's COD charges and your gateway's fees on any online advance are between you and them.

Read next