COD RTO Impact Calculator
Each Return-To-Origin (RTO) order costs 8-15% of order value (outbound shipping × 2 + payment fee + damaged-goods cost). Indian D2C COD RTO rates: 12-25% across categories. A brand with 18% RTO on 60% COD orders pays a 6% margin tax on every dispatch — destroying profitable cohorts.
- Each RTO costs 8-15% of AOV.
- Indian COD RTO: 12-25% (tier-1 lower, tier-2/3 higher).
- Tier-3 pin-codes can hit 50%+ RTO; ship prepaid-only.
Shipping × 2 + fees + damage
How much CAC rises due to RTO drag
Margin tax = COD share × RTO rate × RTO-cost% · CAC uplift = 1/(1 − COD% × RTO%) − 1- Use shipped order count (after-checkout, before-RTO).
- RTO cost % conservative: 8-12% (shipping-heavy categories); 10-15% (heavy SKUs).
- Compare margin tax to CAC: 6% margin tax = 6% CAC efficiency loss.
- Tier-3 pin-code segmentation often surfaces 30-50% RTO concentrations to fix.
Frequently asked questions
Why does RTO destroy margin?
Outbound shipping (₹40-80) + return shipping (₹30-60) + payment failure fee (₹10-20) + damaged-goods 5-8% × AOV. Sum: 8-15% of AOV per RTO.
How do I reduce RTO?
Address verification at checkout, OTP confirmation before dispatch, prepaid discount nudge, RTO-prediction by pin code, progressive trust-building (smaller first orders for new buyers).
Should I disable COD entirely?
Tier-1 cities yes for select categories. Tier-2/3 buyers strongly prefer COD; disabling kills conversion. Selective disable by pin code is the right move.
Is prepaid discount worth it?
Yes. 5-10% prepaid discount converts 30-45% of COD orders to prepaid. The discount cost is less than the RTO margin tax it saves.
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