Offer cash on delivery, but on your terms. COD still decides many first orders in India, yet COD parcels come back far more often than prepaid ones, and every returned parcel costs you two shipping legs. Keep COD for low and mid-value orders, limit it by pincode and order value, and give buyers a reason to pay by UPI.
How common is COD in India in 2026?
COD is shrinking, but it is still the larger half. Logistics platform ClickPost found that 41% of orders were prepaid in 2025, up from 32% in 2024 (Indian Retailer, 24 Dec 2025). Prepaid adoption was highest in metros and lower in Tier 3 towns, so the further your buyers are from a big city, the more COD you will see. Razorpay's guide to COD cites ET Prime Research putting COD at 60 to 65% of ecommerce orders in 2024 (Razorpay, updated June 2026).
Buyers choose COD because:
- they do not yet trust an unknown brand with an advance payment
- they want to see the product before paying
- they have been caught by online fraud before
- some older buyers are still uncomfortable paying online
For a seller this creates a tension: COD wins the order, but it carries costs that prepaid does not.
The hidden costs of COD
1. Return to origin (RTO)
RTO happens when the buyer refuses the parcel or cannot be reached, and it travels back to you. Razorpay puts the RTO rate at 25 to 30% for COD orders against 2 to 3% for prepaid (Razorpay). Your own rate depends on category, price and region, so measure it rather than assume it.
What one RTO costs you:
- forward shipping, which you have already paid
- return shipping, usually charged at a similar rate
- packaging that cannot be reused
- the time to receive, inspect and restock the item
- sometimes a damaged or unsellable product
A worked example. Say you sell a ₹600 kurti with ₹150 margin, and each shipping leg costs you about ₹60. If 20 of every 100 COD orders return, those 20 RTOs cost roughly 20 × ₹120 = ₹2,400 in shipping alone, which wipes out the margin on 16 of the 80 orders that were delivered. Cut RTO to 10% and you get half of that back.
2. Remittance delays
A prepaid payment settles to your bank through your payment gateway on its normal cycle. COD cash is collected by the courier and remitted to you later, after delivery and reconciliation. Until then your money sits with the courier, which hurts if you need it to restock.
3. Fake and impulse orders
COD makes it easy to place an order with no intention of receiving it. Wrong addresses, pranks and buyers who simply change their mind all end in an RTO that you pay for.
4. COD handling charges
Most couriers and aggregators charge an extra COD fee per order, either flat or as a percentage of the order value. On a low-priced product, that can be a large share of your margin. Check the COD charge on your courier's current rate card.
Benefits of prepaid orders
- Much lower RTO. A buyer who has paid wants the parcel.
- Faster cash. The gateway settles the payment on its regular cycle.
- Fewer fake orders. Paying filters out buyers who are not serious.
- No COD handling charge.
How to move buyers to prepaid
You do not need to drop COD. You need to make prepaid the obvious choice.
Strategy 1: A prepaid incentive
Offer a small reward for paying online, such as "₹30 off when you pay by UPI" or a free gift wrap. Even a small incentive often costs less than the RTO risk it removes. Make the offer visible on the product page and at checkout, not just in a chat.
Strategy 2: Faster dispatch for prepaid
"Prepaid orders ship today; COD orders are confirmed by phone first." This works well for gifts and occasion purchases.
Strategy 3: Limit COD by order value and pincode
Not every order needs a COD option. Consider prepaid only for:
- high-value orders, where one RTO wipes out several sales
- perishables, which cannot be resold after a return
- personalised items, which cannot be resold at all
- pincodes where your RTO rate is consistently high
Keep COD for first-time buyers on mid-priced products, where it does the most good.
Strategy 4: Confirm before you ship
Before shipping a COD order, confirm it with the buyer by a call or a WhatsApp message. Cancel orders that cannot be confirmed. A two-minute call is cheaper than a ₹120 round trip.
Strategy 5: A part-payment for high-value COD
For expensive orders, ask for a small advance by UPI and collect the rest on delivery. A buyer who has paid ₹100 up front is far less likely to refuse the parcel.
Category-wise COD guide
| Category | COD approach | Why |
|---|---|---|
| Fashion, ₹300-1,500 | Offer COD | High demand; manageable risk with confirmation calls |
| Sarees and ethnic wear | Offer COD up to a limit | Buyers want to see colour and fabric; cap the order value |
| Jewellery, high value | Prepaid or part-payment | One RTO costs too much; insured shipping is easier prepaid |
| Food and perishables | Prepaid only | Returns cannot be resold |
| Personalised items | Prepaid only | Returns cannot be resold |
| Home decor, mid-priced | Offer COD | Strong COD demand in this category |
For category-specific setups, see the pages for fashion sellers, saree sellers and jewellery sellers.
Track the numbers every month
- COD share: what percentage of orders are COD?
- RTO rate by payment type: compare COD with prepaid.
- Cost per RTO: both shipping legs plus packaging.
- Prepaid share after an incentive: is the offer working?
If your COD RTO rate keeps climbing, tighten your COD limits before you scale ad spend.
How BizzPocket handles COD and prepaid
On BizzPocket, cash on delivery is part of the core checkout on every plan, not a paid add-on:
- Switch COD on or off for your store, and limit it to certain pincodes or order values.
- UPI, cards, net banking and wallets run through your own Razorpay or Cashfree account, so prepaid money settles straight to your bank.
- Shiprocket and Delhivery pickups are booked from the order screen; the courier collects COD cash and remits it to you.
- Coupons and discount codes let you run launch, festival and repeat-buyer offers you control.
Building your store is free, with a ₹1 one-time verification to go live, and the pricing page lists the platform fee on each plan. For the bigger picture on payments and shipping, read how to start an ecommerce business in India.
Frequently Asked Questions
Should a new online store in India offer cash on delivery?
Usually yes, for low and mid-priced products, because COD builds trust with first-time buyers of an unknown brand. Cap it by order value, confirm orders before shipping and offer a small prepaid incentive.
What is a normal RTO rate for COD orders in India?
Razorpay puts it at 25 to 30% for COD against 2 to 3% for prepaid. Rates vary widely by category, price and region, so track your own numbers by payment type.
How do I reduce fake COD orders?
Confirm every COD order by phone or WhatsApp before shipping, block pincodes with repeated refusals, cap COD order value and ask for a small UPI advance on expensive items.
Who pays the payment gateway fee on prepaid orders?
You do, at your gateway's rate; the gateway sets and bills it. COD has no gateway fee, but couriers usually add a COD handling charge.
The bottom line
COD is part of selling in India, but it should be a choice you manage, not a default you absorb. Offer it where it wins orders, limit it where it loses money, and make paying online the easier option. Start with a small prepaid incentive and a confirmation call on every COD order, then watch your RTO rate each month.
