What is Cash on Delivery?
Cash on delivery means the customer pays when the parcel reaches them, not at checkout. It removes the trust barrier that still stops plenty of Indian shoppers from buying online, so conversion climbs. What it costs you is delayed cash, courier collection fees, and a return rate several times higher than anything you see on prepaid orders.
Cash on Delivery
How COD actually works
The buyer selects COD, the order is placed with no money moving, and the courier collects cash or takes a UPI payment at the door before remitting to you after a settlement cycle of a week or two, minus a per-order collection fee.
So one COD order creates three costs a prepaid order does not: the fee, the working capital gap, and the RTO risk. It also creates revenue you would not otherwise have, because first-time buyers in tier two and tier three cities frequently will not prepay a brand they have never heard of. Remove COD and you remove them.
Where teams get COD wrong
Switching it off entirely to fix margin. Conversion drops immediately and the revenue you lose usually exceeds the margin you saved, which makes it a blunt instrument applied to a problem that responds far better to gentle nudges.
Equally wrong is leaving it available on everything with no friction whatsoever, since high-value orders on COD carry the worst risk profile in the business and a Rs 6,000 parcel coming back costs you many times what a Rs 700 one does.
The third mistake is not measuring the two separately. Split AOV, return rate and contribution margin by payment method and the decisions become obvious. Most brands find prepaid is quietly funding COD.
What good looks like in India
The practical setup for a Delhi NCR brand looks roughly like this. Keep COD on, make prepaid more attractive with a modest discount or an extra sample, put UPI at the top of the payment list where Razorpay and PhonePe have already made it the default habit, cap COD above a value threshold that matches your appetite, and confirm every COD order on WhatsApp before it ships.
Then track prepaid share as a headline metric. It moves slowly. Every point you win is margin you keep.
Related terms: Click-Through Rate · Click-to-WhatsApp · Cohort Retention.
Where this shows up in the work: E-commerce Growth · Full glossary.
Cash on Delivery — questions, answered.
Usually yes. Without a recognised name, removing COD costs you a large share of first-time buyers, particularly outside the metros. Offer it, then work on shifting people toward prepaid using incentives rather than restrictions.
There is no universal figure, and it swings enormously by category and price point. Judge it by direction instead. Prepaid share climbing quarter on quarter is the signal that matters, whatever level you started from.
Last updated 2026-08-08
Ready to replace guesswork with a growth engine?
Book a 30-minute strategy call. We’ll show you exactly where your funnel is leaking, before you spend a dollar.