COD vs prepaid: which converts better and costs less?
Cash on delivery wins buyers who do not trust paying online. Prepaid protects your margins. Here is how to get the best of both.
Cash on delivery is still how a large share of Indian online buyers prefer to pay, especially first-time buyers and buyers outside the big metros. Turning COD off can cost you sales. Leaving it fully open can cost you margins. The answer is usually in between.
Why buyers choose COD
- They do not trust a new website with their money
- They do not have, or do not want to use, a card or UPI for online shopping
- They want to see the product before paying
What COD really costs you
COD is not just a fee on the order. Count all of it:
- COD handling fee charged by the courier
- Higher RTO, because a buyer who has not paid can refuse at the door
- Double shipping on returns: forward and return legs
- Cash locked up until the COD amount is remitted to you
- Stock stuck on the road while returns travel back
What prepaid costs you
- Payment gateway fees on each order
- Lost conversions from buyers who will not pay online
For most sellers, the payment gateway fee is smaller than the expected cost of a returned COD order. But that only helps if the buyer still completes the order.
How to get the best of both
- Keep COD, but price it honestly. A small COD fee or a prepaid discount nudges buyers without blocking them.
- Make prepaid easy. UPI first, with one tap, on mobile.
- Use partial COD for risky orders. A small token payment online, the rest at the door.
- Turn COD off only where it fails. Limit COD on the pincodes, products or buyers with the highest returns, not everywhere.
- Get COD money faster. The sooner cash comes back, the less COD hurts your working capital.
Measure it on your own store
Track, for each payment type: conversion rate, RTO rate and cost per delivered order. The cost per delivered order is the number that matters, because it includes the orders that came back.
How ZipNexa helps
RTO Shield scores every COD order, so you can confirm, ask for prepayment or hold only the risky ones. COD remittance pays out on a clear schedule of a fixed number of days, with an early payout option.
Read next: How to reduce RTO in COD orders.