What is Cash on Delivery?
A payment method where the customer pays when the parcel arrives rather than at checkout.
A worked example
A store offering COD converts noticeably better than the same store without it, and sees a meaningful share of those orders refused at the door or returned undelivered. The conversion gain is real. So is the cost of every failed delivery, paid twice in shipping and once in handling.
Why it matters
Cash on delivery is the defining commercial constraint of Indian ecommerce, and international playbooks barely acknowledge it exists. It removes the trust barrier of paying an unfamiliar brand upfront, which lifts conversion substantially, particularly for new brands and outside metros.
It also creates a commitment gap. An order placed with no payment behind it is closer to an expression of interest than a purchase, and a share of those will be refused, unclaimed or undeliverable. You pay forward shipping, return shipping and handling on every one.
The commercial answer is rarely to remove it, because removing it usually costs more in lost orders than it saves in returns. The answer is to constrain it: order value ceilings, pincode rules based on your own delivery history, confirmation before dispatch, and prepaid incentives that make the better option attractive rather than mandatory.
The nuance most people miss
COD failure rates vary sharply by acquisition channel, and treating them as one number hides where the problem lives. Impulse-led social traffic produces materially worse outcomes than search intent, because the buyer was interrupted rather than looking. That means COD rules can reasonably differ by campaign: tighter on cold prospecting, looser on branded search and returning customers. Segment before you set policy.
Indian D2C brands commonly report COD return-to-origin somewhere between 15 and 30 per cent, with prepaid far lower. Category, price point and traffic source move this considerably, so your own figure is the only one worth planning around.
Common mistakes
- Offering COD universally with no order value ceiling or pincode rules
- Reporting revenue on placed orders, which counts COD orders that never delivered
- Removing COD entirely after one bad month, which usually costs more than it saves
- Using a purchased pincode blocklist instead of your own delivery history