What is Prepaid Ratio?
The share of orders paid for at checkout rather than on delivery.
Prepaid Ratio = (Prepaid Orders / Total Orders) x 100
A worked example
Of 1,000 orders in a month, 380 are prepaid and 620 are cash on delivery, a prepaid ratio of 38 per cent. Lifting that to 55 per cent through a small prepaid discount removes roughly 170 orders from the highest-risk group, and the discount usually costs less than the returns it prevents.
Why it matters
Prepaid ratio is a leading indicator that most Indian D2C brands do not track, and it moves before your margin does. Because return-to-origin concentrates almost entirely in cash-on-delivery orders, the prepaid share is effectively a measure of how much of your revenue is at risk.
It also functions as a trust signal about your own brand. Customers prepay when they are confident, so a rising prepaid ratio usually means your reviews, delivery reliability and brand recognition are improving. A falling one, particularly on a new traffic source, is worth investigating before the returns arrive.
The levers are straightforward and cheap: a small prepaid discount, free shipping on prepaid only, cash on delivery restricted above a value threshold, and clear return policies that reduce the perceived risk of paying upfront.
The nuance most people miss
Prepaid ratio differs sharply by channel, and the blended figure hides the segment that needs attention. Returning customers and branded search prepay readily. Cold social traffic prepays least, which is also where return-to-origin is worst, so the two problems compound in exactly the same place. Reporting a single ratio across all traffic will show a comfortable number while one campaign quietly generates most of your losses.
Common mistakes
- Not tracking it at all, which is the most common state
- Reading one blended figure instead of segmenting by channel and campaign
- Framing the incentive as a COD penalty rather than a prepaid saving, which reads very differently to customers
- Setting a prepaid discount larger than the return cost it prevents