COD vs prepaid profit calculator

A COD order usually earns far less than a prepaid one, because COD orders come back much more often and each return costs shipping both ways. Compare one order of each, before ad cost, to see what moving a buyer to prepaid is worth.

Prepaid earns more by: $8.70
Profit per COD order: $15.70
Profit per prepaid order: $24.40

Connect your store and Tera Ads shows how often your COD and prepaid orders come backFree for one business, no card needed.

The formula

Margin = order value × (1 − product cost)
Profit per COD order = (1 − COD RTO) × (margin − shipping − COD fee) − COD RTO × (shipping + return shipping)
Profit per prepaid order = (1 − prepaid RTO) × (margin − shipping − payment fees) − prepaid RTO × (shipping + return shipping)

Rates are shares between 0 and 1: 30% is 0.3. Returned products are assumed to go back into stock.

Worked example

Orders average $50, product cost is 40%, and shipping costs $3 each way.

COD orders pay a $2 COD fee and 30% come back. Prepaid orders pay 2% in payment fees and 5% come back.

A COD order earns $15.70 on average and a prepaid order $24.40, so each buyer who pays online instead is worth $8.70 more.

Questions

Should I turn off COD?

Usually not. Where cash on delivery is common, as in India, most shoppers still choose it, so turning it off costs sales. Use the difference here to decide how much a prepaid nudge is worth.

How big a prepaid discount can I afford?

Less than the difference this shows, because the discount also goes to buyers who would have paid online anyway. Start small, such as a few percent off, and check whether your share of prepaid orders moves.

Why is ad cost left out?

The ads that win an order cost the same whichever way the buyer pays, so they don't change the difference. To see whether the ads themselves pay, use the break-even ROAS calculator.

Should I enter order value with or without sales tax or VAT?

Use order value after the tax is taken out, because it isn't yours to keep. Counting it makes every ROAS look better than it is. Keep product cost, fees and ad spend on the same basis.

The full guide

COD vs Prepaid Orders: The Real Cost Difference for Indian D2C BrandsCash on delivery sells more but returns far more. What a COD order really costs against a prepaid one, and the nudges that move buyers to prepaid without losing sales.