Cash on Delivery: Pros, Cons, and How to Reduce Risk for Your Store

Cash on Delivery (COD) helps you reach customers who prefer to pay when they receive the order. It also brings fake orders, Return to Origin (RTO), and higher logistics cost. Here’s a balanced look at the pros and cons of COD and how to reduce the risk.

What is Cash on Delivery (COD)?

Cash on Delivery means the customer pays when the order is delivered—in cash or sometimes by card/UPI at the door. No payment is taken at checkout. The courier collects the amount from the customer and remits it to you (minus their fee).

COD is common in India and many emerging e-commerce markets where trust in online payment or card usage is lower. Offering COD can increase conversions and reach, but it also increases operational and financial risk if you don’t manage it well.

Pros of Cash on Delivery

• Higher conversion – Shoppers who don’t want to pay upfront are more likely to complete the order.
• Wider reach – You can sell to customers who don’t use cards or UPI online.
• Trust – “Pay when you receive” reduces fear of fraud or non-delivery for first-time buyers.
• Larger cart size – Some studies show COD orders have higher average order value in certain segments.

For many D2C and Shopify stores, COD is a major share of orders—so turning it off isn’t always an option. The goal is to keep the upside and reduce the downside.

Cons and Disadvantages of Cash on Delivery

• Fake orders – Customers place orders with no intention to pay or receive; wrong or fake addresses and phone numbers.
• RTO (Return to Origin) – When delivery fails, the parcel comes back; you pay shipping both ways and lose the sale.
• Unreachable customers – Valid-looking orders but the customer doesn’t answer the courier; multiple attempts and then RTO.
• Refusal at delivery – Customer changes their mind or doesn’t have cash; order is returned.
• Delayed cash flow – You receive payment only after delivery, not at checkout.
• Higher logistics cost – Carriers often charge more for COD; RTO adds double shipping and handling.

The biggest controllable cost is shipping orders that never get delivered—fake or unreachable. Reducing those directly improves margins.

How to Reduce COD Risk

1. Verify COD Orders Before Shipping

Verify that the customer is real and reachable before the order leaves your warehouse. The most effective way is WhatsApp verification: send a short message with a one-tap “Confirm” or “Cancel” link. Only ship orders that are confirmed. This cuts a large share of fake and unreachable orders and reduces RTO.

2. Use Partial or Advance Payment

Collect a small advance (e.g. 10–20%) at checkout for COD. It filters unserious buyers and improves commitment. Many COD apps support partial/advance payment.

3. COD Fees or Conditions

Charge a small COD fee or limit COD by order value, pin code, or product. That encourages prepaid where possible and covers some of the extra cost.

4. Hide COD Where It Doesn’t Make Sense

Disable COD for high-risk pin codes, very low order values, or specific products. Use rules in your checkout or a COD app to show/hide the option.

5. Prepaid Incentives

Offer a discount or free shipping for prepaid orders. Over time, a higher share of prepaid orders reduces RTO and logistics cost.

Starting with verification (step 1) usually gives the fastest result: you stop shipping many of the orders that would have RTO’d or been fake.

Reduce COD Risk with Verification—No Card Required

Level is a Shopify app that verifies COD orders via WhatsApp with one-tap Confirm/Cancel. Only confirmed orders move to shipping; unconfirmed orders can be auto-cancelled. You get 100 free verification messages per month to start—no credit card required.

Try Level for free →