COD vs Prepaid Profit Calculator
Compare cash on delivery against prepaid orders on true expected profit.
COD looks like a small extra fee. In practice the difference between COD and prepaid is dominated by something else entirely: COD orders are refused far more often, and every refusal costs you shipping in both directions plus packaging. This calculator compares the two on expected profit and tells you what a prepaid discount is worth.
Order economics by payment mode
Result
Fill in the fields above and your result will appear here.
What the COD vs Prepaid Profit Calculator does
Cash on delivery remains a large share of Indian e-commerce because it substitutes for trust. It also carries RTO rates that are commonly four to six times higher than prepaid, since refusing a COD parcel costs the customer nothing.
Once that is priced properly, the collection fee turns out to be a minor item. The real cost is the failed deliveries — which is why a prepaid discount can be profitable even though it looks like giving money away.
How to use this tool
- Enter the order value, GST rate, product cost, commission, shipping and packaging — these apply to both payment modes.
- Enter your COD collection fee, as a flat amount, a percentage, or both.
- Enter your COD RTO rate and prepaid RTO rate separately. Your dashboard reports these split by payment mode.
- Enter the payment gateway charge for prepaid orders, typically around 2%.
- Set your current COD share to see the blended profit and what shifting orders to prepaid would be worth.
Formula and method
Profit if delivered = Net revenue − Commission − Shipping
− Packaging − COGS − Payment charge
Loss per RTO = Forward shipping + Reverse shipping + Packaging
Expected profit = (1 − RTO rate) × Profit if delivered
− RTO rate × Loss per RTO
Max prepaid discount = (Prepaid expected − COD expected) ÷ Order value
Worked example
Example: ₹899 order, 22% COD RTO vs 4% prepaid RTO
| COD — profit if delivered | ₹168 |
| COD — expected profit | ≈ ₹100 |
| Prepaid — profit if delivered | ₹180 |
| Prepaid — expected profit | ≈ ₹167 |
| Maximum worthwhile prepaid discount | ≈ 7.4% |
A prepaid discount of 5% is comfortably profitable here — the RTO saving more than covers it.
What your result means
The gap between modes is what a prepaid conversion is worth. Any incentive costing less than that gap improves profit.
The maximum prepaid discount is the ceiling on that incentive. Most sellers find 3–7% is both effective and comfortably within it.
Blended profit reflects your actual mix. It is the number to track month to month, since it moves as customer behaviour shifts.
Important considerations
- COD RTO rates vary sharply by order value, region and category. Higher-value COD orders are refused more often.
- A prepaid discount is only worth offering if it actually converts customers. Test it before rolling it out across the catalogue.
- Restricting COD above a value threshold is often more effective than a discount, and costs nothing.
- Address and phone verification calls before dispatch reduce COD RTO materially on higher-value orders.
- Marketplaces settle COD proceeds later than prepaid, so COD also carries a working-capital cost this calculator does not price.
Limitations of this tool
- It does not model the demand effect of restricting COD — some customers will simply not buy, and that lost volume is a real cost.
- The working-capital difference between COD settlement cycles and prepaid is excluded.
- It assumes RTO loss is identical for both modes, which is broadly true for shipping but not for the occasional damaged return.
Frequently asked questions
Should I stop offering COD?
Rarely entirely — COD still drives a large share of Indian orders, especially outside metros. Restricting it above a value threshold, or offering a prepaid discount, usually captures most of the benefit without losing the volume.
What prepaid discount should I offer?
Something below the maximum this calculator produces, typically 3–7%. Anything above the maximum costs more than the RTO saving it generates.
Why is COD RTO so much higher than prepaid?
Because refusing a COD parcel costs the customer nothing. Prepaid customers have already committed money and have to initiate a return to get it back, which is a far higher barrier.
Do marketplaces charge a COD fee?
Most charge a collection fee, either flat or as a percentage of order value. It is usually the smaller part of the COD cost — the RTO difference is what actually matters.