What is my profit on 100 COD orders if 15 come back?

It is easy to feel good about 100 orders. But with cash on delivery, an order is not a sale until it is delivered and paid. Here is a plain calculation of what a hundred COD orders really earn when some of them come back.

The numbers used

These are illustrative. Replace them with yours.

• Profit on each delivered order: Rs 200
• Loss on each returned order: Rs 150, covering shipping both ways and packaging that cannot be reused

If you are not sure how to arrive at the Rs 200, see how to calculate contribution per order.

With 15 returns

Out of 100 COD orders, 15 return and 85 are delivered.

• Profit from delivered orders: 85 x 200 = Rs 17,000
• Loss from returned orders: 15 x 150 = Rs 2,250
• Net: 17,000 - 2,250 = Rs 14,750

So 100 orders yield Rs 14,750, which is Rs 147.50 per order shipped. Compare that with the Rs 200 you expected per order, and you can see that a 15 percent return rate removes about a quarter of your expected profit.

With 25 returns

Now suppose 25 return and 75 are delivered.

• Profit from delivered: 75 x 200 = Rs 15,000
• Loss from returned: 25 x 150 = Rs 3,750
• Net: 15,000 - 3,750 = Rs 11,250

That is Rs 112.50 per order shipped.

What the gap tells you

The difference between 15 and 25 returns is 14,750 - 11,250 = Rs 3,500. Each extra return in 100 orders costs you Rs 350, which is the Rs 200 profit you lost and the Rs 150 loss you gained.

If you spend Rs 10,000 a month on ads for around 100 orders, a swing of 10 returns erases a third of that spend in damage. A cheap action that cuts returns, like confirming orders on WhatsApp before dispatch, may pay better than an extra rupee of ads.

A simple table in words

• 5 returns, Rs 19,000 minus Rs 750 gives Rs 18,250
• 15 returns, Rs 14,750
• 25 returns, Rs 11,250
• 35 returns, Rs 13,000 minus Rs 5,250 gives Rs 7,750

Check the pattern. Every 10 extra returns costs Rs 3,500, so the result falls in a straight line.

Using this in your planning

• Calculate your real RTO rate from last month, as returned parcels divided by COD parcels shipped
• Apply it to your forecast, not the ideal case
• When you plan ad spend, use profit after returns, and not profit per delivered order. Break-even orders including ad spend shows how the plan changes.
• Work out how high the rate could go before COD stops being useful, using break-even RTO rate for COD

For tips on lowering the rate, read cash on delivery without the chaos.

One last point. These numbers assume returned stock is back in good condition. If part of it is damaged or unsaleable, your loss per return is higher, and the result for 100 orders is lower. Check what actually comes back in your next batch of returned parcels and adjust your own figure.