The Hidden Cost of Cash on Delivery: A Founder’s Perspective on Indian E-Commerce

OPINION • E-COMMERCE REALITY

Cash on Delivery was built on trust. Today, it is quietly breaking the very businesses it once helped create.

The Quiet Crisis of Cash on Delivery

Cash on Delivery (COD) was introduced in India for a good reason. At a time when online payments were unfamiliar and trust in digital commerce was still forming, COD helped millions of customers feel safe buying online.

For years, it worked. It reduced hesitation, expanded access, and helped e-commerce grow.

But somewhere along the way, COD stopped being a bridge — and became a burden for small, genuine businesses.

The Casual Ordering Culture We Have Normalised

A large number of orders today are placed with a mindset that has quietly become normal:

“Aaya toh dekhungi… return toh easy hai.”

“COD order place kar deta hoon… baad mein mann nahi bana toh accept hi nahi karunga.”

Ordering casually. Returning casually. Rejecting COD casually. It feels harmless. It feels routine. But for a small business, every such action triggers a chain of real, irreversible costs.

About 20% of our orders are returned. Some are even returned even after authenticating or confirming the orders on the phone. This is how some customers behave.

What “Free Shipping” Actually Means

When a website says “free shipping,” nothing is free. The business pays for:

• Forward shipping charges
• Higher costs for heavier products
• Packaging materials
• Labour for packing and dispatch

That “free shipping” is already a discount absorbed by the brand.

COD adds another layer of cost. Courier companies charge businesses extra for cash collection, handling, reconciliation, and delayed remittance. COD is structurally more expensive — even before anything goes wrong.

What Happens When a COD Order Is Rejected

When a COD order is placed, the business pays shipping upfront. When that order is rejected at the doorstep:

• The parcel is returned to origin
• The business pays for reverse shipping
• The product remains unsold

Double shipping. Zero sale. No trial. No use. No value exchanged. Just loss.

Returns Are Loss-Making — Even for Prepaid Orders

Even prepaid returns are not neutral. When a product is returned, the business still pays to retrieve it. Inventory is reprocessed. Quality checks are repeated. Time and staff effort are spent again.

There is no sale — but the costs remain. For small brands operating on thin margins, frequent returns are not an inconvenience. They are a serious financial hit.

The Cost Nobody Talks About: Advertising

Every order comes after advertising — search ads, social ads, listing promotions. When orders are placed, sales and ROAS look healthy. When those orders are returned or rejected, revenue disappears — but ad spend does not.

From every angle — operations, shipping, advertising, effort — the result is a loss.

The Fake Brand Problem

Some non-serious or fake brands worsen the situation by allowing reckless COD and easy returns, collecting payments, delaying shipments, or avoiding delivery altogether. They disappear, rebrand, or move on.

The damage they create is absorbed by genuine businesses — through loss of trust, tighter policies, and increased friction for everyone.

Real Incidents, Real Consequences

This is not theory. We have called customers to confirm COD orders only to hear:

“Humne order kiya tha kya? Pata nahi… mat bhejo.”

For the customer, it is a forgotten click. For the business, it is real money lost.

How the Rest of the World Operates

In the US, Europe, Australia, New Zealand, and much of Latin America, COD is rare or nonexistent. Payment implies intent. Returns exist, but they are structured. Repeat misuse carries consequences.

Risk is shared. India remains an outlier where risk is pushed almost entirely onto the seller.

Why This Is Ultimately a National Loss

Every rejected COD order wastes fuel, packaging, labour, capital, and entrepreneurial energy. Money that should have gone into hiring people, improving products, strengthening supply chains, and paying taxes is instead spent moving boxes back and forth for no sale.

This is economic leakage. When genuine small businesses shut down, jobs disappear, innovation slows, and trust erodes. A country cannot build a strong domestic economy on one-sided risk.

A Final Word on COD

This isn’t about being anti-customer. It’s about being fair.

Placing an order is not the same as just browsing. COD is not a “let’s see.” Returns aren’t free. Every rejected order costs a small business real money, time, and effort for the businesses.

Convenience is good—but only when it comes with responsibility. Without that, it doesn’t help anyone. It hurts the people trying to build something honest.

Let’s choose better. Let’s order mindfully.