Cash on delivery and prepaid payments change when money is collected and how an order is handled. For an Indian ecommerce business selling physical products, the better choice depends on customer needs, courier serviceability and the economics of delivered orders.
A higher number of orders placed is not enough to judge a payment method. Compare what gets delivered, what gets collected and what remains after costs.
What is the difference?
Prepaid: the customer pays before delivery through an available payment method. Settlement timing depends on the payment provider.
COD: payment is collected at delivery through the courier’s supported process. You then receive the collection according to the courier or logistics provider’s remittance terms.
Shopify supports COD as a manual payment method. Enabling the checkout option does not by itself arrange a courier, guarantee serviceability or reconcile collections.
Compare the complete journey
| Question | Prepaid | COD |
|---|---|---|
| When does the customer pay? | Before delivery | At delivery |
| What needs checking? | Payment success, settlement and refunds | Delivery eligibility, collection and remittance |
| Can delivery still fail? | Yes | Yes |
| Which costs matter? | Payment fees, shipping, refunds and delivery losses | Collection charges, shipping, failed delivery and return charges |
Understand return to origin
RTO means a shipment returns to its origin after it cannot be delivered. It differs from a customer receiving a product and then requesting a return. Both can affect costs, but they should be tracked separately.
Shiprocket states that returned shipments can incur an RTO charge, with the amount depending on factors including weight and delivery zone. Check your own provider’s agreement; do not assume one universal rate.
Use a delivered-order worksheet
Compare payment methods over a consistent period using orders placed, orders shipped, orders delivered, RTO shipments, customer returns, collections received and variable costs. Allow enough time for recent shipments to reach a final status.
Illustration: if 50 shipments from a completed batch include 10 RTOs, the shipment-based RTO rate is 10 ÷ 50 × 100 = 20%. This is a calculation example, not an industry benchmark. Record customer returns after delivery separately.
To compare financial outcomes, use collected revenue after refunds and subtract applicable product costs, logistics charges, payment or collection fees, losses and advertising. Account for inventory recovered on returns consistently.
Make COD expectations clear
- Show serviceability and any applicable charges before the customer confirms the order.
- Confirm incomplete addresses through an appropriate customer support process.
- Send accurate tracking and delivery information.
- Use realistic dispatch promises and product photos.
- Reconcile courier collections against individual orders.
If you test a prepaid incentive, include its cost in your comparison. A discount may change payment preference without improving overall contribution.
Should a new store disable COD?
There is no universal answer. Test within the locations and order types you can support, then compare delivery outcomes and costs.
Does this apply to ebooks?
Digital delivery normally depends on confirmed payment and access fulfilment. Physical COD logistics are mainly relevant to shipped products.
Read our RTO guide. For a broader view of ecommerce operations, explore the Ecommerce Roadmap.
References: Shopify manual payments and Shiprocket RTO charges.