RTO cost calculator
A cash-on-delivery order that comes back costs forward freight, return freight, packaging and often the product. This puts a monthly number on it, and tells you how much you can afford to offer for prepaid.
How it is calculated
Cost of one RTO = Forward freight + Return freight + Packaging + (Order value × Product cost × Unsellable share) RTOs a month = Orders × COD share × COD RTO rate Monthly RTO cost = RTOs a month × Cost of one RTO RTO cost per COD order = Cost of one RTO × COD RTO rate
Forward freight is paid on every shipment, delivered or not, so an RTO wastes it. Return freight is often charged at or near the forward rate. Product loss covers stock that comes back damaged, opened or past its date and cannot be resold.
How to use the result
The cost per COD order is the most useful number: it is what every COD order carries in RTO cost on average. A prepaid discount, cashback or free-shipping threshold for prepaid that costs less than this pays for itself on every order that switches, before counting the faster cash and lower payment risk.
Measure RTO on orders that have finished, by courier and by pincode. A recent week always looks better than it will end up, because returns arrive a week or more after deliveries. Gran Delivery does this automatically from your courier data.
Questions
What is a normal RTO rate for COD orders in India?
It varies widely by category, price point, region and courier. Many D2C brands see 15 to 30% of COD orders return to origin, while prepaid RTO is usually in low single digits. Measure your own rate on settled orders rather than relying on averages.
What does one RTO cost?
Forward freight, which is wasted, plus return freight, packaging and handling, plus the value of any stock that cannot be resold. For a typical Indian D2C parcel that is often ₹120 to ₹250 before product loss.
How much prepaid discount can I afford?
Up to the RTO cost per COD order. If each COD order carries ₹35 of RTO cost on average, a ₹30 prepaid discount pays for itself on every order that switches from COD.
How do I reduce RTO?
Confirm COD orders by WhatsApp or call before dispatch, make the worst pincodes prepaid-only, route COD to the courier with the best COD delivery rate where both serve the pincode, and nudge customers to prepaid with a small incentive.
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