For most small shops, COD vs prepaid is not an either/or choice. Make prepaid the easy default and limit COD by product, order value and customer history. The reason, from Shipway’s FY25 report on D2C brand shipments, as cited by Amazon Shipping: about 26% of non-prepaid orders came back, against under 2% of prepaid.
Picture a kurti shop in Surat that has started selling on Instagram. (This is a typical example, not a real shop.) Most new customers ask for COD. The owner says yes to everyone, because saying no feels like losing the sale. By the end of the month, a stack of parcels is back on the shelf, each one with a crushed corner and two shipping charges attached, and no money to show for any of them.
This post is about the decision that owner faces, and the numbers and risks behind it. It isn’t written by a courier and it isn’t selling you a courier.
COD vs prepaid: what is the real difference?
With prepaid, the buyer pays before you pack, through a checkout or payment link that confirms the money. With cash on delivery, the customer pays the delivery person at the door.
The difference that matters to you: with COD, the customer can say no at the door, and it costs them nothing. With prepaid, their money is already in, so they want the parcel as much as you want to deliver it.
Why does cash on delivery for small business still matter?
Because a lot of buyers won’t order without it. Someone who found your shop on Instagram yesterday doesn’t know you yet. COD is how they test whether they can trust you.
How common is it? A June 2026 article on Amazon Shipping’s blog, citing ET Prime Research via Dazeinfo, puts COD at roughly 60 to 65% of ecommerce orders in India: Amazon Shipping guide
Your own mix could be very different. A shop selling to regular customers in other cities may see mostly prepaid. A shop reaching new buyers through reels may see mostly COD. Before you change anything, count your last 50 online orders and see how they split.
What does a refused COD parcel actually cost you?
When a parcel can’t be delivered and comes back to you, it’s called RTO (return to origin). On COD orders it usually happens because the customer refused, wasn’t home, or couldn’t be reached. For festive weeks, see these Diwali sale ideas for setting a last order date.
The same Amazon Shipping article cites Shipway’s FY25 report on D2C brand shipments: about 26% of non-prepaid orders were returned, against under 2% of prepaid orders. It also cites a link with speed: orders attempted within one to two days had a 22% RTO rate, rising to 35% when the first attempt came after five days or more. Those are figures from one report, not your shop’s numbers, but the gap is the point.
For a shop owner, one RTO costs:
- Shipping both ways. You paid to send it, and you usually pay again for it to come back.
- Inventory stuck in transit. A saree that spends ten days in a courier network can’t be sold at your counter. In festive weeks that hurts most.
- Damage and repacking. Returns come back in crushed boxes, tags get bent, and sometimes the piece needs checking before you can sell it again.
- Your time. Calling the buyer, updating stock, unpacking, and explaining it to the family member who packed it.
Track your own number: RTO orders divided by shipped orders, split into COD and prepaid. Once you see it by product and by customer, you’ll know where to reduce COD first.
How is handling COD cash different from prepaid money?
With COD, the courier collects the cash and sends it to you later, on the courier’s or platform’s remittance cycle. Until it arrives, it’s your money sitting with someone else, which squeezes your cash flow, and someone in the shop has to match what came in against what was delivered.
With a proper prepaid checkout, payment is confirmed before you pack. There’s nothing to chase. If you’re weighing a separate gateway for that, our guide to payment gateway charges in India lays out what they cost.
One trap: “prepaid” by UPI to your personal ID isn’t really prepaid until you’ve checked the credit in your own bank app. A screenshot is the customer’s claim, not proof, and fake ones are a common fraud. Our guide on how to identify a fake UPI payment covers the check. If you write to customers in Hinglish, the same options for a shop are laid out in dukan me online payment kaise kare.
Do prepaid discounts and partial COD work?
Both are ways to nudge customers towards paying first. Neither is magic. Prepaid UPI may carry a fee soon, so check UPI MDR charges before you offer a prepaid discount.
Prepaid discount. A few rupees off for paying online. It works best when the customer can see it clearly at checkout. Keep it smaller than what an RTO costs you, or you’re paying more to avoid a loss than the loss itself.
COD charge. The reverse: a modest extra charge for choosing COD. A discount feels like a reward and a charge feels like a penalty, so customers may react differently. Try one at a time and watch your own orders.
Partial COD. The customer pays part of it upfront, often the shipping charge, and the rest at the door. Someone who has already paid something is less likely to refuse the parcel. The Amazon Shipping article suggests COD with part payment or a fee for customers who have refused before. Be careful with the manual version, though: if the advance comes to your personal number, you’re back to checking screenshots.
Should you limit COD by order value or pincode?
Yes. Limits are the owner’s best tool, because they target the orders with the most risk. If you also sell on marketplaces, compare Amazon, Flipkart and Meesho seller fees.
- By product or order value. Expensive pieces are where one refusal costs the most. Make them prepaid only, or call before dispatch. The Amazon Shipping article gives a confirmation call or OTP for COD orders above about ₹1,000 as an example rule.
- By product type. Anything stitched to measure, personalised or made to order should be prepaid. You can’t resell it easily if it comes back.
- By pincode. Keep a simple list of pincodes where your parcels keep coming back, based on your last 30 days of orders. For those, ask for prepaid or add a confirmation call.
- By customer. A customer who has refused a parcel before should be prepaid only next time. A repeat customer who always accepts can have COD without fuss.
When should a small shop offer COD, and when prepaid only?
| Situation | What to offer |
|---|---|
| Regular customer who has always accepted parcels | COD is fine |
| First-time buyer, low-priced item | COD, with a confirmation call or message before dispatch |
| Expensive piece (silk saree, silver set) | Prepaid, or COD only after a confirmation call |
| Stitched, personalised or made to order | Prepaid only |
| Pincode that keeps sending parcels back | Prepaid, or an extra confirmation step |
| Customer who refused a parcel before | Prepaid only |
| Festive rush with limited stock | Push prepaid, because stock stuck in transit can’t be sold |
How does Indi Andaz handle COD and prepaid?
Indi Andaz gives your shop an online store with a link like indiandaz.com/sellers/yourshopname, which you share on Instagram and WhatsApp.
- UPI, card and COD at checkout. Online payments are confirmed at checkout, so the order reaches you already marked paid, with no screenshot to check.
- COD per product. COD is switched on or off for each product, so you can keep it off for expensive or made-to-order pieces. See how Indi Andaz works.
- Orders in one list. The Seller Portal on the web and the Partner app on Android.
- Delivery through Delhivery. Shipping is charged separately, and Delhivery’s COD handling fee is separate from the Indi Andaz fee.
- Pricing: No monthly fee, 5% only on delivered online orders, payment processing included. GST applies on the fee. A COD parcel that comes back isn’t a delivered order, so the 5% doesn’t apply to it. The shipping you paid still does.
What it won’t do: stop a customer from refusing a COD parcel. The confirmation call, the pincode list and the decision about who gets COD are still yours.
If COD returns are already hurting, use this checklist: How to Reduce RTO on COD Orders.
Related reading: UPI MDR after Diwali 2026, payment gateway charges in India, dukan me online payment kaise kare.
FAQ
Should a small shop stop offering COD completely?
Usually not. Some buyers will only order with COD, especially first-time buyers. Limit it by product, order value and customer history instead of switching it off for everyone.
How common are returned COD parcels?
There is no single figure for every shop. From Shipway’s FY25 report on D2C brand shipments, as cited by Amazon Shipping: about 26% of non-prepaid (COD) orders were returned to the seller, against under 2% of prepaid orders. Track your own rate, because it depends on your products and customers.
What is partial COD?
The customer pays some of it upfront, often the shipping charge, and the rest on delivery. It reduces refusals because the customer already has money in the order.
Is a UPI screenshot the same as a prepaid order?
No. Until you see the credit in your own bank app, it’s only the buyer’s claim. A checkout that confirms payment removes this step.
Does Indi Andaz charge its 5% on COD orders that come back?
No. The 5% applies only to delivered online orders. Shipping is charged separately, whether the parcel is delivered or not.
Sources (last checked 27 Oct 2026): Amazon Shipping, “What is RTO and how to reduce return to origin”, shipping.amazon.in, June 2026, citing Shipway ShipNotes FY25 and ET Prime Research via Dazeinfo. These are industry figures, not your shop’s numbers.
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About the author: Pritam Nandi is the founder of Prilix Labs, the company behind Indi Andaz. He builds Indi Andaz from Ashoknagar Kalyangarh, West Bengal, to help local Indian shops sell online and bill at the counter from one place.
Indi Andaz by Prilix Labs: an online store with UPI, card and COD checkout, plus GST billing at the counter.
Prilix Labs, Ashoknagar Kalyangarh, North 24 Parganas, West Bengal 743222
Email: indiandazsocial@gmail.com
Phone: 8653001257
© 2026 Prilix Labs
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