The digital payments boom may have transformed the way consumers pay for everything from groceries to utility bills, but one habit continues to frustrate online retailers: cash on delivery (CoD). Despite years of rapid UPI adoption, CoD still accounts for around 60% of e-commerce orders, rising to as much as 75% in Tier-II and smaller markets, forcing brands to increasingly rely on AI-driven tools and smarter fulfillment strategies to curb rising costs and protect margins.
The dependence on CoD reflects a combination of trust issues, limited credit penetration and consumer preference for paying only after receiving a product. According to Prosus India, these behavioural factors remain deeply entrenched despite the digital payments revolution. While CoD accounts for less than 5% of orders in the quick commerce segment, it continues to dominate traditional e-commerce and remains significant for D2C brands.
At handbag maker Miraggio, CoD contributes around 44% of orders and 42% of revenue, while feminine hygiene brand Sirona Hygiene still sees more than 20% of shipped orders through the payment mode after bringing it down sharply over the years. Industry estimates peg the share at 72-75% for Meesho, 35-40% for Amazon, and 20-50% across fashion e-commerce.
For brands, the persistence of CoD creates two structural challenges. The first is working capital. Companies incur manufacturing, packaging and shipping costs well before they know whether the customer will actually pay. Failed deliveries further extend cash conversion cycles while leaving inventory stuck in transit.
“We incur the full cost of goods, packaging and forward freight before we have any certainty that the cash will come in, so scaling CoD ties up capital in inventory that may not convert to revenue,” Deep Bajaj, founder and CEO of Sirona Hygiene, said. For fashion brands launching new collections frequently, delayed inventory can quickly become a lost sales opportunity, Mohit Jain, founder and CEO of Miraggio, said.
The second challenge is the significantly higher return-to-origin (RTO) rate associated with CoD orders, typically ranging between 20% and 30%. Besides losing the sale, brands also absorb customer acquisition costs, packaging expenses, forward and reverse freight charges and CoD handling fees, often ending up with products that cannot be resold immediately. Incorrect or premature non-delivery reports can further worsen losses by pushing otherwise deliverable orders into the return cycle, according to logistics firms.
Rather than trying to eliminate CoD, companies are increasingly deploying technology to make it less costly. Logistics platform Velocity Shipping uses AI-based RTO risk scoring, address validation and multilingual voice agents to verify CoD orders, confirm delivery intent and authenticate failed delivery claims before shipments are returned. The company also encourages high-risk customers to switch to prepaid payments through incentives. According to the company, such interventions have helped brands reduce RTO rates by 5-7% while recovering orders that would otherwise have been lost.
Brands are also experimenting with new payment models that preserve customer convenience while improving payment certainty. Partial CoD, where customers pay a small amount upfront, and Buy Now Pay Later (BNPL) options are becoming more common. Miraggio has introduced UPI mandates that block the payment amount in a customer’s account and collect it only after successful delivery, while Sirona has cut its CoD share from more than 50% to about 20% through better pin code-level intelligence, smarter dispatch decisions and proactive customer communication.
