Reduce Your COD Costs: How Shopify Sellers Save on Hidden Fees in 2025
Cash on Delivery (COD) continues to drive eCommerce growth across emerging markets, particularly for Shopify merchants in South Asia, MENA, LATAM, and Eastern Europe. While it's effective at building trust with first-time buyers, COD also brings operational inefficiencies and hidden costs that, if left unmanaged, directly reduce profitability.
In this post, we’ll identify the most common cost drivers in COD workflows and highlight methods that top-performing Shopify merchants use to streamline operations and protect margins, without removing COD as a payment option.
Why COD Remains Necessary & Operationally Demanding
For stores targeting cash-first regions, COD is often essential for conversion. But offering it comes with well-documented tradeoffs:
- Elevated return-to-origin (RTO) rates
- Inaccurate or fake contact details
- Delayed cash settlements
- Manual overhead for order validation
- Courier inconsistency and chargebacks
If these friction points aren’t addressed systematically, they create margin pressure and resource drain as you scale.
Key Cost Drivers in COD Fulfillment
1. Return-to-Origin (RTO) Charges
Each undelivered order results in two shipping costs: outbound and return. RTO fees increase with distance and are harder to dispute.
Example: In India or Colombia, one failed delivery can cost over $5 once shipping and packaging are factored in.
2. Invalid Phone Numbers and Fake Submissions
Without phone verification, merchants face high risk of shipping to unreachable customers.
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Losses: Logistic costs, packaging, and restocking time
- Outcome: Decreased delivery rates and operational efficiency
3. Manual Order Checks
For growing stores, manually verifying every COD order by phone or message becomes unsustainable.
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Challenge: Staff time and missed delivery windows
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Opportunity cost: Slower order dispatch, lower throughput
4. Delayed Revenue Realization
Payment on delivery stretches your cash conversion cycle, often by several days.
- Impact: Budget constraints for marketing, fulfillment, and reordering
5. Courier Inefficiencies
Unreliable partners affect customer satisfaction and increase refund inquiries.
- Key Metrics to Monitor: First-attempt delivery success, average delivery time, RTO rates by courier
Tactics Top Shopify Sellers Use to Control COD Costs
1. OTP Verification via SMS
Verifying customer numbers before fulfillment dramatically reduces failed deliveries.
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Best Practice: Add OTP confirmation at checkout using tools like Releasit
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Result: Reduced fake orders and delivery rejections
2. Automated Order Filtering & Confirmation
Set up rule-based workflows to confirm only high-risk orders.
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How: Filter by product type, order value, or location and confirm via WhatsApp/SMS
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Result: Focus team time on exceptions, not every order
3. Performance Monitoring by Courier
Track fulfillment KPIs across delivery partners to inform courier selection.
- Action: Compare COD recovery rates and RTOs by region
4. Pre-Delivery Reminders
Automated messages 24h before delivery increase the chances of successful handoff.
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Result: Reduction in no-shows and refusals at the door
5. Strategic Courier Allocation
Assign low-RTO couriers to risky zones and high-value orders.
- Outcome: Minimized rejections and better margins in sensitive segments
Final Takeaway
Cash on Delivery will remain a competitive advantage in 2025, but only for merchants who run it efficiently. Left unmanaged, COD reduces margins and blocks growth. Treated strategically, it becomes a reliable acquisition and conversion tool.
Shopify sellers using Releasit are already improving their:
- Order confirmation speed
- Delivery success rates
- Courier performance insights
Explore how you can cut COD losses without reducing conversion.
