Cash on Delivery (COD) remains a central payment method in many ecommerce markets. For Shopify dropshippers, COD dropshipping is one of the few models where a new or unknown brand can generate orders from day one, as long as the operational chain behind COD is built correctly.

This guide explains how COD dropshipping works end-to-end: from checkout to courier flows, verification, settlement, and reconciliation. It then walks through five practical steps to launch a COD dropshipping operation on Shopify, drawing from patterns seen in COD-heavy regions such as India, Pakistan, Colombia, MENA, and Southeast Asia.

The goal is not to describe Cash on Delivery in abstract terms or promote tools, but to document what actually happens when you run Cash on Delivery in practice, what new merchants should expect, and which decisions matter most when you are operating in cash-preferred markets.

• Why COD still matters for dropshippers
• How COD dropshipping actually works
• 5 Steps to Launch on Shopify
• Releasit’s role in the COD ecosystem
• COD dropshipping FAQs

Why COD Still Matters for Dropshippers

In many countries, COD is not a “nice-to-have” payment option. It exists because of structural conditions in finance, logistics, and customer behavior.

In Tier 2 and Tier 3 cities across India, Pakistan, and parts of Latin America, many shoppers hesitate to use cards online. They may have had cards declined, experienced failed payments on older devices, or simply do not trust unfamiliar online stores with their payment details. For these customers, paying in cash after receiving the product feels safer and more predictable.

In parallel, large segments of the population still rely mainly on cash flows: ATM withdrawals, cash wages, and informal lending networks. Digital wallets and cards are growing, but they are not yet universal. COD allows these customers to participate in ecommerce without changing their financial habits.

Logistics also play a role. In areas where addresses are incomplete or inconsistent, delivery often relies on driver calls and local knowledge. COD fits into this environment because the interaction at the doorstep delivery plus payment remains a familiar routine.

For a new Shopify dropshipping store, this context matters. Prepaid-only stores often struggle to convert in these markets, while COD dropshipping gives hesitant customers a low-risk way to try a new brand. The trade-off is that every COD order introduces additional operational complexity: returns-to-origin (RTO), payment delays, and the need for verification and reconciliation.

How COD Dropshipping Actually Works

COD is not just another payment option in a settings page. It is a logistics-driven payment chain that affects cash flow, risk management, and the kind of processes a merchant must run behind the scenes.

1. Customer places a COD order
2. Order is passed to the supplier and courier
3. Courier attempts delivery
4. Courier remits cash to the merchant
5. Reconciliation and tracking

1. Customer places a COD order

The customer reaches checkout on your Shopify store and selects a Cash on Delivery payment method. Shopify records the order as “unpaid.” At this stage, no money has changed hands and the merchant has no guarantee that the customer will accept the parcel later.

From an operational point of view, this means a COD order should be treated as a signal of interest, not a confirmed sale, until it has been verified.

2. Order is passed to the supplier and courier

Next, the order is handed off to the logistics side. Depending on your setup, you may create a shipping label directly with a courier, or your supplier may handle the shipping on your behalf.

Different couriers have different rules for:

• Which regions they serve
• Which COD amounts they accept
• How many delivery attempts they make
• How and when they remit collected cash

If you choose a courier that does not match your product price point or service area, you can see higher RTO rates and longer settlement cycles.

3. Courier attempts delivery

When the courier reaches the delivery address, several outcomes are possible:

• The customer accepts the parcel and pays the full amount in cash or an accepted local method.
• The customer refuses the order or changes their mind at the door.
• The driver cannot complete delivery because the address is incomplete, the phone number is unreachable, or the customer is not available.

In many COD-heavy markets, failed first attempts are common. Typical first-attempt delivery success rates look like:

Every failed attempt increases the chance that the order ends up as RTO, with both forward and return shipping costs borne by the merchant.

4. Courier remits cash to the merchant

When the courier collects cash for successfully delivered orders, that money does not arrive in your account immediately. It enters a settlement cycle managed by the courier or an aggregator.

Average settlement times are usually in the following ranges:

For a dropshipper, this delay creates a working-capital gap: you pay for product and logistics upfront, but only receive payment later, after delivery and reconciliation.

5. Reconciliation and tracking

Finally, you need to match what the courier reports with what you see in Shopify. This means:

• Checking which orders were delivered
• Matching delivered orders with cash received
• Checking RTO and return charges
• Tracking pending settlements and payout dates
• Identifying any discrepancies between expected and actual payouts

This reconciliation step is not optional for COD. Without it, you cannot know whether COD is profitable or which parts of the process need adjustment.

Five Steps to Launch on Shopify

1. Pick the Right Market for COD Dropshipping
2. Configure Shopify for COD Correctly
3. Build the COD Operations Loop
4. Scale COD Dropshipping Intelligently
5. Expand Beyond One Market

Step 1: Pick the Right Market for COD Dropshipping

COD behaves differently depending on the country. Before launching, you need to decide where COD dropshipping on Shopify is likely to be both viable and manageable for your type of store.

A COD-friendly country typically has:

• A high share of COD in ecommerce (often above 40%)
• Established courier networks that handle cash
• Predictable remittance practices
• Strong mobile and messaging usage, especially WhatsApp
• A culture where delivery and payment at the door are familiar patterns

For Shopify dropshippers, some of the strongest COD markets today include:

India: COD adoption is high, often above 60% of ecommerce orders. Aggregators and couriers are widely available. At the same time, RTO risk is significant if orders are not verified and addresses are not validated.

Pakistan: COD is dominant, with many estimates placing COD usage above 80–85%. Phone confirmation is often essential, and fraud or fake orders can be a concern in some regions if there is no verification step.

Colombia: COD is common in both major cities and regional areas. Remittance cycles are often longer (14–21 days), and delivery success depends heavily on capturing address details such as “barrio” or locality.

UAE and Saudi Arabia: COD share is lower compared to India or Pakistan but still relevant. Couriers are generally reliable, service levels are high, and remittance tends to be more predictable. RTO rates are often lower than in South Asia, especially when addresses and communication are handled correctly.

Because each market has its own address conventions, languages, couriers, and fraud patterns, it is usually better to start with one or two regions, build a working model, and only then expand. Launching in four or five COD markets at once often results in scattered data and operational overload.

Step 2: Configure Shopify for COD Correctly

Once you have a target market, the next step is to ensure that your Shopify store is configured for COD payments in a way that supports verification, accurate data collection, and risk control.

A basic COD toggle in Shopify is not enough. You need to think about four areas:

• Data capture
• COD verification
• COD fees
• Order status logic

Data capture

COD orders depend heavily on address and contact quality. Your checkout should collect:

• A valid phone number
• A full street address
• Region-specific fields

In practice, this often means adding or adapting fields like:

• “Landmark” for India
• “Barrio / Localidad” for Colombia
• “Area / Block” for Pakistan

If these details are missing, drivers may not be able to locate the address, and the likelihood of RTO increases.

COD verification

Before shipping, you need to confirm that the order is genuine and that the customer intends to accept it. This can be done through:

• WhatsApp confirmation messages
• SMS one-time passwords (OTP)
• calls for high-risk or high-value orders

Stores that verify orders routinely see lower RTO. When verification is done consistently, it is common to see RTO reduction in the range of 20–40%, depending on the market.

COD fee (optional)

In some countries, merchants add a small COD handling fee. The purpose is to:

• Discourage low-value orders that are more likely to be refused
• Offset part of the RTO and cash-handling cost
• Encourage prepaid orders when that makes sense for the business

These fees should be used carefully and tested against conversion data, but they are a common part of COD strategy in India, Pakistan, and parts of LATAM.

Hold-until-verified logic

Finally, your system needs a clear way to handle unverified and verified COD orders. A typical pattern is:

• New COD orders are tagged as “pending verification”
• Only verified orders are moved to “ready to ship”
• Orders that cannot be confirmed within a defined time are cancelled

This prevents warehouses or suppliers from shipping every COD order immediately and absorbing the full cost of fake or low-intent orders.

Step 3: Build the COD Operations Loop

Once configuration is in place, the focus shifts from setup to operations. COD performance depends less on a one-time configuration and more on a repeatable loop that you run every day or week.

A practical COD operations loop has four parts:

• Verification
• Delivery
• Settlement
• RTO management

Verification before dispatch

In the verification stage, the goal is to confirm intent before money or inventory is committed. Typical actions include:

• Sending a WhatsApp or SMS message that confirms the order details and asks the customer to reply or tap a link
• Requiring an OTP for higher-risk orders
• Using message templates in local languages

A good verification process aims for a confirmation rate in the 70–90% range, depending on region and product type.

Delivery support

During delivery, communication shifts from confirmation to coordination. Short, timely messages help reduce failed attempts, for example:

• Day-of-delivery SMS (“Your order is arriving today between X and Y”)
• Instructions about cash payment
• Notices if the courier allows time-slot selection

If verification and delivery communications both work well, many COD stores aim for first-attempt delivery success rates above 80%.

Settlement tracking

After delivery, focus moves to settlement. The aim here is not just to receive payouts, but to track:

• How long it takes for cash to reach you
• Whether all delivered orders are properly paid out
• How often payments are delayed or incomplete

Monitoring these items makes it easier to compare couriers and aggregators and to react quickly if settlement patterns change.

RTO management and analysis

Finally, you need a clear view of which orders are being returned and why. Common reasons include:

• Incorrect or incomplete address details
• Unreachable or incorrect phone numbers
• Changes of mind between order and delivery
• Courier delays or repeated failed attempts

Reducing RTO usually involves a combination of:

• Better address validation and prompts at checkout
• Verification rules for new or risky customers
• Region-based courier assignment
• COD fees on low-value orders where that makes sense

Over time, this loop—verification, delivery, settlement, and RTO analysis—becomes the core of a sustainable COD operation.

Step 4: Scale COD Dropshipping Intelligently

Scaling a COD dropshipping operation too quickly can increase RTO and strain cash flow. It is more sustainable to scale once one region shows stable performance.

When the first region is under control, consider three areas before expanding wider:

• Localization
• Strategies to increase AOV
• Fraud & risk rules

Localization

Start by localizing more than just the language. Adjust:

• Checkout labels and helper text
• SMS and WhatsApp templates
• Preferred channels (for example, WhatsApp in parts of MENA and LATAM vs. SMS in other regions)

Language and cultural alignment make verification and delivery communications more effective.

COD-safe strategies to increase order value

It is possible to increase average order value without relying on prepaid upsells. Common COD-friendly tactics include:

• Quantity offers (buy two, pay less per unit)
• Bundles that match local use cases
• Free delivery thresholds at realistic order values
• Simple post-purchase offers that do not require online payment

These tactics should be tracked closely against RTO and settlement data.

Fraud and risk rules

As volume grows, patterns related to fraud and abuse often emerge. Monitoring and rules can include:

• Identifying repeated phone numbers across many orders
• Detecting VPN-heavy traffic sources
• Tracking regions or pin codes with consistently high RTO
• Filtering disposable email domains

You can then apply stricter verification, limit COD access, or require prepaid only in those specific segments.

Courier evaluation

Finally, courier performance should be reviewed regularly. Over time, you will see differences in:

• Delivery speed
• RTO handling
• Damage and loss rates
• Remittance consistency

A quarterly review of courier metrics helps you retain partners who support your model and phase out relationships that generate repeated problems.

Step 5: Expand Beyond One Market

When one region shows predictable performance—RTO below a defined threshold, settlements on schedule, reconciliation in place—you can consider adding a second market.

Before expanding, most COD merchants look for:

• RTO below roughly 25% (exact targets vary by niche)
• verification rates above 70%
• stable and predictable remittance cycles
• weekly reconciliation processes in place

Adding a new market introduces new couriers, address formats, languages, and fraud profiles. Growing one country at a time gives you a better chance to understand each environment, build the right verification and communication patterns, and avoid confusion between markets.

Releasit’s Role in the COD Ecosystem

Releasit develops COD-focused infrastructure for Shopify merchants. It does not replace couriers or suppliers. Instead, it supports the parts of the COD chain that live inside your store and your workflows.

In a dropshipping context, Releasit can help with:

• checkout extensions that capture accurate addresses and contact details
• phone and address validation tuned to COD needs
• WhatsApp and SMS confirmation flows
• OTP-based verification for high-risk orders
• rules to hold orders until they are confirmed
• tagging, routing, and reminder automation
• analytics for RTO rates, average order value, and remittance patterns

The aim is to make COD more measurable and more manageable so that merchants can treat it as a structured channel rather than an uncontrolled source of risk.

Install Releasit COD Apps for Shopify

Related Reading

To go deeper into specific parts of the COD operation, you can explore:

• Market Selection & Country Playbooks – detailed breakdowns of COD by country and region
• Courier & Aggregator Strategy – how to compare providers and select partners
• Unit Economics & Pricing – how to calculate margins after RTO and courier costs

COD Dropshipping FAQs

1. Which countries perform best for COD dropshipping?

India and Pakistan stand out for volume, while Colombia and several MENA countries often provide more predictable logistics once the right couriers are in place.

2. Do I need local registration to run COD?

Not in every case. Many aggregators work with international entities and settle funds through standard business accounts, though requirements vary by country.

3. How long do COD payouts usually take?

In most markets, settlement cycles range from 5 to 21 days, depending on the courier, aggregator, and country.

4. How can I reduce fake or low-intent COD orders?

The most effective methods are verification before dispatch (via WhatsApp, SMS, or calls) and limiting COD in specific high-risk segments or regions. Combining this with better address validation and region-based courier selection usually provides the biggest gains for COD dropshipping.