Why COD orders fail
Cash on delivery is still how many Filipino buyers prefer to pay. It builds trust, but it also lets a buyer change their mind at the door. When that happens, the parcel goes back to you: returned to sender, or RTS.
- Impulse orders. A buyer adds to cart during a live or a sale, then doesn't have the cash or no longer wants it when the rider arrives.
- Nobody home or unreachable. Wrong numbers, incomplete addresses and buyers who don't answer the rider's call.
- Long waits. The longer delivery takes, the more likely a buyer has bought elsewhere.
- Fake or prank orders. Less common, but they happen, especially for new shops.
What a failed order costs
Each failed delivery can cost you shipping, the time and materials to repack, and sometimes the product itself if it comes back damaged or opened. On top of that, you lose the profit that order would have made. The calculator shows the two separately: the RTS loss is money that actually leaves your pocket, and sales you didn't get is profit you missed.
Whether you pay the shipping on failed orders depends on the platform, the courier and your plan. On the big marketplaces it often isn't charged to sellers. If you ship COD yourself through a courier, your courier's terms decide it. Check a failed order on your statement and enter what it shows.
A worked example
A seller ships 300 orders a month, 60% of them COD, and 15% of COD orders fail. Their statement shows ₱60 charged for outbound shipping and ₱60 for the return on each failed order. Repacking costs ₱10, and 20% of returns can't be resold. The product costs ₱250, and each delivered order makes ₱140 profit.
| COD orders | 180 a month |
| Failed deliveries (15%) | 27 a month |
| Loss per failed order | ₱60 + ₱60 + ₱10 + 20% × ₱250 = ₱180 |
| RTS loss this month | ₱4,860 |
|---|---|
| Profit from failed orders that didn't happen | ₱3,780 |
| Expected profit per COD order | 0.85 × ₱140 − 0.15 × ₱180 = ₱92 |
| Break-even RTS rate | ₱140 ÷ (₱140 + ₱180) = 43.75% |
| Prepaid discount you can afford | 0.15 × (₱140 + ₱180) = ₱48 |
COD still pays here, because 15% is well below the 43.75% break-even. But each COD order earns ₱92 on average against ₱140 for a delivered one. That gap is why the seller could offer up to ₱48 off for paying online and still come out even, as long as prepaid orders rarely fail.
Ways to lower your RTS rate
- Confirm by chat. A short message before shipping ("Hi! Confirming your order of … for ₱… COD. Is the address right?") filters out many impulse and fake orders.
- Ship fast. Same-day or next-day dispatch gives buyers less time to change their mind.
- Write clear listings. Exact sizes, colours and real photos mean fewer buyers refuse the parcel because it isn't what they expected.
- Reward prepayment. A small "pay online" voucher or freebie moves some buyers off COD. Use the prepaid discount above as your limit.
- Watch repeat refusers. If you sell outside the marketplaces, keep a list of buyers and addresses that refused before, and ask them to pay first.
Frequently asked questions
What does RTS mean?
Returned to sender. The courier couldn't deliver the parcel, or the buyer refused it, so it goes back to the seller. For COD orders this usually means no payment was collected.
What is a normal RTS rate for COD in the Philippines?
It varies a lot by product, price, area and shop. Many sellers aim to stay under 10%. More important than any average is your own break-even RTS rate, which this calculator works out.
Do Shopee, Lazada and TikTok charge me for failed deliveries?
Their policies change and depend on the reason for the failure. Often the seller isn't charged shipping on a failed marketplace delivery, but check a failed order on your statement and enter exactly what it shows.
Should I turn off COD?
Usually not. Many buyers only order with COD, so turning it off can lose more sales than it saves. Turn it off, or ask for a deposit, only where your RTS rate is above break-even, for example certain areas or first-time buyers.
How big a prepaid discount can I give?
Up to your RTS rate times (profit per delivered order + loss per failed order). Beyond that, a prepaid order earns less than a COD order on average. Most sellers offer less, so they keep part of the saving.