Should AJIO keep cash on delivery free for everyone or charge a COD fee to reduce RTO?

Introduction

Cash on delivery (COD) is still how a large share of Indian online fashion shoppers pay, especially first-time buyers and customers in Tier 2 and Tier 3 cities. For AJIO, COD is a conversion engine: many customers will not buy at all unless they can pay at the door. It is also a cost engine: COD orders are refused at the door far more often than prepaid orders, and each return-to-origin (RTO) wastes forward and reverse shipping and keeps inventory off sale.

The question: should AJIO keep COD free for all users, or introduce a COD fee to reduce RTO? Several Indian e-commerce players already charge small COD or "handling" fees. The answer depends on how much conversion AJIO would lose versus how much RTO it would save, and on which customers we are talking about.

Step 1

Clarifying Questions (3 minutes)

• Context: What share of AJIO orders are COD, and how does RTO differ between COD and prepaid?

• Hypothetical answer: About 55% of orders are COD overall, over 70% in Tier 2+ cities. COD RTO is around 20% versus about 4% for prepaid.

• Business context: Is the goal to reduce cost, improve contribution margin, or nudge customers to prepaid?

• Hypothetical answer: Improve contribution margin without hurting new-customer acquisition.

• User impact: How do competitors handle COD today?

• Hypothetical answer: Some charge a small fee on COD; value platforms keep COD free to win Tier 2+ buyers.

• Technical: Can we vary the fee by customer, pincode and order value?

• Hypothetical answer: Yes, the checkout supports rule-based fees.

• Resource: Is there budget for prepaid incentives (for example UPI discounts)?

• Hypothetical answer: Yes, a limited budget.