Short answer: the cost of cash on delivery is not the collection fee. It is the sum of five things: the collection fee, shipping out and back on the orders that never arrived, the packaging lost with them, the ad cost that produced them and does not come back, and the cash locked up from the day you ship to the day the courier settles. Any profit calculation built on the sale price without those lines overstates your profit by a fixed proportion — and the error grows as you grow.
Why COD looks cheaper than it is
A courier quote arrives with two numbers: a delivery price and a collection percentage. Both are clear and both are in every store's spreadsheet. The real cost is in neither, because it is not incurred on the orders that succeed — it is incurred on the ones that fail.
An order the customer does not accept took the full effort anyway: it was picked, packed, shipped, called once or twice by customer service, and returned. The only difference is that it brought in nothing. And if you do not know that proportion as a number, you do not actually know your margin.
What I see repeatedly: an owner compares two couriers on delivery price alone and picks the one that is cheaper by a few pounds. The more expensive one turns out to be cheaper in reality, because its first-attempt delivery rate is higher. A small difference in delivery price is worth nothing next to one returned order.
The five costs COD adds
| Cost | When it is incurred | Why it gets forgotten |
|---|---|---|
| Collection fee | On every delivered order | It is the only one people do calculate |
| Shipping out and back | On every returned order | Booked as freight expense, not an order cost |
| Lost packaging | On every returned order | The box comes back damaged and is not reused |
| Wasted ad spend | On every returned order | Already spent; it does not come back with the product |
| Locked-up cash | From shipping to settlement | It is not an expense, so no report shows it |
The fourth is the harshest and the least calculated. If advertising produced an order and that order came back, you paid for a customer who did not buy. If that happens to a share of your orders, your real cost of acquiring a customer is higher than the platform shows you — and the gap is exactly your return rate.
The one number you need
Not the return rate, because that arrives too late. The number you can act on is the first-attempt delivery rate, calculated per channel and per governorate separately, not as one average.
Why per channel? Because where the order came from tells you the customer's intent. An order from someone who came looking for the product is not the same as an order from someone an ad stopped by accident. Both look identical in a sales report, and completely different in delivery rate.
Why per governorate? Because delivery cost and success rate both move with distance and coverage. You can have a region you sell a lot in and lose money in, and the overall average hides that entirely.
Once you have both numbers, every other decision becomes obvious: where to stop advertising, where to require prepayment, and where to add spend.
What actually reduces returns
Ordered by impact from operating experience, not by ease:
- Confirm the order before shipping — a call or a WhatsApp message that requires a reply. This is the largest lever available, and it costs time rather than money. An unconfirmed order goes onto a different list, not straight to the courier.
- Set the expectation on the product page — real size, real timeline, shipping price stated plainly. Most doorstep refusals happen because what arrived is not what the customer pictured.
- The advertising itself — an ad that overpromises brings more orders and returns a larger share of them. The net is lower than a calmer ad would produce. This is measured in net profit per order, not in order count.
- Incentivise prepayment — a small discount for paying online. Here you have to do the arithmetic: the discount has to be smaller than the expected cost of a return on the same order, or you are buying the same problem at a higher price.
- Choose the courier on delivery rate, not price — and compare them on the same regions, because every courier is strong in some areas and weak in others.
- Chase delivery attempts — an order with one failed attempt can still be saved by a call the same day. After the second attempt it is effectively a return.
Cash flow: the part that stops growth
This is what surprises owners as they scale. Under COD you pay product cost, shipping and advertising before you receive your money, and the collection and settlement cycle differs from courier to courier.
The result: as you grow, the cash locked up grows at the same rate. You can be profitable on paper and unable to grow because there is no cash. So the number to track alongside net profit per order is cycle length: from the day you pay an order's costs to the day its money is in your account.
That makes two things commercial decisions rather than operational ones: negotiating a shorter settlement cycle with the courier, and increasing the share of prepaid orders. Both shorten the cycle more than any cost improvement will.
Takeaway
COD is not a mistake, and in the Egyptian market it is usually not a choice. But it has to be treated as a decision with a calculated cost: know your first-attempt delivery rate per channel and per governorate, charge the cost of what did not arrive to what did, and track cash-cycle length the way you track profit. Only then is adding spend a decision rather than a gamble.
This is the kind of work my team does on my own brands every day — from pre-ship confirmation through to reading these numbers per channel. If you have a brand that sells and you want this part run properly,
Read next: Net profit per order, line by line · Selling but not making money · The owner's dashboard · Rabehni Agency.