Cash on delivery: working out the real cost of a delivered parcel (confirmation, delivery, returns)

When you sell cash on delivery, the figure the ad platform gives you is the cost of an order. What you really pay is the cost of a parcel that is delivered and paid. The gap comes from three rates only you can measure: confirmation, delivery and returns. The figures below are invented to show the calculation; replace them with yours in the calculator.

The formula

For one order received, the share that becomes a delivered parcel is:

delivered parcels per order = confirmation rate × delivery rate

All the order’s costs (advertising, confirmation calls, packaging, product, delivery, returns) are then divided by that share. That is what pushes the cost up: unconfirmed orders and returned parcels cost money, and it has to be spread over those that succeeded.

A worked example (invented)

Assumptions: selling price 4,000 DA; product 1,500 DA; packaging 100 DA per shipped parcel; 50,000 DA of advertising for 100 orders, that is 500 DA per order; confirmation at 60%; delivery at 75% of shipped parcels; 600 DA of delivery at your expense per delivered parcel; 400 DA of fees per returned parcel; 100 DA of confirmation cost per order received.

Of 100 orders, 60 are confirmed and 45 are delivered. Each order received therefore yields 0.45 delivered parcels. The real cost per delivered parcel breaks down like this:

The profit is 4,000 − 3,700 = 300 DA per delivered parcel, that is 135 DA per order received and 13,500 DA over the 100 orders. Shown ROAS is 8 (4,000 / 500); cash-collected ROAS is 8 × 0.60 × 0.75 = 3.6.

The same example with 60% delivery

If only 60% of shipped parcels are delivered and everything else is the same, the real cost rises to 4,200 DA per delivered parcel: you lose 200 DA per parcel, 72 DA per order, 7,200 DA over the 100 orders. The platform dashboard did not move, since the orders are still there. In this example, the minimum delivery rate to avoid losing money is about 65%.

How to measure your own rates

Over a given period (a month, for example), note the number of orders received, confirmed orders, parcels shipped, delivered and returned. Divide: confirmed over received, delivered over shipped. Split by product, carrier and wilaya if you have enough volume: a single average rate can hide a carrier or a region that loses you money. Do not take another seller’s rates: the “60 to 80%” you read on blogs have no source.

What this changes in your decisions

A product whose margin looks good before advertising can lose money once returns are counted. Before raising a budget, look at the maximum cost per order the tool calculates: if your real cost is close to it, do not increase. To compare carriers on this criterion, see the comparison method, and for tracking your campaigns the Meta Ads guide. Taxes and contributions are not included here: see the CASNOS calculator and the VAT calculator.