COD true-profit calculator

The margin you check is not the margin you get

Work out the profit on an order that arrives and it looks like this: selling price, less what the goods cost, less delivery, the COD fee, the packaging and the advertising. Say it comes to 500 on a 1,500 sale. A 33% margin. Comfortable.

Now send four parcels and have one refused. The three that arrived earned 1,500 between them. The one that came back earned nothing and still cost the delivery out, the delivery back, the packaging and the advertising that won it. Call it 500. You are left with 1,000 across four orders, which is 250 each rather than 500.

The delivered margin never moves. It is still 33% on every parcel that arrives, which is why this can run for months looking fine. The number that pays rent is the one per order placed, and that is what this page works out.

Two different orders, two different costs

A parcel that arrives carries:

• the goods
• delivery out
• the COD fee, because cash was collected
• the marketplace commission, because there was a sale
• packaging and advertising

A parcel that comes back carries:

• delivery out and delivery back
• packaging and advertising
• no COD fee, because nothing was collected
• no commission, because nothing was sold
• not the goods, which return to the shelf, unless they came back in a state you cannot sell

That last line is the assumption most likely to be wrong for a given seller. If your returns are not resellable, add the write-off to the return delivery figure.

The number to watch

It is the break-even return rate. If a delivered order earns 500 and a refusal costs 500, half your parcels can come back before you are working for nothing. If a delivered order earns 200 and a refusal costs 600, a quarter can.

That turns a vague worry into a line. You know your courier’s reported rate, and now you know how far it can drift before this product stops paying. It also tells you where the fix is: if your break-even rate is uncomfortably close to your actual one, cutting the return cost usually moves it further than raising the price does.

And where the tool says there is no break-even rate at all, that is worth reading. It means a delivered order already loses money, so refusals are not the problem and no improvement in delivery rates will save it.

What this does not do

It costs one product at one price, once. It is not an inventory system, it does not track orders, and it knows nothing about your overheads, your stock sitting in a warehouse, or the cash tied up between despatch and collection, which on COD is often the real constraint rather than margin.

It also has no opinion on whether a product is worth selling. A thin expected margin can be worth carrying for something that brings people to your other listings. The tool produces numbers; the decision is not arithmetic.