RTO cost calculator for Pakistani COD stores
A parcel that comes back earns nothing and still costs money. Put in your own figures and see what one RTO costs, what your return rate costs a month and a year, and how much of your delivered orders' profit it eats.
One RTO costs 57% of what a delivered order earns you.
A delivered order's profit here is its price minus product cost, freight, tax on the freight, packaging, ad spend and the 2% + 2% tax withheld on COD.
What a returned parcel actually costs
Most stores count an RTO as a lost sale. It is worse than that. The sale was never yours, but the costs were: the courier carried the parcel out and back, charged tax on both trips, the packaging is usually spoilt, and the ad that brought the customer in has already been paid for. The calculator adds those up for one parcel, then multiplies by your return rate.
The figure most worth looking at is the last row of the second panel. It compares what your returns cost with what your delivered orders earn. At the starting numbers about a quarter of the profit from delivered orders goes on paying for the ones that came back. A store with a thinner margin or a higher return rate can lose all of it.
What it leaves out
- Damaged or missing returns. The calculator assumes the item comes back fit to sell again. When it doesn't, add its cost to the loss.
- Stock held up in transit. A parcel on its way back can't be sold for days or weeks. For a store selling out of a small stock, that is lost sales on top.
- Staff time and calls. Confirming, chasing the rider and receiving the return all take time.
- Differences between cities and couriers. One return rate for the whole store hides the city where half your parcels come back. That breakdown needs your real orders.
Bringing the number down
The "each point of RTO" row is what one point of improvement is worth a month. The levers that move it are covered in the guide to RTO: confirming orders before dispatch, catching fake COD orders, working failed deliveries the same day, and sending each city with the courier that actually delivers there. To see how RTO sits inside the whole month's profit, use the COD profit calculator.
Kaarobar does this on your real data. It counts every return against the order it came from, by courier and by city, with the freight the courier actually billed. See returns and RTO in Kaarobar.
See your real RTO cost — install freeQuestions merchants actually ask
- How much does one RTO parcel cost?
- The forward courier charge, the return charge, sales tax on both, the packaging and the ad spend behind the order. With a PKR 220 charge each way, 16% tax, PKR 60 packaging and PKR 250 of ad spend per order, one return costs about PKR 820, and it brings in nothing.
- Why isn't the product cost counted in the RTO cost?
- Because the item comes back. Counting its cost as well as the freight would count the loss twice. If returns often come back damaged or don't come back at all, add their cost on top of the calculator's figure.
- Is tax withheld on a returned COD parcel?
- No. Nothing is collected on a return, so no income tax or sales tax is withheld. The courier's own charges are still taxed, in both directions, which is why tax appears in the RTO cost.
- RTO ka asal kharcha kaise nikalein?
- Aane aur jaane dono ka courier charge jorein, us par lagne wala sales tax, packaging, aur us order par kharch hua ad budget. Yeh ek wapas aane wale parcel ka kharcha hai. Phir isay mahine ke wapas aane wale parcels se zarb dein. Upar wala calculator yahi hisaab aap ke apne numbers par karta hai.