Marketing in a Minute – Episode 10 | Ahmed Moaaz

Undelivered orders that return to you can cost outward and return shipping as well as packaging. Track RTO by region, product and payment method. Cash-on-delivery orders often carry greater risk.

What does RTO mean?

RTO stands for Return To Origin. A parcel leaves your warehouse with the carrier but returns without being delivered to the customer. This is not an order cancelled while it was still in the store: it has travelled most of the way before failing at the final stage.

The metric is especially relevant to cash-on-delivery businesses. The customer has not paid yet, so refusing delivery may cost the customer nothing while leaving the store with the costs of the failed attempt.

Why do parcels return undelivered?

• The customer changes their mind: An impulse purchase loses its appeal, or the customer finds a lower price elsewhere.
• The customer does not answer: The courier calls before delivery, but the customer ignores an unknown number or the phone is switched off.
• The address is incomplete: Missing details or an unclear location prevent the courier reaching the customer.
• Delivery is late: An item arrives after two weeks when three days were promised, so the customer no longer needs it or has bought an alternative.
• The order was not genuine: Test orders, mischievous orders or other non-serious requests can occur in cash-on-delivery stores.
• Cash is not available: The customer has not prepared the amount when the courier arrives.

What does each returned order cost?

RTO costs extend beyond the delivery fee:

• Outward and return shipping: Many carriers charge for the failed delivery attempt and returning the parcel to your warehouse. Check your carrier’s actual terms.
• Wasted packaging: Boxes, bags and protective materials may not be reusable.
• Unavailable stock: The item is out of your store for days or weeks, unavailable to other buyers. It may return damaged or after its season has passed.
• Wasted acquisition spend: The ad that brought in the order was paid for, but the order generated no revenue.
• Operating time: Staff prepared the order, tracked it, received the return, checked it and put it back into stock.

For a simple example, consider an EGP 600 order with an expected profit of EGP 200 if completed. If outward and return shipping cost EGP 80, packaging EGP 15 and acquisition advertising EGP 60, a failed order creates approximately EGP 155 in those costs. That can consume much of the profit from another successful order.

How do you calculate RTO rate?

RTO rate = (parcels returned without delivery ÷ total parcels dispatched) × 100.

If you dispatched 400 parcels during the month and 90 came back, the rate is 22.5%. This article uses 15% to 30% as a broad reference range for cash-on-delivery operations, not a target that fits every market or store. Every extra undelivered parcel puts pressure on margin.

Break the rate down by carrier, region and product type. Often the problem is concentrated in a particular part of the operation rather than spread evenly across all orders.

How can you reduce RTO?

• Confirm before dispatch: A quick call or WhatsApp message can confirm that the customer still wants the item and that the address is correct. This helps catch non-genuine orders and missing addresses.
• Consider a partial advance payment: Even EGP 50 paid in advance can increase commitment because the customer now has money in the order.
• Deliver quickly: Each extra delay gives the customer more time to change their mind. Choose a carrier based on actual delivery times, not price alone.
• Send shipment updates: Tell the customer the order is on its way and when it should arrive. An expected parcel is easier to receive than a surprise.
• Help the customer prepare cash: On delivery day, remind them of the amount due.
• Review repeated delivery refusals: If a customer has refused delivery three times, consider requiring advance payment rather than sending a fourth cash-on-delivery order.
• Describe the product clearly: Accurate photographs, sizing and material descriptions reduce the gap between expectations and what arrives.

A full-month worked example

A store dispatches 500 cash-on-delivery orders per month with an average order value of EGP 550. Its RTO rate is 24%, meaning 120 parcels return. At EGP 150 in shipping, packaging and advertising cost per failed parcel, the store loses EGP 18,000 a month on those failed deliveries.

It introduces two measures: WhatsApp confirmation before dispatch and a small advance payment for hesitant customers. The rate falls to 16%, or 80 returned parcels. Avoiding forty returns saves EGP 6,000 in failed-delivery costs, alongside the benefit of additional completed sales. Improving delivery can therefore be worth comparing with the return expected from another advertising campaign.

There is another effect that is harder to quantify: staff morale. Every return means wasted packing and follow-up time. A higher delivery rate makes the working day easier as well as improving business results.

Where should you start?

Start with one step that requires no new advertising spend: export last month’s orders and separate delivered orders from undelivered returns. Ask the carrier for the recorded reason for each return. That gives you a clearer map of the problem and helps identify which improvement to try first.

Summary

RTO can quietly erode the profit of a cash-on-delivery store. Calculate it monthly and analyze it by carrier and region. Start with practical measures such as confirming orders before dispatch and improving delivery speed. Each parcel delivered successfully avoids a failed return journey and gives you a customer who may buy again and recommend you.

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